The California Cannabis Countdown: The City of Los Angeles

California cannabis lawyersUntil recently, the “Wild West” of U.S. cannabis lacked robust statewide regulations which left California cannabis companies subject to unclear rules and risk of federal shutdowns. The Medical Marijuana Regulation and Safety Act (MMRSA) created these regulations, but ultimately left control in the hands of local cities and counties.

At last count, California has 58 counties and 482 incorporated cities across the state, each with the option to create its own rules or ban marijuana altogether. In this California Cannabis Countdown series, we plan to cover who is banning, who is waiting, and who is embracing the change to legalize marijuana — permits, regulations, taxes and all. For each city and county, we’ll discuss its location, history with cannabis, current law, and proposed law to give you a clearer picture of where to locate your cannabis business, how to keep it legal, and what you will and won’t be allowed to do. Our last California Cannabis Countdown post was on the City of Desert Hot Springs, and before that, Sonoma County, the City of Sacramento, the City of BerkeleyCalaveras CountyMonterey County and the City of Emeryville.

Welcome to the California Cannabis Countdown.

Los Angeles is one of the largest cities on any scale and remains one of the most popular locations eyed by prospective medical marijuana business owners in California even though no new cannabis businesses have been allowed within the city since 2007. In fact, the city prohibits all marijuana activities within its boundaries but allows a small number of businesses to operate under a strict immunity system. For those who dare to open and operate an illegal medical marijuana business, the repercussions can be high and the City Attorney is not hesitating to take swift and serious action to shut them down.

LocationThe City of Los Angeles is the most populous city in California, the second-largest city in the United States, and it has the third-largest gross metropolitan product (GMP) in the world. It is home to Hollywood, which makes the city a major center of the U.S. entertainment industry. Beyond its thriving local economy, the city is known for its mediterranean climate and ethnic diversity.

History with Cannabis. On August 1, 2007, Los Angeles passed Interim Control Ordinance 179027 (the “ICO”) to prohibit new medical marijuana dispensaries unless a hardship exemption was approved by the City Council. At the same time, the ICO exempted certain existing medical marijuana facilities that were operating prior to September 14, 2007, and timely registered with the City Clerk by November 13, 2007.

On June 24, 2009, the City passed Ordinance No. 180749 that, among other things, removed the ability for new businesses to request a hardship exemption.

On January 26, 2010, the City passed Ordinance No. 181069, the Medical Marijuana Ordinance (the “MMO”), which added Article 5.1 to Chapter IV of the Los Angeles Municipal Code in order to establish a regulatory framework for medical marijuana collectives. The code required collectives to meet preinspection requirements and register with the Department of Building and Safety. The MMO was later amended by the City on January 21, 2011, through Ordinance No. 181530, the Temporary Urgency Ordinance (the “TUO”), which required collectives to notify the City of their intent to register by February 18, 2011.

On March 8, 2011, voters in the City approved Measure M, which imposed a tax of $50 for every $1,000 of revenues generated by medical marijuana collectives.

On May 21, 2013, voters in the City approved Proposition D, which repealed and replaced the regulatory system set in place under the MMO in order to further stem the proliferation of medical marijuana businesses occurring throughout Los Angeles.

Current Cannabis Laws. Article 5.1 of the current City Code states that

It is unlawful to own, establish, operate, use, or permit the establishment or operation of a medical marijuana business, or to participate as an employee, contractor, agent or volunteer, or in any other manner or capacity in any medical marijuana business.”

This includes renting, leasing, or otherwise permitting a medical marijuana business to occupy or use a location, vehicle, or other mode of transportation.

A medical marijuana business includes any location where marijuana is cultivated, processed, distributed, delivered or given away to a qualified patient or caregiver, as well as any vehicle or other mode of transportation used to transport, distribute, deliver, or give away marijuana.

Limited immunity from prohibition is granted to medical marijuana businesses which can establish the following:

  1. Registration under the ICO through a business tax registration or tax exemption certificate issued prior to November 13, 2007;
  2. Notification of intent to register under the MMO, as amended by the TUO, by February 8, 2011;
  3. Registration for taxation under Measure M in 2011 or 2012; and
  4. Compliance with other applicable operating and location restrictions.

Current Cannabis EnforcementIn lieu of our usual discussion of “Proposed Cannabis Laws” (considering that there are currently no published proposed ordinances to speak of), we will instead review how Los Angeles is currently choosing to enforce its existing cannabis laws and policies. Only 135 medical marijuana businesses qualified for limited immunity under Proposition D, which means that all of the other hundreds of businesses currently operating in Los Angeles are operating illegally.

California cannabis lawyersWe’ve written repeatedly about the Los Angeles City Attorney’s efforts to shut down illegal businesses, including offering tips for common pitfalls to avoid under Proposition D. On the Los Angeles City Attorney’s website, there is a list of over 400 criminal cases filed against illegal medical marijuana businesses as of July 7, 2016. The City Attorney has also cracked down on delivery services operating in Los Angeles through several lawsuits, arguing that medical marijuana delivery as a whole is not allowed under Proposition D.

Penalties for operating illegally can be severe. And these penalties don’t just apply to medical marijuana business owners but to landlords and real estate professionals who work with these businesses as well.  Allowing an illegal marijuana business to operate on your property is a misdemeanor punishable by daily fines of $1,000 and up to six months in jail. Add to that an additional daily penalty of $2,500 which can be assessed for a nuisance violation. The City Attorney has already been begun filing criminal complaints against landlords in violation.

Unless you are one of the few businesses lucky enough to receive immunity from the City or you plan to purchase the property owned by one of these lucky few, the blunt truth is that you will not be able to open and operate a legal marijuana business in Los Angeles. Despite this, our California cannabis lawyers continue to receive multiple calls every week requesting advice on how to start new Los Angeles dispensaries, grows, and delivery businesses.

These frequent calls reveal three things: 1) there is still a lot of confusion about what is and isn’t allowed when it comes to marijuana in Los Angeles, and 2) there is an obvious demand for more legal medical marijuana businesses in the city, and 3) Los Angeles should change its local laws sooner rather than later.  Though the City is working with various advocacy groups to implement such changes, the question remains how long those who are interested in operating a legal cannabis business in Los Angeles will have to wait before they can begin preparing for state licensing, which is set to begin in California as early as 2018.