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Adult-use marijuana and real property uses
Robert Nolan, a parter at Warner Norcross + Judd, contributed to this post.
Even though medical and recreational use of marijuana is allowed under Michigan law, there are a number of differences in the legislation that may affect the uses of real estate by this industry.
Michigan’s Medical Marijuana Facilities Licensing Act and adult-use legalization under the Michigan Regulation and Taxation of Marijuana Act both grant municipal governments the right to determine whether they will allow marijuana business operations in their jurisdictions. If a municipality, defined as a city, village or township, decides to allow marijuana businesses, it also may regulate the number, type and location of those businesses. Since virtually all marijuana business operations require a place to conduct business, the implications of municipal decisions on real property are significant.
While the MMFLA and MRTMA each legalize and regulate marijuana, there are many differences between the two. Where MMFLA requires municipal adoption of an opt-in ordinance to qualify for a state license, MRTMA allows the state to issue a license to an applicant unless the municipality opts out and notifies the state before an application is filed. Additionally, there are several license types under MRTMA that do not exist under MMFLA. What follows are examples of possible municipal regulation and land uses for some of the unique adult-use establishment licenses.
Micro business. This license type authorizes cultivation of up to 150 plants, processing if the licensee so desires, and retail sale directly to adults 21 years of age and older. The licensee is prohibited from selling product to other marijuana licensees. Unless the municipality has opted out, or established zoning for this type of business, the licensee can locate in any real property that would otherwise be appropriate for the cultivation and retail sale of plants and plant-based products.
Designated consumption establishments. As the name implies, this license will allow on-site consumption of marijuana. Sometimes colloquially referred to as “cannabis cafés” or “cannabis lounges,” this is the type of establishment that municipalities often describe when they worry about marijuana businesses in their communities. Presumably, any municipality that does not opt out of adult-use marijuana will stringently control the locations where these types of establishments may operate. Like bars, these types of facilities likely could be the targets of various claims. An owner-operator or lessor should accordingly make appropriate insurance decisions.
Marijuana event organizer and temporary marijuana event licenses. These two license types are joined together. To obtain a temporary marijuana event license, the applicant is required to hold a marijuana event organizer license, which appears to require an application but has no unique qualifications. A temporary marijuana event license may be issued for no longer than seven days and must be applied for at least 90 days before the proposed event. While municipal pre-approval is generally not required for a MRTMA license, the temporary license must have express approval of the proposed venue. Like consumption establishments, these temporary venues can be very unpopular with local municipalities. Again, because of the express municipal approval requirement, not all real property will be available as a venue.
Marijuana delivery business. As defined in the recently published draft combined marijuana license rules, the marijuana delivery business licensee is authorized to deliver adult use marijuana product from a marijuana retailer or micro business to individuals 21 years and older. The marijuana delivery business should not be confused with the secured transporter licenses issued under MMFLA or MRTMA. The delivery business is only for the delivery of adult-use marijuana product to ultimate individual customers. Like the other establishments described above, a delivery business will require a physical address. Curiously, it appears even if the municipality where the delivery business is located has opted out of allowing adult-use establishments, there is no need for municipal authorization to obtain a delivery license.
Although adult-use marijuana is regulated under a different state law than medical marijuana, adult use marijuana-related activity still violates federal law. Owners of real estate operated, leased or licensed to a MRTMA establishment still run the risk of federal marijuana law enforcement.
Additionally, of the approximately 1,750 Michigan municipalities, more than 1,400 have currently opted out of allowing adult-use establishments in their jurisdictions. While real estate eligible for use as an adult use marijuana establishment might have enhanced value in the marketplace, most of those markets are presently not available due to municipal opt-out.