States "legal" marijuana market.
federal law, state regulations and unusual
working conditions of green tenants make
obtaining a lawyer all that more critical
when creating commercial marijuana
leases. Lawyers may be reluctant to take
on these cases, however, due to ethical
concerns.
Professional Conduct states:
engage, or assist a client, in conduct
that the lawyer knows is criminal
or fraudulent, but a lawyer may
discuss the legal consequences of
any proposed course of conduct with
a client and may counsel or assist a
client to make a good faith effort to
determine the validity, scope, meaning
or application of the law.
advises or assists a landlord in knowingly
leasing space to a marijuana dispensary
operating illegally under federal law but
legally under state law? Different ethics
committees have concluded differently.
The New Jersey Advisory Committee on
Professional Ethics narrowly concluded
that lawyers may represent clients
whose businesses involve growing
marijuana pursuant to the New Jersey
Compassionate Use Medical Marijuana
Act, stating that public policy encourages
lawyers to provide legal services to
businesses navigating complex regulatory
framework.
of the Connecticut Bar Association,
however, found that although Connecticut
may permit medical marijuana use, such
behavior remains a federal crime and
the rules of professional conduct do not
distinguish between which crimes are
enforced. As such, the Professional Ethics
Committee concluded lawyers may only
advise clients of the requirements of the
Connecticut Palliative Use of Marijuana
violating federal law, which includes
representing marijuana clients before
state licensing committees.
lawyer's dilemma through amending
existing state rules of professional
conduct. In Colorado, the state supreme
court amended the Colorado Rules
of Professional Conduct to explicitly
allow lawyers to counsel clients on state
marijuana laws as well as assist clients in
conduct the lawyer reasonably believes
is permitted under the state and local
marijuana laws.
and laws prohibit a simple answer for
whether lawyers can help landlords lease
to green commercial tenants. Lawyers
must conduct a case-by-case analysis,
review their state rules of professional
conduct, and search for relevant ethics
opinions. Assuming the lawyer may
assist the landlord, a green commercial
lease should address several important
considerations.
prosecute the landlord under the Controlled
Substances Act for leasing to state-
sanctioned marijuana dispensaries, even
though the Department has mostly refrained
from prosecuting landlords and tenants
complying with state marijuana laws.
As such, the green lease must include
generous landlord termination provisions.
The scope of permissible use should be
narrowly drawn with no cure period for
defaults to ensure strict compliance with
applicable state marijuana laws. This
helps avoid federal scrutiny and provides
easy termination for noncompliance. The
ideal green lease also provides non-
curable defaults for federal intervention,
changes in federal enforcement policy,
forfeiture threats, and federal enforcement
actions. This gives the landlord a better
negotiating position with the Department
of Justice should the need arise.
strict compliance with all applicable
federal law impossible for green
tenants. The lease should address this
by including provisions requiring strict
compliance with all state law and relevant
federal law to the fullest extent possible.
Special indemnification provisions
should also be included for landlord's
losses relating to the tenant's business
including a taking of the landlord's
property, criminal prosecution, and
damage as a result of break-ins, robberies
and burglaries. Marijuana dispensaries
are largely cash businesses, which can
attract unscrupulous attention. Finally, the
lease should provide no tenant allowance,
require that the tenant install all tenant
improvements, and require that the tenant
remove any improvements at the tenant's
sole expense upon landlord's request at
the lease's expiration. This helps distance
the landlord from the green tenant's
business activities.
Despite the risks, commercial
marijuana leases can be a lucrative
endeavor. Landlords and attorneys must
ensure they are sufficiently protected,
however, before adventuring into the new,
green economy.
3 Compassionate Use Act of 1996, Cal. Health & Safety
5 David W. Ogden, Memorandum for Selected United
in States Authorizing the Medical Use of Marijuana,
UNITED STATES DEPT. OF JUSTICE (Oct. 19, 2009),
www.justice.gov/opa/blog/memorandum-selected-united-
state-attorneys-investigations-and-prosecutions-states
(last visited June 20, 2016).
MAGAZINE (Apr. 19, 2016), www.forbes.com/sites/
katiesola/2016/04/19/legal-u-s-marijuana-market-will-
grow-to-7-1-billion-in-2016-report/#4b1241bf568d (last
visited June 20, 2016).
Counsel And Assist Clients With Regard to New Jersey
Medical Marijuana Laws (May 19, 2016), www.judiciary.
state.nj.us/notices/2016/n160519a.pdf (last visited June
20, 2016).