California is now well established in the business of commercial cannabis, and those who have received local licensing are realizing that they are only halfway done and are in process of applying for a state license. If you’re feeling the pressure, here are some things to consider on whether it’s time to hire a law firm to represent your cannabis business.
Depending upon the activity applied for, the relevant agency regulating commercial cannabis at the state level – the Bureau of Cannabis Control (BCC), California Department of Public Health (CDPH), or California Department of Food and Agriculture (CDFA) – will contact the city or county to verify the local license and that the business is in compliance with or exempt from the California Environmental Quality Act (CEQA), as required by state law. This should be an easy mark off the checklist. Although, we are finding the state is returning responsibility to the applicant to provide evidence of CEQA. The language in the local ordinances, particularly in the smaller, rural jurisdictions, can be vague and up to interpretation. Failure to provide evidence of compliance with the CEQA, or with any of the regulations under state law and associated governmental bodies, is subject to denial of the state license. As a result, all operations will be forced to cease. Any operations occurring without a valid local and state license are subject to heavy fines, as recently seen in Humboldt County, and could result in criminal prosecution. An attorney will advise in navigating through all local and state requirements to protect your business from shutting down.
A common issue aggravating many are problems arising due to incorrect zoning that can lead to costly consequences. Before you sign a lease or purchase a property, verify the zoning. For example, for those in the market for the City of Los Angeles during its second phase of licensing, you may have noticed the maps to check zoning against sensitive use areas in each of the 15 districts are no longer available. At the request of the Department of Cannabis Regulation (DCR), the maps have been removed due to numerous issues arising from incorrect zoning. Applicants were relying on the maps not realizing there may have been a school, EMMD, or other sensitive use within the area. The city is allowing applicants the opportunity to find another location that is in the correct zoning until at least September 13th, when this phase of licensing closes. Finding a location in the correct zoning is no easy feat. Have the propertyprofessionally mapped and consider hiring an attorney to negotiate the terms of the lease or purchase contract, ensuring the property complies with all zoning and land use requirements under the ordinance, and reducing the chance your license is denied.
If you are an investor looking to buy an existing license, beware of fraudulent deals and false licenses. Does the license comply with CEQA? Is it in the correct zoning? What is the licensing authority’s policy on transferring of cannabis licenses? Having an attorney do the due diligence will help reduce the risk of your investment.
As the industry evolves, there is going to be more need for legal protection for entrepreneurs and investors, so consider a business investment into a law firm well educated in the field of cannabis law and protect your success.