Florida has been home to a burgeoning medical marijuana market since 2014, and the industry has had its eyes on the Sunshine State ever since. In 2016, Florida voters overwhelmingly supported the passage of Amendment 2, a constitutional amendment that legalized medical marijuana’s billion-dollar industry for Florida.
Though some laws are in place and regulations continue to be developed, many are unclear as to how medical marijuana impacts their industry. Here are four considerations to keep in mind when analyzing how these regulations may affect the commercial side of real estate:
Commercial real estate may see marked growth
Because indoor medical marijuana cultivation requires enough space and a consistent climate to support continual plant growth, the sale and leasing of industrial spaces and vacant or improved agricultural lands could see an uptick. Though licensed Medical Marijuana Treatment Centers (MMTC) typically have one location for cultivation and processing, they have the potential for dozens of dispensary locations to be approved. Since the latest round of MMTC license applications have been released for final adoption, license hopefuls have been locking down properties for cultivation, processing facilities, and retail dispensing. With now more than 110,000 patients registered in Florida, existing MMTCs will also be looking for key retail dispensing locations in high population centers to meet this growing demand. Brokers shouldn’t be surprised if they start to get calls about suitable locations for MMTCs statewide.
Standard agreements may require additional care
Use caution when using standard agreements. Many groups have no problem using their standard agreement templates for business and real estate 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 (and marijuana generally) remains illegal under federal law, that provision would put a licensed MMTC in automatic default. Similarly, even though landlords aren't growing or selling the medical marijuana products, that doesn't mean they are necessarily immune from such federal liability. Thus, the federal liability implications of any agreements must always be carefully considered.
Financing may need to be figured out differently
Because of marijuana's federal illegality, obtaining financing is difficult, if not impossible, for many in the industry. While there are lenders and private groups willing to finance some 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 the business’ assets. Why? Because as a lender (who isn't licensed to sell marijuana), coming into possession of all marijuana products by virtue of a default means that lender could now potentially be liable for violating both federal and state law.
Local codes and ordinances may require special caution
Under Florida Statutes Chapter 381.986, local governments can either ban or permit medical marijuana dispensaries in their jurisdiction. 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 for dispensaries, a close review of existing and pending ordinances in that jurisdiction is critical. Zoning verification letters or other official written determinations from local planning and zoning departments are a great way to obtain assurance as to whether your property can have a dispensary.
These four factors barely scratch the surface of the complex regulatory and legal considerations inherent to the medical marijuana industry. However, with companies spending tens of millions of dollars to purchase existing medical marijuana licenses and putting hundreds of thousands of dollars towards applying for new licenses, it’s clear that Florida’s market will likely see immense growth in the coming years.