Los Angeles Landlords Beware: It is Illegal to Rent to an Illegal Marijuana Dispensary

Cannabis lawyerWe’ve previously blogged about the city of Los Angeles’ Proposition D law which retroactively confirmed the illegal status of most of the city’s marijuana dispensaries, and about the city’s continued attempts to shut down local marijuana delivery services. Hundreds of unpermitted marijuana businesses currently operate in Los Angeles and City Attorney Mike Feuer has been actively trying to shut them down even as new businesses continue to open up. More recently, Feuer and his team have begun targeting landlords who rent their properties to these illegal businesses. Over 120 property owners have been charged with criminal complaints by the City Attorney for leasing their property to an illegal marijuana business.

Los Angeles County takes an even more restrictive approach and in 2011 it banned all marijuana dispensaries in unincorporated areas of the county. However, just as in the city of Los Angeles, unpermitted marijuana businesses continued to pop up within the county and some areas even began issuing special permits to allow for their existence. The county is now following in the city’s steps and taking more drastic measures to shut these businesses down. In February, the county’s Board of Supervisors requested a draft ordinance that would prohibit all cultivation, manufacturing, laboratory testing and distribution of marijuana within the county for at least 45 days. In March, the same board voted to create a Medical Marijuana Dispensary Enforcement Team to focus solely on shutting down and prosecuting illegal marijuana businesses.

This week, the county went even further by passing an ordinance that makes it illegal to rent space to a marijuana dispensary. On March 29, 2016, the Los Angeles County Board of Supervisors voted unanimously in favor of amending its existing ordinance to make clear it is illegal for a landlord to rent or lease property for use as a marijuana dispensary. Still, some argue that the amendment is not a substantive change to the current state of the laws as landlords in Los Angeles County have been subject to significant risk since the ban was enacted in 2011. Property owners found guilty of violating the ban are subject to harsh penalties – including fines and property forfeiture – and landlords could already be held liable for sales of illegal controlled substances on their properties.

Though the outlook is hazy for property owners in Los Angeles wishing to rent to a marijuana dispensary, there is still hope. There are over 100 dispensaries operating legally in the city of Los Angeles and landlords will not be penalized for renting to one of these permitted businesses.  Marijuana businesses are often willing to pay higher rental rates than other industries, which makes them an attractive tenant for property owners.  However, renting to an illegal marijuana business (whether intentional or unintentional) can result in severe reprecussions, so it is important for landlords to do their due diligence on any potential marijuana tenants. This means asking for and reviewing documentation, such as proof of permits. Know also that a tax certificate from the city does not make it legal for the business to distribute marijuana. Also make sure any documents you receive are legit as businesses are not above providing fake certificates, or hire a cannabis lawyer to do the diligence for you. Don’t trade in dollars now for a jail sentence later.