What cannabis business property owners, mortgage lenders, landlords and tenants need to know:
- Cannabis continues to be a Schedule I drug under federal law. This creates unique risks to landlords leasing to cannabis businesses. It is important to understand those risks before leasing property to a cannabis business and to ensure that leases address and mitigate these risks to the extent possible.
- Kentucky’s Senate Bill 47 includes statewide restrictions on where cannabis businesses may be located.
- The Bill further allows towns, cities, and other local government entities to impose their own additional restrictions as to the location and operation of cannabis businesses, including the option for those jurisdictional areas to ban cannabis businesses altogether. Accordingly, Property owners desiring to lease to a cannabis company or to operate a cannabis company on their property must ensure that their local governing body does not ban cannabis businesses and that the property otherwise meets all of the local zoning and land use requirements for cannabis businesses.
- Additional considerations when financing, purchasing, or leasing real property upon which a cannabis business operates or intends to operate.
- The pool of lenders is small, underwriting loans requires additional considerations, and interest rates are normally higher than regular market rates (Green Tax).
- A limited number of title insurance underwriters will insure ownership, mortgage, or leasehold interests.
- Licensing provisions and requirements must be negotiated on leases and loan agreements, together with contingencies for the loss of such license.
- Landlords and mortgage holders may not take a lien on inventory.