Working out of Harris Bricken's Los Angeles office, Julie is a fearless advocate for businesses and organizations striving to master government processes, avoid litigation, and foster an environment that allows them to grow freely. Her experience working for federal and local governments and agencies has provided Julie with a unique perspective and an ability to foster cooperative relationships with public agencies on behalf of her clients.

california cryptocurrency cannabis tax

We’ve written about the potential benefits of harnessing the power of blockchain technology to track and trace cannabis from seed to sale and provide an effective regulatory tool for governments (see here and here). We’ve also warned of the risks and dangers (and outright scams) associated with many cryptocurrencies and the heightened risks that come when a federally prohibited substance is combined with use of typically anonymous cryptocurrencies.

I have been writing and speaking about the potential benefits of blockchain in a variety of contexts, not limited to cannabis. Last month, I spoke about the benefits of blockchain for local governments on a panel hosted by the International City Managers Association, Government Finance Officers Association, and National League of Cities. The consensus in terms of local government use is that blockchain technology has the potential to provide tremendous benefits to local governments in terms of efficiency and transparency, but that it is still very much in the development stages and great skepticism should be exercised when presented with opportunities to implement it. There are still a great deal of scams and misinformation surrounding blockchain technology, especially in the context of cryptocurrency.

A handful of cities and states are pioneering the way forward in adoption of blockchain technology use. Last month, California Assembly Members Ting and McCarty introduced AB 953, which would allow local governments accept city or county cannabis license tax amounts due by payment using “stablecoins.” The bill would authorize local governments to either accept stablecoins directly into a digital wallet controlled by that jurisdiction or to utilize a third-party digital asset payment processor that allows for the immediate conversion of any payments made by stablecoins into United States dollars and deposit into an account of that jurisdiction. The vulnerability of digital wallets is explained in my white paper.

A stablecoin is defined in the bill as: “a digital asset that has price stable characteristics pegged to United States dollars and United States dollars serve as collateral to that digital asset.”

Digital asset is defined as “a digital representation of value that is used as a medium of exchange, unit of account, or store of value and is not legal tender, whether or not denominated in legal tender.”

We are very interested in watching how this bill plays out in the Assembly, and will keep the blog updated as things progress. We are skeptical that this particular proposal will succeed, but encouraged that the State Legislature continues to search for viable banking solutions for the cannabis industry. Stay tuned: the bill may be heard in committee on March 24.

supreme court 8th amendment forfeiture cannabis

The United States Supreme Court issued a unanimous ruling on Wednesday in the case of Timbs v. Indiana, incorporating the Eighth Amendment’s Excessive Fines Clause against the states through the Due Process Clause of the Fourteenth Amendment. As we have written about, the case involves the forfeiture of petitioner’s Land Rover as punishment for selling heroin. The Indiana Court of Appeal held that the forfeiture of the Land Rover was grossly disproportionate to the gravity of the offense, and the Supreme Court of Indiana reversed and concluded that because states are not subject to the Excessive Fines Clause, the forfeiture was not unconstitutional. In a sweeping decision authored by Ruth Bader Ginsburg, the United States Supreme Court flatly rejected that contention.

The decision is an expansion of the federal Constitution to apply against state and local governments, and it means that all state and local asset forfeiture regimes could be subject to challenge insofar as they allow for forfeitures that are “excessive” under the Eighth Amendment. That includes forfeitures related to cannabis activity. According to the decision,

… the historical and logical case for concluding that the Fourteenth Amendment incorporates the Excessive Fines Clause is overwhelming. Protection against excessive punitive economic sanctions secured by the Clause is, to repeat, both ‘fundamental to our scheme of ordered liberty’ and ‘deeply rooted in this Nation’s history and tradition.’

The decision is being hailed as a victory for criminal justice reform. It strengthens property rights and could limit controversial police seizures such as those done through civil forfeiture nationwide. The decision will have nationwide impacts for those accused of drug crimes and other offenses, and will be an important check on the government’s power to interfere with private property. This is great news for the cannabis industry, and will provide additional legal support for our clients who have had their property seized or threatened to be seized by state and local governments.

