Medical Marijuana Facility Conundrum
June 13, 2016
Prospective applicants for a Pennsylvania medical marijuana dispensary or grower/processor permit face a dilemma when it comes to securing facilities for their operations. Applicants must show the ability “to obtain in an expeditious manner” sufficient land, buildings and equipment to properly grow, process or dispense Medical Marijuana. The length and uncertainty of the application process, however, makes obtaining a location risky.
The Act does not specify what the Applicant will need in order to convince the Department that it has a facility “tied up” enough to satisfy the foregoing requirement. In descending order of firmness, property can be:
- Already owned by the applicant
- Already leased by the applicant
- Subject to a binding agreement to purchase and sell
- Subject to a binding option exercisable by the applicant to buy or lease
- Subject to a binding letter of intent
- Subject to a non-binding letter of intent
This raises a “chicken or egg” problem. The applicant needs to actually control, or have the right to obtain control, of the property before a permit is issued. However, in the real world this means that one of two things must happen: (1) the applicant must assume the risk of owning or leasing the property without knowing if it will be able to conduct its intended business; or (2) a seller or landlord must be willing to without allow the applicant to tie up the property during the application review period with the right to get out of the sale or lease if a license is not issued. It’s unlikely a seller or landlord would be willing to allow tie up the property for an extended period without a significant non-refundable deposit or option price, if they would do it at all. Either way entails risk or cost not usually encountered by most businesses. The Act does not say whether the Applicant needs to have obtained any necessary land use approvals for the facility in order to satisfy the requirement that the applicant can obtain the property in an expeditious manner. Obviously, controlling the facility does not do the applicant any good if the desired use is inconsistent with (and not allowed by) the local zoning ordinance. The Act does not address whether the Department of Health will consider the zoning issue at all. Zoning issues for Pennsylvania medical marijuana facilities will be addressed in another post. Here we just note the ambiguity in the application process.
Pennsylvania medical marijuana applicants will be torn: on the one hand, the applicant will not want to apply for the permit until it has all of its ducks in a row and knows it can use the facility for the permitted use. On the other hand, the applicant will want to spend as little money as possible until it knows that it has received a permit from the Department of Health. Hopefully the Department of Health’s regulations will do something to alleviate this real world problem.
The Regulated Substances Blog is intended to keep readers current on developments regarding medical cannabis legalization and regulation and is not intended to be legal advice. If you have any questions, please contact the author, Gary Miller at gmiller@eckertseamans.com, or Daniel Clearfield at dclearfield@eckertseamans.com, Robert Hoffman at rhoffman@eckertseamans.com or any member of our Regulated Substances Group.