On the Canna Law Blog, we intend to start with the meaning of “marijuana regulations and tax laws (MRTA)” for real estate and discuss the issues faced by each type of license.But after reading the “New York Times” Recent articles Regarding the real estate “peak” caused by the MRTA, we feel compelled to deal with some statements that may mislead potential applicants when evaluating licensing options.

As a brief review, MRTA’s Adult license regulations Point out that the applicant needs to prove that it owns (or through a contract) (through a lease or management agreement) the physical location in which the applicant will operate during the initial two-year license period. In all license types, location is one of the most important considerations for applicants.

For those involved in production (cultivators, processors and distributors), finding the right real estate at the right price is essential for successful business operations. For retail applicants (including on-site consumer applicants), identifying and ensuring the right space in the right area may be the difference between financial success and failure. As we said in New York: location, location, location.

The “New York Times” article pointed out that many landlords would not rent it to cannabis companies, “because the tenants are at risk of violating federal laws or because of their still stubborn and brutal reputation.” The article subsequently announced that landlords who are willing to rent to cannabis companies. “It has been able to charge premium rates”, which means that the rental market in New York will be prohibitively expensive for cannabis companies. From a technical and practical perspective, this article is misleading at best.

Many commercial landlords Can’t Leased to cannabis companies under The terms of their mortgage agreement, Not because of inherent risks or “bad” reputation. For any commercial landlord who has a mortgage issued by the Federal Insurance Bank, the loan documents will include a clause in the “Representation and Guarantee” section that prohibits renting to illegal businesses, and usually expressly prohibits allowing cannabis businesses to operate property in the mortgage. The regulations will look like this:

The borrower hereby enters into a contract and agrees that it shall not engage in, allow or suffer any illegal activity (regardless of whether such illegality is determined by local, state or federal laws) or activities related to controlled substances (determined by local, state or federal) laws Regulations) (including but not limited to any cultivation, distribution and/or distribution of cannabis (whether for medical, recreational or other purposes)).

It may not seem like much, and it may not even stop certain landlords, but for applicants, the distinction is crucial and must be understood. Before the Federal Banking Law was amended, many landlords would not be able to rent to cannabis companies at all, because doing so could cause their loan documents to default and trigger a series of consequences, including potential foreclosure.

For adult-use applicants in New York, the key is to find commercial landlords who can: 1) fully own their own property, or 2) obtain loans or other financing sources from non-federal insurance banks (New York has many); or 3) willing to take the risk The risk of being asked to rent loans to cannabis tenants. It is essential to establish contact with the right commercial real estate agent.

This leads us to actual errors in the article.in our experience When representing commercial landlords and real estate developers, landlords who are not contractually prohibited from renting cannabis businesses will welcome this opportunity. The impact of the COVID-19 pandemic on the New York retail real estate market (including restaurants and bars) has been Widely publicized. Nowadays, a short walk along any part of New York City’s historic retail district is an unpleasant sight, as “vacant” signs appear on countless windows. Landlords are eager to find paying commercial tenants in any way possible, and the potential for an excess flow of people benefiting neighboring countries will only increase the attractiveness of cannabis tenants.

This is not to say that cannabis applicants are easy to sign lease agreements. The MRTA requires that the lease be executed after the application is submitted, which will require creative contracts and (possibly) large amounts of funds, because the applicants will not know whether they are licensed or not before signing the lease agreement. But this is a solvable problem, and we hope that many commercial landlords will work with cannabis tenants to find mutually beneficial solutions.

Even if it is not necessary, will some landlords avoid marijuana tenants? Yes it is. But those landlords are likely to opt out of MRTA, and even after the development of the cannabis industry in New York, they may change their minds.

All in all, protecting real estate will be a challenge for adult cannabis applicants in New York, but not for reasons suggested by the New York Times. Overall, we believe that the commercial real estate industry in New York will welcome cannabis tenants, and we are excited to help solve this complex problem. Stay tuned to the Canna Law blog for more information on the meaning of MRTA and its real estate.