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Commercial leases face new vulnerabilities

The commercial real estate landscape is changing rapidly, after the statewide legalization of recreational marijuana use has created a red-hot market for legitimate growing and distributing opportunities. However, the fundamentals of the real-estate business are not as quick to adapt to the shifting landscape, leaving both landlords and tenants in a tricky situation. While the use and regulated sale of marijuana is legal within the state, it is still classified as a Schedule 1 illegal drug at the federal level.

The tension between federal authority and states' rights leaves lenders in a complicated bind, making the new construction of spaces to house marijuana-based businesses difficult to finance. In light of tightly-controlled financing, many growers and dispensaries will be operating in leased commercial spaces.

While both the state and federal government catches up to the new law, commercial tenants may face difficulties integrating marijuana-based businesses into the overall commercial landscape. For some tenants, they may see their leases harder to renew because of lucrative competition vying for limited space. Others may face problems sharing a commercial space with marijuana businesses that bring with them increased regulations.

The truth of the matter is that many of the legal issues that commercial tenants may face are difficult to anticipate before they arise. If you are a commercial renter, now is the time to re-examine your lease to make sure you have a good handle on its strengths and weaknesses in the face of the changing market. The guidance of an experienced attorney can help you understand the full scope of the issues at hand and ensure that you take the necessary steps to protect your right before they might be violated.

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