by Andrew Robinson (with research and support from Brad Bachman)
This article highlights the importance of developing a firm understanding of the rules, regulations, and laws of zoning when starting a business in the cannabis industry, and the benefit of seeking legal and/or political assistance throughout that undertaking. By default, most businesses in the industry will need brick-and-mortar locations. Owners must consider many factors when planning their establishment depending on the space and facilities the business needs for its intended purposes. Dispensaries do not require as much size and square footage as testing and growing facilities, but the former will need to consider parking and proximity to public transportation, while the latter must have adequate infrastructure and access to electrical lighting. Regardless of the type of services the business will provide, owners must know how they will acquire property and receive approval from the appropriate planning and zoning entities before breaking ground.
Most jurisdictions have zoning plans that outline the government’s right to decide if your business can occur on a specific property. State regulators generally defer to local zoning boards and commissions to approve the land use. Local government often have varying views on the proposed land use and greater discretion to enact more restrictive rules than the state. Some may approve uses as of right, while some may only approve uses based on special variances or exceptions received from other zoning entities. Understanding the local-level processes and regulatory environment, from the state down to county and municipal level, is important since plans are reviewed and approved by all respective jurisdictions. Local requirements, terminologies, and ordinances will differ based on jurisdiction and could potentially interplay based on location. Whether a business owner decides to purchase or lease property, they must establish early on what it will take, aside from the building and tenant improvement permits, to occupy and commence use of the property.
It benefits the owner to know all local approvals they must receive before selecting a location. This can often be a moving target in the cannabis industry, as zoning boards are either creating and implementing regulations or are continuously updating and revising them. While some jurisdictions can base their specific zoning ordinance provisions on their state cannabis laws and regulations, others will develop local zoning ordinances with additional standards and limitations affecting where businesses can be located for such uses. Frederick County, MD, for example, allows medical growing facilities to operate in industrial rather than agricultural zones based upon an interpretation that such use is “limited manufacturing” in nature, while dispensaries are interpreted as being akin to “pharmacies,” and, thus, such uses are currently restricted to commercial zones. Zoning interpretations are not always definitive, however, as they remain subject to future interpretations and legal challenges and appeals. Local approvals are typically focused on issues such as traffic, lighting, security, waste disposal, and proximity to public buildings and use like jails, schools, and parks. Local requirements such as these can seem burdensome, but they present an opportunity to ensure the business is properly located in an accessible neighborhood that is receptive to the cannabis industry.
Building a facility on leased or purchased property is also governed by local jurisdictions, which provide most of the permitting to do so. All businesses must adhere to the standard building, electrical, fire, health, and safety codes, but that is just to physically occupy the space. While the use and occupancy permits may evidence that a particular occupant/operator has complied with certain local codes governing the space for a specific purpose, certain regulatory authorities (state and local) may also need to approve certain aspects of an intended cannabis business. Not only may owners/operators have to work with such regulators to pull permits and have build-out specifications evaluated, but they may need to navigate the process with those who disagree with what local permitting and planning offices demand. This is a multi-step endeavor, especially if different agencies in the same jurisdiction have contrasting requirements to permit a build-out. This is likely to happen in a new industry such as cannabis and it stresses the importance of understanding the interplay between differing local regulations.
Acquiring property will involve establishing relationships with many individuals in local real estate and government. While the volume of these interactions might be overwhelming, there is an advantage to fostering these important relationships. For states such as Pennsylvania that require site control or a letter of intent from applying cannabis businesses, the ability to convince a seller or landlord to delay the contract or lease from taking effect, or “going hard,” prior to obtaining all appropriate licenses related to the use, can decrease accumulated costs and prevent loss of up-front money. Additionally, obtaining formal approval of a use or an official interpretation of the applicability of local ordinances to such use, such as a zoning determination letter from a local zoning office, prior to a lease or purchase, can be vitally important to a business owner’s success. Having political contacts can smooth this approval process, especially when doing business around a controversial issue like cannabis. Politics is a main consideration in zoning matters appealed to boards, and discretionary zoning matters that mandate a public hearing where a body must apply the law to a set of facts, or in situations where it may be advantageous to a business owner to pursue changes to existing zoning ordinances to accommodate the realities of the local real estate market.
Acquiring a location and obtaining all zoning and permitting approvals may seem onerous, but the business will be in a strong position to quickly succeed if done carefully. There are many intricacies throughout the process of finding an acceptable location, purchasing or leasing the property, and building out the facilities for the business to operate. Due to the level of sophistication required to successfully navigate the multitude of zoning and permitting issues inherent in the cannabis industry, knowledgeable owner/operators routinely seek out legal professionals familiar with this ever-changing and complex area of the law early in the process.
If you have any questions about zoning in the cannabis industry, please contact Andrew Robinson at firstname.lastname@example.org.
ABOUT ANDREW ROBINSON
Andrew Robinson is a Principal in the Real Estate Law And Transactions group. He focuses on land use cases as well as areas of administrative and construction law. Mr. Robinson has experience representing clients facing homeowner association, landlord-tenant or construction disputes. He has assisted clients in processing subdivision and condominium development as well as in planning and zoning matters. Additionally, clients turn to Mr. Robinson for complex real estate transactions, commercial leasing and general litigation
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