For more background on this issue, check out the following:

qualified opportunity zones cannabisQualified Opportunity Zones, which provide a tremendous benefit to investors and low income communities, are the hot new topic in the real estate investment world. The cannabis industry is buzzing about investment opportunities in these zones, but we remain hesitant to recommend them without reservation. Congress disqualifies certain businesses from participation in Qualified Opportunity Zones, and we have seen some indications Congress is considering disqualifying cannabis businesses as well.

Qualified Opportunity Zones were created under the relatively new federal tax law, known as the “Tax Cuts and Jobs Act.” That law authorized each state to nominate certain low-income communities as “qualified opportunity zones.” A list of qualifying census tracts can be found here.

To take advantage of the benefits of these zones, taxpayers must invest in a Qualified Opportunity Fund, which is an investment vehicle organized as a corporation or partnership for the purpose of investing in qualified opportunity zone property that holds at least 90 percent of its assets in qualified opportunity zone property.

The benefits to investors include (1) a deferral of tax on capital gains from the sale of existing property that are reinvested into a Qualified Opportunity Fund, (2) subsequent basis increases on deferred capital gains reinvested into a Qualified Opportunity Fund, and (3) the elimination of capital gains tax on growth attributable to gain reinvested in a Qualified Opportunity Fund held for at least ten years.

The State of California explains that Opportunity Zones will support new investments in environmental justice, sustainability, climate change, and affordable housing, and has created a website to educate investors about various opportunities.

This brings us to cannabis. Commercial cannabis activity, outside the industrial hemp context, is federally prohibited. As such, marijuana businesses are treated as criminal enterprises in the eyes of the feds. We’ve previously written extensively this. (See here, for example). Marijuana’s criminality colors how all federal agencies, including the IRS, treat cannabis businesses.

We have written extensively about Section 280E and its implications for taxation of cannabis businesses (See here, here, here and here). Section 280E disallows deductions and credits for any amount paid or incurred in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances.

The benefits provided in connection with Opportunity Zones are not deductions or credits, but deferrals. The new Opportunity Zone clause provides a list of business activity that is disqualified from tax benefits, which includes “any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, racetrack or other facility used for gambling, or any store the principal business of which is the sale of alcoholic beverages for consumption off premises.” The disqualified list does not include cannabis businesses.

Because the statute omits “cannabis activity” or “marijuana activity” from the list of disqualified businesses, some contend that marijuana qualifies as an opportunity zone business. However, many tax practitioners worry that cannabis businesses being omitted from the list of disqualified businesses was an oversight that Congress will fix in a technical corrections bill. The list of disqualified businesses isn’t limited to illegal businesses — even if Congress is inclined to relax criminal marijuana laws, it hasn’t shown any indication that it wants to provide tax benefits to marijuana businesses. The final regulations governing Opportunity Zones have not yet taken effect.

Cannabis businesses that invest in Opportunity Zones hoping to benefit from the tax benefit need to weigh the risk that Congress will pull the rug out from under them by adding marijuana businesses to the list of disqualified businesses. If marijuana businesses are able to avoid that fate, however, Qualified Opportunity Zones could provide a great opportunity for investors and low income communities.

As we’ve stated time and time again, the cannabis industry is rampant with risks and scams, and can be an ethical minefield for attorneys to navigate. Legalized cannabis is a multi-billion dollar industry, however, and legitimate businesses need good and ethical attorneys to provide legal advice.

This is complicated, because due to federal laws, an attorney providing legal advice to a cannabis business in compliance with state and local laws could technically be aiding and abetting violations of the federal Controlled Substances Act.

Earlier this month, I gave a presentation to California attorneys regarding ethical representation of cannabis businesses and how to navigate the complicated tension between state and federal laws. I was joined by municipal lawyer Ruben Duran, partner with Best Best & Krieger, who advises public agencies.

This post will focus on the ongoing tension between state and federal laws. My next post will discuss the application of California’s new Rules of Professional Conduct, and the third post in this series will touch on on attorney-client privilege concerns and real life ethical scenarios.

