You may decide to purchase or lease a property for your cannabis business, but it’s important to carefully analyze it to make sure it’s suitable for your needs and won’t create major headaches and stress down the road. This guide provides the most essential criteria to consider.
Can Your Property be approved for Cannabis Use?
The search for a property for cannabis use or operations isn’t as straightforward as most people think. It’s critical to understand that a cannabis business cannot operate anywhere. It must be within a “Green Zone“.
A green zone is an isolated area that permits the establishment of businesses that supply cannabis and its related products. Investors are allowed to open up operations and serve the surrounding neighborhoods. According to the National Association of Realtors (NAR), there are limited green zones, and that’s why properties within such areas are in high demand.
Green zones are determined according to state laws. State lawmakers can, for instance, pass laws that prohibit the establishment of cannabis businesses in zones listed for residential developments. Additionally, the law might dictate that operations must be located within a 1000-ft radius of a school zone.
Simply because your property lies in a “green zone” doesn’t mean you’ll get approval. You may find a green zone that only allows the retail and manufacture of marijuana products. If you intend to cultivate, then you won’t be approved to operate in such a zone.
Each step of the process carries a surprisingly reliable value increase, as most investors are willing to pay premiums for businesses closer to operation. There will, however, be some variations between each type of business within the cannabis industry. While the path to operation often begins similarly for production, processing, retail, and distribution companies, each of these is a unique type of business that will have its own challenges and milestones throughout the process as well as those listed below.
Are there regulations that might make it difficult to obtain or maintain permits?
Cannabis laws in California have come a long way since the Compassionate Use Act was passed in 1996 to allow the use of medical marijuana for seriously ill patients. It’s now 2021, and cannabis is fully legal in 30 states, compelling many investors and entities to invest in the sector.
Typically, cannabis laws are enforced to ensure:
- Businesses operate under safe conditions
- Only quality, contaminant-free cannabis products reach consumer markets, and packaging must be labeled to inform customers
- Cannabis is not sold to minors/children
The Department of Cannabis Control (DCC) is the state agency responsible for making regulations that govern cannabis businesses. These policies specify the following:
- The paperwork required when filing a permit application
- Rules for operating a green zone real estate
- The variety of cannabis products that businesses can produce and the ingredients that can and cannot be used
- The quality tests that each product must satisfy before it hits the market
- Packaging specifications to alleviate contamination and labeling requirements to inform consumers of the content
- The legal implications against any cannabis operation that fails to adhere to the regulations
The DCC was formed to merge three cannabis programs. That said, cannabis investors can expect changes to these regulations from time to time to create a single standardized cannabis program. Keeping tabs on these changes is critical to keep for your business to continue operating legally.
Is this property allowed for other cannabis uses?
Depending on an investor’s business plan, a business owner may want to leverage their property for other cannabis use, such as marijuana cultivation or manufacturing. It’s critical to ensure that the premise meets the conditions and requirements necessary to support other cannabis-related purposes. For instance, CalCannabis Cultivation Licensing provides the guidelines on the cannabis cultivation best practices and outlines the conditions and requirements to cultivate the plant legally.
It’s also essential to understand your long-term business goals and determine if that property is best suitable to serve them. If you purchase a warehouse for marijuana-product storage, you can repurpose it in the future for indoor cultivation due to the extensive square footage and high ceilings. On the flip side, it’s challenging to use a storefront for cultivation a few years down the line due to the limited space. Hence, find a property based on the plans you have for the future. While you may not have plans to use the property for other uses, it is more valuable when you need to sell it.
Are there any sensitive uses around my property that will prevent my approvals?
Cannabis businesses are required to exercise proper and responsible property management. Therefore, any illicit use of the facility may hinder a property’s approval. It’s the licensee’s responsibility to monitor both the client and employee activities within the premises and parking areas under their control. They must discourage any use of the property for illegal, criminal, and nuisance activities, such as:
- Public consumption/smoking of cannabis
- Public drinking
Are there any property characteristics that will affect my business?
Whether you plan to cultivate, manufacture, or retail cannabis products, location is the most critical factor to consider, and it influences each operation differently.
If you want to start an outdoor cannabis farm, find a location that has a suitable climate. It should be temperate and predictable to support the growth and projected yield levels. The site must also have a stable water table, quality soil, excellent surface run-off, and be free from extreme storms. If not, you have to budget on how you can supplement these necessities.
Alternatively, you can find a location with a building that you can use for indoor cultivation. The structure must have high ceilings to allow the use of pendant lights needed by the plants. The power supply must also meet the indoor farm’s requirements.
The biggest challenge for retailers is getting their businesses visible to potential customers. That’s where location comes in. The operation must be in a high-traffic area and well visible from the road. Additionally, it must be easily accessible and feature an easy-to-navigate layout that provides clients a fun retail experience to ensure they come again.
Marijuana storefronts are in high demand. That pushes many investors to purchase/lease the first property they find without considering the build-out price. Build-outs include shelving, merchandising cases, and product storage. Fitting these fixtures is costly. You need to evaluate each property to ensure they have these features to reduce your costs.
When shopping for a manufacturing property, find a location that can allow you to operate a kitchen. Purchasing a manufacturing facility involves a substantial financial investment, leaving many people with only one option: lease.
The electricity supply must be sufficient to meet the facility’s power demands when operating at full capacity. It requires you to think about the business years down the line when the operation has grown and scaled.
Furthermore, the extraction process releases hazardous chemicals and is usually steeped in safety risks. The insurance expenses of running the business are significantly higher. Couple that with the rent, and you’ll be dealing with huge monthly expenditures. So, you must weigh in several critical factors when you’re considering purchasing a manufacturing property.
Questions to ask yourself when determining cannabis property suitability
- Can Your Property be approved for Cannabis Use?
- Are there regulations that might make it difficult to obtain or maintain permits?
- Is this property allowed for other cannabis uses?
- Are there any sensitive uses around my property that will prevent my approvals?
- Are there any property characteristics that will affect my business?
Leverage BeGreenLegal’s Property Suitability Analysis to Find the Right Property for Cannabis Use
Before you decide to buy or lease property for your next cannabis operation, take advantage of our Property Suitability Analysis for expert property reviews that guarantee approvals. It’s a remote review process that covers the areas that matter most, such as compliance with local and state regulations as well as practical, real-world issues that may hamper your approval or the desired use of the property.
Our BeGreenLegal professionals will remotely access the details of your chosen property from a variety of publicly available resources and compare your planned use to what’s permitted under the local and state regulations. Furthermore, we’ll offer you insights into the likelihood and severity of political limitations during your application and local approvals, especially in front of the planning commission. Contact us today!