In recent years, hemp and cannabis have moved from their traditional treatment of being regulated at the state and federal levels, with penalties for criminal prosecution, to a more legally and socially acceptable part of the domestic market.
Hemp has been effectively decriminalized at the federal level (through passage of the 2018 Farm Bill), and cannabis is generally legal in an increasing number of state administrations, from medical-only programs to full recreational platforms. Hemp and cannabis market participants are unique players in many areas, but the focus of this article is their position in the landlord and tenant space. Tenants Both landlords and landlords are advised to be aware of important issues in this world and partner with an attorney familiar with these issues when preparing a commercial lease.
general commercial lease
Throughout the country, and especially in North Carolina, the relationship between residential landlords and tenants is tightly regulated by law. Generally speaking, residential leases are permitted to control certain aspects of the landlord-tenant relationship, but only within the limits of applicable law. To a lesser extent, in many cases the situation is the same as in commercial leasing. The parties to a commercial lease are viewed by the courts as sophisticated business her players with the ability and know-how to negotiate the terms of the contract, and the courts typically adhere to and enforce the terms of commercial leases. There are some limited exceptions depending on applicable law, but those exceptions are much rarer than in the residential rental context. This places a heavy burden on parties negotiating commercial leases. In the hemp and cannabis space, “getting it right” means considering the unique and special issues faced by market participants.
Regulatory Compliance and Licensing
Your ability to participate in the hemp and cannabis market is highly regulated and highly, if not completely, dependent on proper licensing by state and/or federal authorities. Landlords must:
- Identify applicable regulations and licensing agencies, whether state or federal, or both.
- Understand the parameters and limitations of the regulations and applicable licenses and, perhaps most importantly,
- Assess and plan for the consequences if a tenant violates regulations or if a license is revoked or suspended.
It is important to include provisions that allow landlords to monitor their compliance status and license status with this regulation and require tenants to maintain compliance and keep their licenses in good standing. It is also important for landlords in states that have legalized or decriminalized cannabis to be aware of the conflicts between state and federal laws and to plan as much as possible about how those conflicts may affect future tenants.
foster neighborly love
Hemp and cannabis tenants do not inherently harm other tenants, and it would be unfair to put them all in that light. It is important to understand that there are aspects that For example, odors from agricultural and processing operations in this space are strong and may cause concern among affected neighborhood residents. The more traditional impacts of noise and traffic must also be considered. These, as well as many other matters that are often considered inherently negative, should be addressed in both positive communication and tenancy agreements with tenants and other tenants. We can deal with it.
Land use and zoning
While many jurisdictions across the country have county and local ordinances enforcing land use and zoning regulations, few in North Carolina (with respect to hemp businesses) still do. You should be familiar with the restrictions imposed and be careful not to violate them. These parties should also consider the nature and characteristics of the hemp or cannabis business, as agricultural businesses may be exempt from certain land use and zoning regulations.
Whether you are a tenant or landlord, relying on boilerplate or forming a commercial lease for a hemp or cannabis business is not good enough and is not recommended. It requires careful consideration and treatment, as well as partnering with an attorney familiar with these issues on the front lines of the relationship. This approach may not prevent all disputes and problems, but it mitigates them in a meaningful way.
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