Tension Between State and Federal Laws

MAUCRSA, codified at Business and Professions Code section 26000 et. seq., provides a comprehensive system to control and regulate commercial cannabis activity in California. Civil Code section 1550.5(b), which took effect January 1, 2018, provides that commercial activity conducted in compliance with local and state laws is the lawful object of a contract, not contrary to good morals, and not against public policy. This is important for practicing and prospective attorneys because good moral character is a prerequisite for admission to the bar.

Under federal law, however, commercial cannabis activity is unlawful pursuant to the Controlled Substances Act. An attempt to violate or a conspiracy to commit a violation of the Controlled Substances Act is subject to the same penalties as the underlying offense. Accordingly, there is potential for attorneys to be roped in to a criminal action if they are considered a co-conspirator.

Any investment into a marijuana business puts an individual at risk of criminal prosecution, and those assets, investments, and profits are subject to forfeiture.
Financial transactions that involve proceeds generated by marijuana business can form the basis for federal prosecution under money laundering statutes, the unlicensed money transmitter statute, and the Bank Secrecy Act. (18 U.S.C. §§ 1956, 1957.)

For the last several years, a rider to the appropriations bill that funds the Department of Justice (commonly referred to as the Rohrabacher-Blumenauer Amendment or Rohrabacher-Farr Amendment) has provided some degree of protection to certain categories of marijuana businesses. In the case of US v McIntosh, a Ninth Circuit panel held that the rider prohibits the Department of Justice from spending funds to prosecute people engaged in conduct permitted by state medical marijuana laws who fully complied with such laws. The panel wrote that individuals who do not strictly comply with all state law conditions regarding the use, distribution, possession, and cultivation of medical marijuana have engaged in conduct that is unauthorized, and that prosecuting such individuals would not violate the rider. Note that the rider says nothing about adult use/recreational marijuana or manufactured marijuana.

In addition to the potential criminal risks, there are many other ways the federal government is working against the cannabis industry. There are potential immigration consequences (for example, see the recent lifetime entry ban of Canadian investors), bank accounts and credit card accounts may be shut down, TSA pre-check privileges may be revoked, among other perils. On the bright side, national legalization of cannabis in the United States has been a talking point for many congressional representatives lately, and it seems like legalization may be a priority for incoming legislators. We won’t hold our breaths, but federal policy will be something to watch in 2019.

Stay tuned for the next post in this series regarding the application of California’s new Rules of Professional Conduct to attorneys working in the cannabis industry.

asset forfeiture fine cannabis marijuana

We have handled a number of excessive fines cases on behalf of clients who’ve had their property seized, or threatened to be seized by the government. For some background on this, see our blog posts here and here.

The United States Constitution provides that excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted. U.S. Const., Amdt. 8. The Excessive Fines Clause “limits the government’s power to extract payments, whether in cash or in kind, ‘as punishment for some offense.’” Austin v. United States, 509 U.S. 602, 609-10 (1993). That constitutional protection applies in cannabis cases, just like everywhere else.

On Wednesday, the United States Supreme Court heard oral arguments in the case of Timbs v. Indiana regarding whether the Eighth Amendment’s Excessive Fines Clause is incorporated against the States under the Fourteenth Amendment. The case involves the forfeiture of petitioner’s land rover as punishment for selling heroin. The Indiana Court of Appeal held that the forfeiture of the land rover was grossly disproportionate to the gravity of the offense. The Indiana Supreme Court reversed and concluded that because states are not subject to the Excessive Fines Clause, the forfeiture was not unconstitutional.

The predicted outcome is that the United States Supreme Court will apply the Excessive Fines Clause against the states. The Timbs decision will have nationwide impacts for those accused of drug crimes and other offenses, and will be an important check on the government’s power to interfere with private property. That would be great news for the cannabis industry.

As stated in the petitioner’s opening brief:

“The right to be free from excessive fines is fundamental and applies to the States. The power to fine is—and has always been—a formidable one. And unlike every other form of punishment, fines and forfeitures are a source of revenue for the government, making them uniquely prone to abuse. The accompanying risk to life, liberty, and property is very real. “[I]n a free government,” after all, “almost all other rights would become utterly worthless, if the government possessed an uncontrollable power over the private fortune of every citizen.” 3 Joseph Story, Commentaries on the Constitution of the United States § 1784, 661 (1833).”

