It’s legal in 19 states, and two of those states don’t even require a prescription (Colorado and Washington State), but while marijuana dispensaries and retail outlets may seem to be ideal tenants for “challenging” commercial or retail spaces, experts caution that the status of those marijuana-related businesses under the law is in limbo, and real estate owners could find themselves on the wrong side of a civil forfeiture action.
Selling or growing marijuana
There are two main problems: 1) Selling or growing marijuana (with or without a prescription) is still against federal law, and the local U.S. Attorney’s Office may choose to enforce that law; 2) Although there are specific carve-outs in some states for these dispensaries and retail outlets to operate within the law, not all local law enforcement agencies support their rapid expansion. This could lead to enforcement actions by local agencies on a case-by-case basis.
Sale of marijuana is still a federal crime
According to the United States Justice Department, production, distribution and sale of marijuana is still a federal crime under the Controlled Substance Act (“CSA”), because marijuana is designated a Class I drug (i.e., drugs with no currently accepted medical use and a high potential for abuse). The U.S. Justice Department has now issued guidelines that assign a low priority to cases under the CSA with regard to the operation of facilities that are otherwise legal under state law. However, these are still just guidelines, and do not have the force of law. The bottom line is that it remains up to each U.S. Attorney’s Office to decide which cases to bring within its jurisdiction. In addition, there are exceptions to the guidelines that may be open to interpretation.
The risk of forfeiture
Beyond the risk of actions under the CSA is the risk of forfeiture under the Civil Asset Forfeiture Reform Act of 2000. This federal law allows for the seizure of real estate involved in acts prohibited under federal law, AND civil forfeiture does not necessarily require a judicial proceeding, nor does it require anyone to be charged with a crime.
The federal government isn’t alone in using civil asset forfeiture to discourage the growth of these businesses. Although marijuana is legal under certain conditions in California and New York, state authorities in California took in $181.4 million in revenue from seized property and cash in marijuana cases from 2002 to 2012, followed by New York at $101.3 million.
The growth of medical and recreational marijuana sales
Further, some police authorities have viewed with concern the growth of medical and recreational marijuana sales in states like Colorado and California. In California, the first state in the U.S. to legalize marijuana for medical use (1996), a billion-dollar industry has emerged, with of hundreds of marijuana dispensaries each handling millions of dollars in cash.
The growth of such businesses, and the lack of detailed state-wide standards as to what constitutes a legitimate medical need, has led to a patchwork approach to enforcement and the legal status of such businesses. For example: “San Diego authorities take the view that marijuana dispensaries are illegal and have aggressively prosecuted them.”
While this business segment may be growing and profitable, its legal status remains cloudy, and doing business in this space carries the risk of property loss and other legal sanctions that may be applied arbitrarily.