Is it lawful to rent a space for a marijuana business?
New York may be the next state to legalize the use of recreational marijuana. Governor Cuomo issued a directive several months ago to study the potential impact of a regulated marijuana program, and just recently the New York State Department of Health Commissioner indicated that it will recommend legalizing the use of marijuana in its report to the state. Should New York authorize the use of marijuana in the state, many industries will be impacted. Chief among them is the New York real estate market.
Cannabis Based Businesses Bring in Big Bucks
The cannabis industry is huge, and by legalizing recreational marijuana, it is anticipated that the state will generate $3.1 billion and New York City alone will take in some $1.1 billion. This influx of sudden cash holds the potential to alter the real estate market. New York City’s real estate market has had a strong few years, with homes reaching record prices. Luxury real estate recently took a dip. This could change with the wealth generated through the opening of a legal marijuana trade.
Conflicts may arise, however, between federal and state laws, which may complicate matters for buyers and sellers. Under Federal law, marijuana remains a Schedule 1 drug. As such, marijuana growers cannot legally deposit revenues from their sales in federally insured banks. They can further not receive bank loans to start a marijuana based business. Mortgage companies cannot lawfully give a loan to borrowers with income derived from a cannabis based business. As such, some growers will have a hard time purchasing property. Nonetheless, other states that have legalized cannabis have seen a real estate boom based on cash purchases.
Renting to a Marijuana Based Business Brings Challenges
Many new cannabis businesses will need to lease a space to start their business. Again, the conflict with federal law could bring complications. It is unlawful under federal law for landlords to rent to a cannabis based business, but the law is not generally enforced. The cash based nature of the business can pose some difficulties for new landlords. New York landlords looking to benefit from the new cannabis industry should consult with a real estate law attorney for assistance with analyzing the law, drafting a thorough lease, and protecting themselves while still profiting from this booming field.