It’s a compelling argument, and you can read the full brief here.

We will be monitoring this case and will provide an update once the decision is published.

california real estate development agreement
You get what you negotiate in development agreements.

This is the third post in our three-part series on development agreements in California. In our first post we provide an overview of the use (and misuse) of development agreements in the cannabis industry. The second post breaks down the basics of development agreement laws. Here, we will discuss the key terms to include and what to watch out for when negotiating a development agreement with a public agency.

Term

As we’ve explained, California’s development agreement laws were enacted to provide assurances to developers faced with uncertainty in government approval processes for complex and long-term development projects. A development agreement should provide developers with assurances that the developer will see a return on investment by providing vested rights to engage in a particular use on a property. The rights are locked in so that if local laws change in the future (e.g., the voters or legislative body prohibit a particular use), the uses permitted in the agreement can continue for the remaining term of the agreement.

Accordingly, one of the fundamental terms of a development agreement is its duration. Commonly, development agreements in the non-cannabis context provide vested rights for a period of ten to twenty years. Properly building out a facility tailored for commercial cannabis uses may cost millions to tens of millions of dollars. If the term of a development agreement is only one to five years (as many California public agencies are proposing), a developer will not likely recoup the value of his or her investment. Imagine investing $15 million into a state-of-the-art cultivation and manufacturing facility, only to be prohibited from engaging in commercial cannabis activity one year down the road. Don’t go in for a short-term agreement!

Permitted Uses

Another key term of a development agreement is the description of permitted uses at the property. This clause should be given careful attention, and must be drafted to ensure that all of the contemplated uses of the property are explicitly spelled out. Stating “commercial cannabis activity” without referring to specific categories or license types will lead to confusion and potential problems. If the developer wants to engage in manufacturing, cultivation, and distribution, for example, then all of those uses should be described with as much specificity as possible to ensure that there is no question as to what the public agency authorized.

Many developers want to include uses that the local jurisdiction has not yet authorized. For example, a local jurisdiction may currently allow cultivation and manufacturing, but no retail use. A developer might want to engage in retail use at some point down the road, and therefore want to include retail in the permitted use clause. However, while a developer can commit to uses more restrictive than those set forth in the zoning ordinance, a development agreement may not allow uses or create exceptions to use restrictions beyond those allowed in the zoning code; to do so requires a rezoning or amendment to the zoning ordinance. Neighbors in Support of Appropriate Land Use v County of Tuolumne (2007) 157 Cal. App. 4th 997, 1015. Once the zoning code is amended, the developer can apply to amend the development agreement accordingly.

Vested Rights

Another fundamental aspect of a development agreement is the provision of vested rights to the developer. A “vested right” is a right to proceed with construction or other land use activity despite an intervening change in the law. See Avco Community Developers, Inc. v South Coast Reg’l Comm’n (1976) 17 C3d 785. Obtaining vested rights is essentially the entire point of a development agreement. However, we have seen some cities attempt to expressly prohibit developers from obtaining a vested right to engage in commercial cannabis activity. A development agreement should explicitly grant vested rights to the developer, and the vesting should not be conditioned on unreasonable or unattainable benchmarks.

Notice and Cure Period

Development agreements should provide developers with an adequate notice and cure period to enable the developer to remedy any problems and maintain its rights under the agreement before the public agency has the right to terminate. Vested rights under a development agreement are a valuable asset to the property, and developers (and their lenders, if applicable) need to have an opportunity to cure any potential defect and remain in good standing with the public agency to protect the value of the property.

Non-Mandatory

A development agreement should provide developers with the right, but not the obligation, to develop and use a property. Similarly, a development agreement should not require the developer to pay fees for a use it does not pursue. Many development agreements we have seen purport to require developers to pay fees to the public agency even when the cannabis uses are not actually pursued by the developer.

Construction Schedule

Some public agencies require developers to include a construction schedule in the development agreement. If the public agency insists on such a provision, make sure that the proposed schedule provides maximum discretion and control to the developer, is realistic and attainable, and does not penalize developer for failing to reach certain construction milestones. Construction is riddled with unforeseeable delays, which means there is a strong chance of running afoul of the development agreement terms or having to amend the development agreement if a strict construction schedule is spelled out in the agreement.


