Joint Tenancy: Medical Marijuana Leases

Real estate is one of the law’s most confusing areas,* but add in the buzz over medical marijuana and what’s a landlord to do when considering leasing to a marijuana dispensary? Talk to your lawyer for starters.

The possession and use of medical marijuana is legal in Colorado, but state and local officials are scrambling to fill-in huge gaps in the authorizing law, including, for purposes of this post, where that medical marijuana can be grown, distributed and used. Add the simple fact that marijuana is still an illegal drug under federal law, and a property owner will have many more questions about potential legal liability for leasing to a dispensary than there are currently answers.

To begin understanding some of the questions, even as the law evolves, consider two pretty basic pieces of paper: your mortgage and your insurance policy. In each, there may be implicit and even explicit requirements that a lease to dispensary could violate, especially as the regulatory structure develops. Thus, potentially, the lease could default your loan or cause your insurance to be cancelled or limited, so be sure to review them first. Your other tenants and neighbors may have their own legal concerns with your new tenant, so best be prepared for that, too.

Even without the legal issues, consider the other practical matters that you should examine before every lease, such as creditworthiness and sustainability of the tenant. The Denver Post reports that Denver has issued more sales tax licenses for marijuana dispensaries than for “liquor stores or Starbucks Coffee.” While that fact might please a Wild West yearning in some, it hardly makes for good business. Certainly many of those dispensaries will be eliminated by the market, while others will be regulated out of existence.

Your goal as a landlord is make sure your tenant's problems don’t become your problems. Since these are the goals of owners of commercial real estate generally, the due diligence procedures and well-drafted lease you would use for any tenant are great starting points for a marijuana dispensary tenant, but until the law, and the market, are settled, get your lawyer involved, too.

*Joint tenancy, to clear any confusion my attempt at humor may create, has nothing to do with marijuana leases and everything to do with estate planning and probate. Joint tenancy is a way for two or more people (often spouses) to take title to property so that title passes directly, outside of a will, on the death of a joint owner.