California is in the process of transitioning from its gray market of medical cannabis collectives to a full-blown, heavily regulated regime under the Medical Cannabis Regulation and Safety Act (“MCRSA“). At the end of April, California dropped more than 200 pages of regulation for retailers, distributors, transporters, manufacturers, and cultivators, and it’s now taking public comment on the initial rules. Note that our firm will be hosting a free webinar on June 1 to discuss how applicants can secure licenses under the new regime. Though these rules will no doubt change before (and even after) they are finalized, what won’t change are NIMBYs who don’t want cannabis businesses near them.
When cannabis businesses come into a community, there can and often will be all kinds of local impact and chaos. We’ve written in the past about various NIMBY lawsuits and how quickly local governments can flip when it comes to non-conforming uses and land use disputes, and that will be the case in California as well, just as it has been the case in all regulated cannabis states.
The entry of the cannabis industry to a state means an influx of entrepreneurs and, with them, an increase in rents in the areas in which they locate. And always there are the angry neighbors who don’t want to smell cannabis harvests every six weeks or so. Most cities and counties zone for growers and manufacturers to be on the outskirts of town or in industrial or agricultural zones and retailers to be in commercial or industrial areas. Occasionally, cities and counties will allow cannabis home farms, but that’s more the exception than the rule.
One of the first notable land use disputes since passage of the MCRSA took place in Santa Rosa, though it’s surely not going to be the last. Most importantly, there is much to be learned from that case. The city of Santa Rosa has welcomed California’s to-be regulated cannabis economy by allowing cultivators and manufacturers to operate in industrial zones. But at least one land developer cried wolf because the city is allowing medium-scale cultivation to move in next door to a long-time planned (but not yet built) residential development.
In February of this year, Fleuron, Inc. applied to and secured approval from the city (through a use permit) to build a 10,000 plus-square-foot cannabis cultivation and processing facility in an industrial zone (on Maxwell Court), part of which was supposed to transition into a residential area. A land developer, who pursued development of apartments for the past 13 years next to where Fleuron wants to build, opposed and appealed the city’s decision and went on record stating that “[i]t is impossible for housing to be built in an area with cannabis uses.” This developer also cited a variety of alleged issues attendant to cannabis grows, like nuisance, public safety, environmental and economic issues. Another nearby apartment land developer said that his investors are “nervous” at the prospect of having a marijuana cultivation site as a neighbor. And a nearby auto-body shop claims to have seen a recent 15% increase in rent attributable to cannabis operators coming in.
Just this week, the city council unanimously rejected the land developer’s appeal against the issuance of Fleuron’s use permit. The city’s mayor even stated that, right now, cannabis seems more “viable as a business than housing.” And council members touted Fleuron’s ownership as “well-regarded, professional businessmen following the rules Santa Rosa established.” Chalk this up as a clear victory for the cannabis industry. But there will no doubt be many more such fights as neighbors in the past have brought nuisance lawsuits, RICO actions, and lawsuits claiming bad odors. Our cannabis lawyers are aware of cases brought against cannabis businesses for creating “marred mountain views,” for making horse riding “less pleasant” during cannabis harvest time, and for loss of business at a hotel where guests allegedly cancelled their reservations upon finding out they were located next to a cannabis business that had not yet even opened.
Though many (most?) NIMBY lawsuits against cannabis businesses have little basis in reality or fact, this does not seem to stop determined NIMBYs from suing neighboring cannabis businesses to try to stop them from ever getting off the ground. NIMBYs are a fact of life in the cannabis industry (our cannabis litigation lawyers have defended enough of these to know this), but smart planning, transparency, and running a compliant business are usually enough to beat them.