This post is not exhaustive, and you should consult with an experienced cannabis real estate attorney before negotiating a development agreement related to this highly dynamic industry in California.

AB 2164 cannabis fines marijuana
AB 2164 may create surprises for cannabis landlords.

Prior to the enactment of AB 2164, California law required cities and counties to grant a person responsible for a continuing municipal code violation a reasonable time to remedy the violation before the city or county could impose fines or penalties when that violation pertained to building, plumbing, electrical, or other similar structural and zoning issues that did not create an immediate danger to health or safety. Cal. Gov. Code section 53069.4.

In June, California’s Fifth District Court of Appeal interpreted Government Code section 53069.4 to require the County of Fresno to provide a cannabis cultivator a reasonable time to abate cultivation activity before imposing a fine. See Thao v. County of Fresno, Court of Appeal of the State of California, Fifth Appellate District, Case Nos. F072276, F073035, Filed June 28, 2018 (unpublished).

Apparently, the state legislature didn’t like that, because earlier this month, Governor Brown signed AB 2164 into law, which amends Government Code section 53069.4 and allows local governments to eliminate the “reasonable time period” to correct a code violation in cases of cannabis cultivation. According to the bill’s author, this removes at least one monetary incentive for illicit grows to continually move while giving local governments the ability to bring meaningful penalties on willfully illegal growers.

While it may sound reasonable, in practice this new law will have drastic impacts on unwitting landlords who may or may not know that cannabis cultivation is occurring at their property. Even the most sophisticated property owners are befuddled by California’s new regulatory scheme, unsure of whether cannabis activity is authorized as a matter of right in all jurisdictions (it is not), or whether they are even allowed to prohibit cannabis use or activity in their leases (they can).

We have been assisting a number of property owners facing excessive fines and penalties imposed by cities due to unlawful cannabis activity by their tenants (see here for more on that). Some cities impose strict liability against property owners for their tenants’ code violations, rack up fines of $10,000 per day, and then record the fines as an assessment on the property owner’s tax bill. This can result in a tax bill for hundreds of thousands to millions of dollars, non-payment of which results in sale of the property by the county.

Providing a reasonable period of time to correct a violation like cannabis cultivation ensured that property owners, who generally cannot proactively inspect property that is leased to a tenant (and therefore may be unaware of illegal activity) could take action to eliminate unlawful activity before it became an insurmountable financial burden. Now, property owners face serious and immediate risks and must take steps to ensure they are not held liable for unlawful cultivation activity by their tenants.

Fortunately, AB 2164 includes a “safe harbor” that requires cities and counties to provide a reasonable period of time to correct a violation prior to the imposition of administrative fines or penalties if all of the following are true:

  1. A tenant is in possession of the property that is the subject of the administrative action;
  2. The rental property owner or agent can provide evidence that the rental or lease agreement prohibits the cultivation of cannabis; and
  3. The rental property owner or agent did not know the tenant was illegally cultivating cannabis and no complaint, property inspection, or other information caused the rental property owner or agent to have actual notice of the illegal cannabis cultivation.

So, if you are a commercial landlord and want to protect yourself from municipal fines and penalties without warning, make sure that either (1) your tenant is lawfully cultivating pursuant to all local and state laws, or (2) you are complying with items 1-3 above. Otherwise, the consequences of city or county action can be painful.

california cannabis marijuana development
Development agreements are a unique process.

This is the second post in our three-part series on California development agreements. In our first post we provided an overview of the use (and misuse) of development agreements in the cannabis industry. This post breaks down the basics of development agreement laws.

California’s development agreement statutes are located in Government Code sections 65864 – 65869.5. According to the legislative findings and declarations, the lack of certainty in the approval of development projects can result in a waste of resources, escalate the cost of housing and other development to the consumer, and discourage investment in and commitment to comprehensive planning which would make maximum efficient utilization of resources at the least economic cost to the public. Cal. Gov’t Code § 65864(a).

