Medical marijuana is now legal in 30 states, including Illinois. So what is the effect of this growing industry on real estate?
John Marshall Law School’s Center for Real Estate Law convened a panel of national experts including lawyers, real estate developers, investors and medical marijuana entrepreneurs to discuss the impact at its “Marijuana’s Disruptive Effects” event on April 18.
“Peter Eisenberg (’00) and John Collins, principals of Clark Street Real Estate brainstormed with me nearly a year ago about disruptive forces in the real estate industry and in the law. The legalization of medical marijuana is a disruptive force to other long-legal drug companies and to those distributing alcohol and tobacco as well. As a ‘disruptive innovation’ from illegal to legal the industry calls for a response from communities where the cultivation and distribution of medical marijuana occur,” said John Marshall Law School Professor Celeste Hammond, Director of the Center for Real Estate.
“In what has been called a ‘legality innovation’ the law will respond. In addition to the impact on both public/government and private land use restriction, real estate attorneys will help to support the role of banks, title insurance, and the real estate that serve as leasing sites for marijuana to grow and be sold. There will be implications even for climate change as the newly legal industry requires huge amounts of water and energy. The disruption is more exciting and more important than I imagined,” said Hammond.
In a wide-ranging discussion, the panelists agreed that legalized marijuana usage for medicinal and recreational purposes will continue to grow nationwide and advised audience members to keep abreast of changes in federal and state laws to knowledgeably participate in the industry.
The panelists also discussed the importance of learning how to navigate zoning and land use regulations. Since most zoning and land use regulations were drafted before legalized cannabis was contemplated, lawyers, entrepreneurs and real estate professionals need to understand both the laws and creative ways to operate around existing codes, the experts said.
Commercial, retail and industrial leases also pose a thicket of issues. Because cannabis is so highly regulated, the panelists advised audience members to scrutinize leases because standard provisions may conflict with regulations for cannabis. The panelists also discussed how banking laws can impact the payment of rent and security deposits. “You don’t want to be paid with a duffel bag full of cash,” Robert Sistek, the chief financial officer of Innovative Industrial Properties, said about a very real problem businesses in the legalized cannabis industry face.
Joining Sistek on the panel were Jason Divelbiss of the Hagerstown, Maryland law firm Divelbiss & Wilkinson; Bryna Dahlin of the Chicago law firm Rollman & Dahlin; Bob Morgan of the Chicago law firm Much Shelist; and Pete Kadens, the chief executive officer of Green Thumb Industries. John Collins, a principal of Clark Street Real Estate in Chicago, served as the moderator.