Securing Real Estate in Massachusetts’ Cannabis Industry
Chapter List
Overview
One of the most difficult and expensive requirements for obtaining a license for a retail Marijuana Establishment (“ME”) in Massachusetts is securing real estate. This requirement comes with the additional hurdle of complying with zoning requirements established by both the Cannabis Control Commission (“CCC”) and municipalities throughout the State.
Identifying Real Estate
Part of the license application process requires the applicant to provide the following information to the CCC regarding the location in which they plan to operate their ME:
(1) Identify the desired location for the ME, and
(2) Submit any one of the following documents proving interest in the property:
(a) clear title;
(b) an option to purchase;
(c) a legally enforceable agreement to transfer clear title; or
(d) written permission from the owner to use the property.
To locate a city or town in Massachusetts that allows for adult use of marijuana and marijuana retail establishments, a prospective applicant should search the Municipal Zoning Tracker provided by the CCC. In addition to locating a municipality whose zoning permits MEs, an applicant must also receive approval from the desired municipality by way of a Host Community Agreement.
Funding-Related Barriers & Possible Solutions
Although it is reasonable to require an applicant to secure a location for retail operations before the CCC will grant a license, applicants should be aware of the associated economic burden. Because the process for obtaining a license can take up to 18 months, an applicant needs to have enough capital to make rental or mortgage payments well before they can profit from their cannabis business. Unless an applicant has their own capital or access to a willing investor, it could be nearly impossible for an entrepreneur to enter the industry. Also, obtaining a bank loan is difficult, as few banks offer loans to cannabis entrepreneurs due to federal law.
For those applicants who do not have enough capital or cannot obtain a bank loan, they may want to consider one of the following options for securing a premises:
seek a written option to purchase from a property owner in the desired municipality at a specific price and within a specific time period, which will be contingent upon receiving a license (note: options to purchase are binding and enforceable, so long as consideration is provided to evidence acceptance, such as a down payment along with a promise to accept the offer to purchase once the license is granted) See, Mark S. Dennison, J.D., Optionee’s Timely Exercise of Option to Purchase Realty, 60 AMJUR POF 3d 255, §6. Necessity of Consideration (2001); or
if seeking to rent a location, consider requesting written permission from the property owner to lease and use the premises as a ME, and negotiate either one of the following with the owner before entering into the agreement:
postponing rental payments until the license is granted, or
(b) if the applicant has other business interests, negotiate the right to use the property for a different business purpose until the license is obtained, so long as that other purpose complies with existing zoning regulations in the municipality where the property is located.
Zoning Restrictions
In addition to having sufficient capital to purchase or rent real estate for a ME, an applicant must check local zoning requirements to ensure that the location in which they want to start their business is properly zoned. One of these requirements is referred to as “buffer zones,” which allow municipalities to control where a ME can be situated.
The CCC requires a buffer zone of at least 500 feet in between a ME and the nearest entrance of a pre-existing K-12 school, but allows cities and towns in the State to reduce this distance through the adoption of an ordinance or bylaw. Some municipalities have adopted their own ordinances to reduce the CCC’s 500-foot school buffer zone (e.g., 200-foot buffer zone in the Town of Great Barrington; 300-foot buffer zone in the City of Cambridge). Also, some municipalities have gone even further to include a requirement that a ME be a specific distance from an already existing ME (e.g., the City of Cambridge requires an 1,800 feet distance; the City of Boston requires a distance of one half mile).
The purposes behind the buffer zones are to reduce the impact cannabis may have on children, to reduce clustering of retail shops in cities and towns, and to prevent the nuisances associated with commercial activity (e.g., noise, odor, etc.) from impacting residents. Other reasons are likely linked to the faulty perceptions that some members of the public have on the use and sale of marijuana, i.e., it is an addictive, dangerous drug that promotes criminal activity.
Potential Solutions to Zoning Restrictions
Although the reasoning behind the zoning restrictions are rational, they do place limitations on the expansion of the cannabis industry in the State by reducing the availability of land parcels to those who want to enter the business; not to mention the fact that land zoned for commercial activity is becoming scarce in some of the State’s major cities.
To increase the availability of land for those seeking to enter the cannabis market, the CCC should consider making two amendments to the current regulations: (1) adding a provision that places a maximum on the distance that an ME can be situated from an existing ME, such as 1,350 feet or ¼ mile, and (2) giving municipalities the option of waiving the buffer zone requirement altogether.
The first amendment would prevent cities and towns from placing significant restrictions on the number of MEs that can be located within its borders, allowing for an overall increase in cannabis businesses in the State. More importantly, such a change in zoning regulations would bring the cannabis industry one step closer to being treated like package stores in the alcohol industry (whose current regulations do not have a minimum distance requirement between stores).
The likelihood of most municipalities adopting an ordinance or bylaw incorporating the second amendment may be pretty low, considering the main purpose behind the school buffer zone is to reduce the impact cannabis may have on children. However, allowing a city or town to waive the requirement does not mean that concern for children would go out the window. Instead, the CCC could further require any cannabis business located in a municipality allowing for waiver to donate a certain percentage of its annual profits, along with a certain amount of its business hours, to educating the local youth about cannabis. Allowing municipalities to waive the buffer zone requirement would not only promote cannabis business growth in the State, but would also educate the local youth about the safe and legal use of cannabis.
Final Thoughts
The cannabis industry is struggling to establish itself in Massachusetts, but by no fault of its own. Gaining access to funding is nearly impossible for the average entrepreneur, and zoning regulations reduce the amount of land available to prospective businesses. Until the CCC and municipalities build roads instead of barriers to entry, it will be impossible for the average aspiring cannabis entrepreneur to set-up shop in the State.
For More Information see Additional Sources
Cannabis Control Commission, Adult Use of Marijuana, 935 CMR 500.110(3), https://www.mass.gov/doc/935-cmr-500-adult-use-of-marijuana/download
Cannabis Control Commission, Frequently Asked Questions, https://masscannabiscontrol.com/applicants-licensees/frequently-asked-questions/#applicant-forum
Cannabis Control Commission, Guidance on Licensure, January 2020, https://mass-cannabis-control.com/wp-content/uploads/200825_Guidance_on_Licensure.pdf
Josh Landes, Great Barrington Voters Reject Stricter Cannabis Zoning Bylaw, Downtown Parking Plan at Town Meeting, WAMC Northeast Public Radio, June 8, 2021, https://www.wamc.org/new-england-news/2021-06-08/great-barrington-voters-reject-stricter-cannabis-zoning-bylaw-downtown-parking-plan-at-town-meeting