Providing assurance to development project applications that, upon approval of a project, the applicant may proceed in accordance with existing policies, rules and regulations, and subject to conditions of approval, strengthens the public planning process, encourages private participation in comprehensive planning, and reduces the economic costs of development. Cal. Gov’t Code § 65864(b). In other words, the California State Legislature has determined that providing certainty and predictability in the development process is good for everyone.

Government Code section 65865(a) provides that anyone with a legal or equitable interest in real property may enter into a development agreement with a city or county for the development of the property.

“Development” is not defined in the development agreement statutes, but “development project” is defined in a subsequent chapter as any project undertaken for the purpose of development, including a project involving the issuance of a permit for construction or reconstruction, but not a permit to operate. Cal. Gov’t Code § 66000. Accordingly, a cannabis business that obtains permits for tenant improvements would fall under this definition, but a development agreement would likely not be appropriate where a cannabis business enters a turn-key facility that requires no construction. In practice, this does not seem to be the case, and we’ve seen cities require development agreements where no construction is contemplated.

The development agreement process begins with the local agency’s procedures for development agreements. If none exist, a city or county must adopt procedures upon the request of an applicant, at the applicant’s expense. Cal. Gov’t Code § 65865(c).

The development agreement statutes provide minimum standards for local procedures and requirements, including periodic review of the agreements at least once every twelve months, specification of the duration of the agreement, the permitted uses of the property, the density or intensity of use, the maximum height and size of proposed buildings, and provisions for reservation or dedication of land for public purposes. Cal. Gov’t Code §§ 65865.1-65865.2

A development agreement is a legislative act that must be approved by ordinance and is subject to referendum. Cal. Gov. Code § 65867.5(a). A noticed public hearing by both the planning agency and by the city council are required before a development agreement is approved. See Cal. Gov’t Code § 65867. A development agreement cannot be approved unless the legislative body finds that the provisions of the agreement are consistent with the general plan and any applicable specific plan. Cal. Gov. Code, § 65867.5(b). Like all other ordinances, the ordinance approving the development agreement must go through a two-reading process, with at least a five-day intervening period. See Cal. Gov’t Code § 36934. A development agreement cannot legally take effect until after the 30-day period for a referendum expires. See Cal. Elect. Code § 9141; Referendum Committee v. City of Hermosa Beach, 184 Cal. App. 3d 152 (1986); Midway Orchards v. County of Butte, 220 Cal. App. 3d 765 (1990).

In practice, all of this means that the development agreement approval process takes a substantial amount of time. First, the developer and local government need to negotiate essential terms. Once the terms have been negotiated, the agreement is placed on the planning commission calendar for hearing, followed by two separate city council meetings. Only after the referendum period has expired can the agreement become effective. In a best case scenario, this process may take 90 days. It often takes much longer.

Development agreements in California are rarely challenged, and when challenged, development agreements are usually upheld because the statutes are liberally construed to encompass agreements that substantially comply with their specific terms and conditions and achieve their essential objectives. Santa Margarita Area Residents Together v. San Luis Obispo County (2000) 84 Cal.App.4th 221, 228.

However, given the popularity of use of development agreements in the California cannabis industry, we anticipate seeing an increase in legal challenges, especially where the agreements are mandatory, require substantial fees, have short terms, and lack any connection with construction.

Stay tuned for our next post in this series regarding key terms to fight for in development agreement negotiations related to California cannabis use.

california cannabis marijuana development agreement
California municipalities are missing the mark on development agreements.

Development agreements have become a popular tool for California municipalities regulating commercial cannabis activities. We’ve talked a bit about development agreements in the cannabis context here. In a nutshell, a development agreement is a contract between a municipality and developer that freezes applicable rules, regulations, and policies pertaining to a property at the time of execution. Our California cannabis real estate and land use lawyers have come across quite a few of them lately. Unfortunately, many times local jurisdictions are misusing them at the industry’s expense.

Development agreement laws were enacted to provide assurances to developers faced with uncertainty in government approval processes for complex and long-term development projects. A development agreement should provide developers with assurances that the developer will see a return on investment by providing vested rights to engage in a particular use on a property. The rights are locked in so that if local laws change in the future (e.g., the voters or legislative body prohibit a particular use), the uses permitted in the agreement can continue for the remaining term of the agreement.

