As with many aspects of doing business as a cannabis enterprise, securing a lease agreement entails extra layers of complexity and considerations that traditional businesses typically don’t have to contend with.
This includes the higher rents often demanded by landlords to compensate for the perceived risk of working with a cannabusiness, but there are other details to keep in mind as well. To help navigate these and secure a cannabis lease agreement that can help set you up for long-term success, here are eight tips you should follow.
1. Opt for full disclosure
Do not hide behind vague statements, such as “medical services” or “horticulture”, when describing the nature of your cannabusiness, whether it is a retail dispensary or a marijuana cultivation site.
This will put you on a bad footing with your landlord and may allow them to wriggle out of their legal obligations. Worst case scenario, they could cancel the lease agreement and demand you pay the outstanding rent for the rest of the lease period.
What’s more, vague language will make it more difficult to apply for a marijuana business license. Typically, licensing authorities insist on specific language that makes clear the property owner is aware that, for instance, the site is being used to grow cannabis.
2. Negotiate flexible terms
Consider including a clause that gives you the first option to buy the property when the lease expires, especially if you think it is likely to increase in value.
Moving location is a huge disruption to your business, and you could even come to a pre-agreement on a reasonable price based on sales in the area.
3. Carry out a background check on the landlord
Diligence is key when it comes to learning about your landlord who is, in effect, a business partner.
Make use of public records to find out their financial background, as well as to confirm they are who they say they are and are the rightful owner of the property.
A real estate attorney can help you conduct a comprehensive background check on the landlord and his business interests.
4. Consider recruiting a professional
As well as a real estate attorney, you should consider securing the services of professional consultants with cannabis-specific industry expertise.
Not only will this help you present yourself in a serious, professional way, it also means you are less likely to overlook important details and are better able to negotiate improved terms.
5. Research zoning laws
In-depth knowledge of zoning laws is crucial. You may need to know, for instance, local ordinance requirements for industry, agriculture, retail, or greenhouses.
Cannabis-specific zoning laws are equally important. For instance, many jurisdictions prohibit marijuana businesses within 1,000 feet of a school or park.
Once again, a marijuana industry consultant will understand these requirements inside-out, potentially saving you a lot of time and money.
6. Make sure your business plan is solid
A solid business plan is always important, but given the stigma and risks surrounding cannabis, your operations are likely to be under even greater scrutiny.
Once a landlord sees how prepared and professional you are, plus the expected returns, you’re more likely to secure a favorable cannabis lease agreement.
7. Make a checklist of all your needs from the space
Knowing exactly what you need in terms of, for example, inventory space and utilities, will help you determine how much you need to invest to get the business up and running quickly. Thus, you will know more precisely what the property is worth to you and what kind of lease agreement you want to make.
8. Agree on a convenient lease start date
You want to minimize the time you are paying rent before you start generating revenue. So, you need to factor in time spent on renovations and installations, and negotiate a start date based on these to ease your financial burden.
No business owner can go it alone, especially in an industry as complex as marijuana and with something as important as your business premises. Look into cannabis-specific real-estate services to draw on their expertise and give your business the best chance of success.
