Six Issues to Consider
In 2016, Florida voters overwhelmingly supported the passage of Amendment 2, legalizing medical marijuana for an expanded group of eligible patients statewide. Even with the passage of time and new regulations, many feel left in the dark as to what this industry will really mean for the Sunshine State. Here are a few key takeaways to keep in mind:
1. Commercial real estate may see marked growth. Because indoor medical marijuana cultivation requires enough space and a consistent climate necessary for the growing cycles, the sale and leasing of industrial spaces and agricultural lands could see a boom. Some predict that hundreds, if not thousands, of groups could apply for the next round of Medical Marijuana Treatment Center (MMTC) license applications. Thus, the need for cultivation and processing facilities (whether retrofitting existing spaces or buying vacant land to build) as well as retail dispensing locations for those license hopefuls may mean more opportunities for brokers and owners statewide. With now more than 100,000 patients registered in Florida, existing MMTCs will also be looking for key retail dispensing locations in high-population centers to meet this growing demand.
2. Be wary of using standard agreements. It is always tempting to use standard agreements for business transactions, but in the world of medical marijuana, nothing is business as usual. Simple boilerplate provisions can cause serious problems. For example, agreeing to comply with all local, state and federal laws is typically a no-brainer provision, but because medical marijuana remains illegal under federal law, that provision would put a licensed MMTC in automatic default. Similarly, even though landlords are not growing or selling the medical marijuana products, that does not mean they are necessarily immune from liability. Thus, the federal liability implications must always be carefully considered.
3. Figure out financing. Because of marijuana’s federal illegality, obtaining financing is difficult, if not impossible, for many in the marijuana industry. While there are lenders and private groups willing to finance certain deals, the terms of those loan agreements must be carefully reviewed. For example, collateral for the loan should not necessarily be in the form of all of the assets of the business. Why? Because as a lender (who is not licensed to sell marijuana), coming into possession of all marijuana products by virtue of a default means you could now be violating both federal and state law.
4. Be aware of local codes and ordinances. Under Chapter 381.986, local governments can either ban or permit marijuana dispensaries. However, if permitted, such dispensaries must be treated as pharmacies for zoning purposes and must be located at least 500 feet away from existing schools. When looking at properties, a close review of existing and pending ordinances in that jurisdiction is necessary. Zoning verification letters or other official written determinations from local planning and zoning departments is the best way to know whether your property is actually permitted to have a dispensary.
5. IP issues remain sticky. In the marijuana industry, trademark registration is a thorny issue, as the United States Patent and Trademark Office has denied applications because the applicant cannot demonstrate it has made “legal use” of the mark in commerce due to its illegality under federal law. As a result, many medical marijuana businesses are relegated to seeking more limited protection afforded by the state trademark registration process. Also, due to the difficulty (or legal impossibility) of operating marijuana businesses across state lines, participants often employ intellectual property (IP) licensing agreements to extend their brands and/or monetize their know-how beyond their home states. It is imperative to structure these deals correctly to protect your IP and avoid potentially placing yourself at criminal risk.
6. Employers should employ caution. Just because medical marijuana is legal for qualified patients with a physician recommendation, that does not mean every employer’s drug-free workplace policy has gone up in smoke. Quite the contrary — Florida statutes specifically allow employers to establish, continue, or enforce a drug-free workplace program or policy. Employers do not have to accommodate the medical use of marijuana in any workplace, and the ADA similarly does not require such accommodation. Employers should nonetheless review and evaluate their current employment practices and policies concerning drug testing, workplace conduct and drug/alcohol use.
Even though medical marijuana is legal in Florida, it still remains an uncertain market given its federal illegality. Consulting lawyers and professionals well-versed in the nuances and regulatory complexities of the industry is always recommended before entering the market.
Tara Tedrow is a land use attorney and the co-chair of the Cannabis and Controlled Substances Group at Lowndes, Drosdick, Doster, Kantor & Reed, P.A.