Now that marijuana businesses are up and operating in Washington State, we are seeing more and more landlord-tenant disputes in regard to these businesses. Unfortunately, some of these disputes result in an eviction of the marijuana business tenant. Upon commencement of an eviction action, there are a number of considerations for both parties.
First, the tenant facing eviction must notify the Washington State Liquor and Cannabis Board (“LCB”) that it has received an eviction notice. It is important to keep in mind that a recreational marijuana license is issued for a specific location. Thus, a tenant cannot simply move from one location to another without consulting with the LCB and obtaining the requisite change of location approval.
Once a marijuana business notifies the LCB that it has received an eviction notice, the LCB may set forth conditions to temporarily allow the licensee to relocate and secure inventory. Notification to and communication with the LCB is critical. The licensee tenant will definitely want to work with the LCB in securing a new location so that it can maintain its marijuana license.
Next, the question arises for landlords as to what to do with abandoned marijuana inventory or product. If a marijuana licensee tenant abandons the premises leaving marijuana onsite, the landlord must notify the LCB. The LCB will then work with the landlord to arrange for the removal or destruction of the marijuana. Since the landlord is not the marijuana licensee, the landlord cannot legally sell or otherwise transfer the marijuana even though it is on their property.
To avoid landlord-tenant disputes, parties should try to anticipate issues of concern up front and address them in their lease agreement. For example, in regard to producer/processor tenants, landlords should consider whether and to what extent odors and effects on other building tenants need to be limited. Tenants should consider what tenant improvements will be necessary for the build-out of the premises as well as the amount of rent they can reasonably pay given the unpredictability of the marijuana market.
Lease agreements for marijuana businesses raise a host of issues unique to this industry, with the obvious one being the federal illegality of marijuana. Thus, marijuana business lease agreements should be carefully drafted to address these unique issues as well as to mitigate future landlord-tenant disputes.
For more information on the regulation of marijuana businesses, please contact Heather Wolf.