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One way older buildings compete with newer buildings, where it’s hard to compare in terms of their physical amenities, is by providing enhanced tenant services.
Most landlords believe that a comprehensive and creative amenities package can be used to (i) seduce current tenants to remain as such and (ii) attract new tenants to the building.
A structured amenities package may include: (i) on-site massage therapy, (ii) general wellness classes, (iii) sleep pods for power naps, (iv) a fitness center, and (v) dry cleaning and laundry pick up services.
It is advisable for landlords to have an “it is what it is” mindset in relation to tenant services, and not go beyond delivering HVAC to a tenant’s space Monday through Friday.
Landlords must be creative in terms of the tenant services and amenities packages they offer when attempting to retain current tenants and also attract new tenants.
Essentially, all activity relating to marijuana is illegal under federal law.
Cannabis is a controlled substance, therefore, federal authorities may enter business establishments and charge those involved with forfeiture proceedings.
It is advisable for landlords with tenants in the cannabis business to create a profit sharing scheme, such as percentage rent from tenant’s revenue.
Landlords cannot have a financial stake in a tenant’s cannabis business because it is technically an illegal business.
Landlord advocates should incorporate language into its lease outlining the time for which a tenant must get a cannabis license in relation to the lease commencement date.
Although there is a high potential for a tenant’s licensing application to not comply with the changing state or local marijuana laws, cannabis related termination language in its lease is not imperative.
Landlords with tenants in the cannabis industry tend to have a lack of stable and secure cash flow due to the uncertainty in the cannabis and real estate industry with regards to how state and federal regulations will be decided.
Most landlords, along with tenants in the cannabis industry, would prefer to have leasing disputes resolved by the way of arbitration, as opposed to litigation.
In a cannabis related lease, both parties must waive, acknowledge and agree that any defense of “federal illegality” will be prohibited from being raised by either party to any landlord or tenant breach or default under the lease by the non-breaching/non-defaulting party.
In a cannabis related lease, in regards to the use clause, landlords would prefer to have a broader use clause to allow tenants to have an exit strategy by way of an assignment or sublet.
In a cannabis related lease, tenant advocates should add the following language to the use clause, “Notwithstanding anything herein to the contrary, landlord acknowledges and agrees that the use of the premises for the permitted use (including the sale of marijuana and marijuana-related products) shall not be a violation of this lease (subject otherwise to the terms and conditions of this lease).”
In a cannabis related lease, language relating to landlord’s access to the premises does not need to be in conformity with state and local cannabis laws.
Generally, in regards to a cannabis related lease, institutional lenders will lend on the property, regardless of the “illegality activity” concern.
There are many financing and banking concerns for the landlord in leasing space to a tenant.
Landlords and tenants, in particular tenants who are growers, must take into consideration Department of Building regulations, and decide whether tenant’s fixtures and equipment comply with applicable code.
Generally, in cannabis related lease negotiations, tenant advocates should not incorporate language in its lease requiring landlord’s assistance in the event that new laws or rules are enacted relating to a myriad of items, including licensing.
In most instances, landlords should take a liberal stance in complying with tenant’s request to grant a tenant improvement allowance for a stated amount when negotiating the terms of a cannabis related lease.
When negotiating with a cannabis tenant, landlord advocates should include the following language in its lease, “Landlord shall not lease to or permit any other occupant, concessionaire or tenant within the building or property adjacent to the building owned or controlled by landlord or any affiliates thereof to operate a marijuana dispensary or similar use to that of tenant.”
In a cannabis related lease, it is imperative that the landlord specify the proper method of payment from the tenant, as the landlord cannot accept cash payments.
In lease negotiations with a cannabis tenant, it is in the landlord’s best interest to maintain the right to terminate its lease if a change of law or prosecution of law concern arises.
Landlord advocates should include language for tenants in the cannabis business that are non-growers and non-processors along the lines of, “The sale of marijuana and marijuana-related products shall not be included in the definition of hazardous substances.”