The scant authority dealing with development agreements focuses on the broad purpose of the statute to provide assurances to developers as soon as project commitments must be made. Santa Margarita Area Residents Together v. San Luis Obispo County (2000) 84 Cal.App.4th 221, 230.

Development agreements allow municipalities to impose fees without having to deal with the uncertainty and expense of putting the matter before voters (as required with the imposition of a tax), and to negotiate community benefits and public improvements to be provided by developers. They also put municipalities in privity of contract with developers, providing an additional degree of control and remedies for each party that would not otherwise exist.

In the context of cannabis, we are seeing a perversion of the intent of California’s development agreement statutes. Many municipalities require development agreements for commercial cannabis activity regardless of whether there is actual land development involved. The terms are incredibly short (often only 1 to 5 years), the fees are substantial, and developers are not expressly provided with vested rights to operate. In other words, most of the cannabis-related development agreements fail to provide developers with assurances that they will see a return on their investment.

Further, the vast majority of municipalities do not allow any negotiation of commercial cannabis development agreements, which calls into question the validity of any associated fees. After all, the justification for exempting development agreements from the constitutional and statutory requirements applicable to municipal fees and taxes is that the terms are bargained for between the parties.

Stay tuned for the next two parts of this series on demystifying development agreements. In part two, I’ll break down the basics of development agreement laws, and what they mean for the marijuana industry. In part three, I’ll cover some key terms to fight for in development agreement negotiations related to California cannabis use.

california marin county marijuana cannabis

California has 58 counties and 482 incorporated cities across the state, each with the option to create its own rules or ban marijuana altogether. In this California Cannabis Countdown series, we cover who is banning cannabis, who is embracing cannabis (and how), and everyone in between. For each city and county, we’ll discuss its location, history with cannabis, current law, and proposed law to give you a clearer picture of where to locate your California cannabis business, how to keep it legal, and what you will and won’t be allowed to do.

Our last California Cannabis Countdown post was on the City of San Jose, and before that the City of Cotati, the City of San Luis Obispo, the City of Redding, the City of San Rafael, the City of Hayward, Alameda County, OaklandSan FranciscoSonoma County, the City of Davis, the City of Santa RosaCounty and City of San BernardinoMarin CountyNevada County, the City of Lynwood, the City of CoachellaLos Angeles County, the City of Los Angeles, the City of Desert Hot SpringsSonoma County, the City of Sacramento, the City of BerkeleyCalaveras CountyMonterey County the City of Emeryville and the City of Antioch.

In addition to the above, we have previously written about commercial cannabis regulations in Marin County here, here, and here. Today’s post is an update on those regulations, as requested by one of our faithful readers.

Welcome to the California Cannabis Countdown.

What commercial cannabis activity is allowed in Marin County?

In unincorporated Marin County, medicinal cannabis delivery-only retailers (MCDORe) are allowed pursuant to a licensing ordinance approved on November 14, 2017. These locations must be closed to the public– only delivery is allowed.

How many retailers are allowed?

A maximum of four MCDORe locations are authorized in the C1 (Retail Business), CP (Planned Commercial), AP (Admin and Professional), OP (Planned Office) and IP (Industrial Planned) zoned districts. MCDORe locations must be located at least 600 ft from schools, day care centers, youth centers and playgrounds.

What about delivery?

Delivery of medicinal cannabis into unincorporated Marin County by licensed retailers located outside of unincorporated Marin County is also allowed. All other commercial cannabis activities are prohibited in unincorporated Marin County.

Is Marin County accepting MCDORe license applications?

The deadline for applications was July 12, 2018 and Marin County is not accepting additional MCDORe applications at this time. According to County staff, there may be an opportunity for additional licenses in the future if the program expands. After implementation of MCDORe licensing, Marin County will be evaluating program expansion into other potential licensing regulations.

What about non-medical?

Currently, Marin County does not allow any adult-use commercial cannabis activities, including cultivation, manufacturing, testing, distribution or retail sales. This is unfortunate, because in 2016, 69.6 percent of Marin voters supported Proposition 64. For this to change, citizens and industry should make it known to the County Board of Supervisors that an additional licensing ordinance is needed.