Marijuana Dispensaries Blowing Up in Smoke
The medical use of marijuana is a hot topic in California. The regulation of dispensaries has generated numerous land use regulations, and landlord-tenant disputes now before the California Supreme Court. Dispensary regulation creates a mechanism for local government oversight of medical marijuana cultivation and distribution. Local state government enforcement includes zoning and conditional use permitting under the purview of the City Council. There are a number of legal issues that arise for landlords, tenants, employers, dispensaries, growers, and individual users of medical marijuana. Although the sale of marijuana is legal in California for medical purposes per the Compassionate Use Act, the sale and use of marijuana is a federal offense. Business and property owners have found that legal assistance is required in maneuvering through the conflict of state versus federal law.
In 1996, California voters approved Proposition 215, the Compassionate Use Act (CUA), allowing medical patients in California the right to obtain and use marijuana. The intent of the CUA was to provide patients with terminal illness and sever health conditions access to the use of medical marijuana, which is not to be confused with recreational use. However, the CUA did not address specific issues of enforcement. In 2003, the California legislature passed Senate Bill (SB) 420, establishing the Medical Marijuana Program clarifying some of these issues, including the establishment of a voluntary state medical marijuana identification card (MMIC).
The MMIC identifies the cardholder as a person protected under the provisions of Proposition 215 and SB 420. It is used to help law enforcement identify the cardholder as being able to legally possess certain amounts of medical marijuana under specific conditions. Dispensaries must require customers to maintain a MMIC. Controversy arises as to whether the MMIC is valid, and whether the dispensaries strictly sell to MMIC holders.
Landlords must protect themselves with a proper lease agreement when leasing to a dispensary. While the sale of marijuana (for medical purposes per the CUA) is legal in California, the sale and use of marijuana is a federal offense. United States Attorneys in California have targeted medical marijuana cooperatives on the grounds that they are selling marijuana to the public, as well as MMIC holders. The prosecutors target dispensaries by threatening property owners with civil forfeiture of their property if they continue to allow it to be used to further a federal crime. In fear of losing ownership, landlords are forced to evict tenants. Abrupt lease cancelations, if not permitted in the lease itself, result in unlawful eviction lawsuits. Many local courts have held that landlords may not evict a tenant based on a section of California law that provides for terminating a lease when the tenant has used the property for an “unlawful purpose.” ( California Code of Civil Procedure §1161(4).) Courts have held that “unlawful purpose” must be understood solely with respect to state law, not federal law. If the tenant-dispensary complies with the provisions of the Compassionate Use Act, its activity is not “unlawful” under state law and the eviction is not upheld. Landlords should be educated about ordinance, zoning, and permitting restrictions in specific areas before allowing the operation of a dispensary. A standard lease agreement is not enough to protect the landlord from the dichotomy of state verses federal law. The landlord should insist to have the right of eviction based on a violation of any law, federal included. As discussed below, even though a tenant may have a valid business permit, a local ordinance may prevent that specific business operation.
Tenants Beware (City Ordinances Can Be a Nuisance)
Just as City ordinances differ from county to county, so do court orders regarding operating a medical marijuana facility. For example, the City of Temecula was successful in stopping a dispensary from operating in commercial zoning area, while the City of Lake Forrest was defeated in similar circumstances.
Cooperative Patients Services, Inc. (“CPSI”) operated a “Therapeutic Cannabis (Medical Marijuana) Patients’ Resource Center,” for a couple of years before Temecula filed a complaint to abate CPSI’s dispensary. The City of Temecula claimed that CPSI is a public nuisance and sought to prohibit the landlord, Evergreen Ventures, Inc. (“Evergreen”) from continuing to allow the dispensary to operate. The trial court issued a temporary restraining order prohibiting CPSI and Evergreen from operating a business without a valid business license or certificate of occupancy.
On October 9, 2012, the Court of Appeals, (in a case that has yet to be published, City of Temecula v. Cooperative Patients Services, Inc., 2012 WL 4788107 (Cal. App. 4 Dist)), confirmed the trial court’s ruling. The Appellate Court issued a ruling prohibiting CPSI from operating a medical marijuana dispensary. The court upheld zoning and city ordinances which prohibit medical marijuana dispensaries in commercial zoning districts. A violation of any provision of the Municipal Code shall be deemed a public nuisance which may be abated by the city attorney in a civil judicial action. Since, CPSI’s property is located in the Service Commercial Zone, they were forced to stop doing business. CPSI appealed arguing that the municipal ordinance on which Temecula relies is preempted by state law. The court held that Temecula’s city ordinances trumpeted the Medical Marijuana Program Act (Health & Saf.Code) and the Compassionate Use Act of 1996 (CUA).
However, on February 29, 2012, in the case of The City of Lake Forest v. Lake Forest Wellness Center (2012 WL 676644 (Cal. app. 4 Dist) also an unpublished case), Orange County lost its fight against the medical marijuana dispensaries. The Lake Forest Wellness Center successfully appealed a trial court’s order granting a preliminary injunction enjoining their medical marijuana activities in this nuisance abatement proceeding. Lake Forest Wellness Center and the Independent Collective of Orange County argued that medical marijuana dispensaries are authorized by Health and Safety Codes. The California Appellate court held that the City’s asserted blanket, per se ban on medical marijuana dispensaries contradicts state law and furnishes no valid basis to obtain a preliminary injunction. Rather, the City must show a dispensary did not grow its marijuana on-site, or otherwise failed to comply with applicable state medical marijuana law or permissible local regulations.
Whether you are a landlord seeking legal advice regarding the enforcement actions against commercial property owners for tenant activities, or a tenant dealing with evictions based on ordinance violations, Kring & Chung’s knowledgeable counsel can assist you. Our attorneys have many years of experience in drafting lease agreements, and resolving landlord tenant disputes. Should you need assistance in preparing, negotiating or revising a lease agreement or simply need legal assistance with obtaining a business permit, please do not hesitate to contact us.