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Cannabis Property Due Diligence

Cannabis Property Due Diligence

Due diligence is the legal period of time you can take before buying or selling something in which you make sure the transaction is a safe one. In the case of purchasing property to establish a cannabis business, due diligence gives you time to make sure the building you’re buying is a sound financial choice both as a physical structure and a location where your business venture can be successful.

A lot of research can go into performing appropriate due diligence, with the process being even more intricate for cannabis business operators. To ensure you handle this time period appropriately, and make a safe property purchase, you should consider partnering with a consulting firm already well-versed in all the legal aspects of this type of transaction.

Understanding the process of acquiring property

Running a cannabis business presents some unique considerations when looking at property options. Firstly, you can only purchase or lease property in authorized locations. Where a cannabis business can reside is regulated by state, county, and city laws. Once you’ve established where you can look, properly zoned buildings may also have special easements, covenants, conditions, or restrictions directly related to the cannabis industry. A building may be pre-approved for cannabis companies, for example, but the bank who owns the mortgage may not allow the property owner to lease the space to you. Special addendums like this are often discovered during the due diligence period where research involves looking into the specific paperwork associated with the building as well as the local laws.

Another unique aspect of buildings pre-approved for cannabis company use are rules about access and inspections when it comes to leasing a property. Since due diligence should be done whether you’re buying or leasing, you should review the rules, already written, about how often your landlord may enter your premises. Some states allow for landlords to have unfettered access, dropping in whenever they see fit. Not knowing this before you sign your lease could lead to an unfavorable business environment and impact your productivity.

Taking the time to dig into the regulations and stipulations connected to the property you’re interested in acquiring can greatly impact whether you purchase, lease or move on to another option. It’s within the due diligence period that you have the ability to look into all of this and make an educated decision on whether this piece of property is right for your business.

Tracking special considerations for cannabis businesses

Adding to the complicated nature of really educating yourself on whether you’re making a smart choice in your property selection are the special regulations many states have. These are often unique to a particular state, but can have a major impact on your business. If you aren’t made aware of these special considerations during the due diligence period, you could end up missing an opportunity for your cannabis business or even worse, get stuck with materials you can’t use. For example:

  • In Anchorage, Alaska you can legally attach a shop that serves food and drink to a cannabis dispensary. Not only that, but people are allowed to smoke within the cafe section. Adding this secondary business onto your cannabis operation could greatly increase your profits. Customers make a purchase from the dispensary, go enjoy a snack and smoke, maybe run out of product, and come back to make another cannabis purchase before heading home. You make money on each transaction since you own both businesses.
  • Throughout Massachusetts, it’s illegal to sell any type of merchandise for your business within your dispensary. No T-shirts, novelty items, or promotional gifts allowed. It could be a huge financial loss to have ordered materials like this prior to opening your dispensary, and not be able to sell them.
  • Arizona doesn’t have any odd laws about how to set up you dispensary, but they do require your cannabis business license be tied to a physical address and business name. Changing the address or company name after the fact can incur hefty fees, so you can take the due diligence period to finalize your company name and be sure you’ve found the right location for the long-term.

Not being aware of unique regulations such as these can create a costly situation as you set up your cannabis business. It can impact the size of the property you are looking for, not to mention your entire business strategy. Taking advantage of the due diligence period helps ensure you’re aware of every regulation impacting your future business, and gives you time to properly take advantage of them.

Finding experts to guide you through

At this point, the due diligence period may feel overwhelming and time consuming. How will you have the time to conduct all this research while continuing to organize the funds and supplies you need for your business? Industry Source Consulting (INSO) is here to help take the stress out of due diligence. Not only do we have legal experts in every state, our team knows how to successfully navigate the entire property acquisition process. We already know what’s allowed within each state, where the authorized property is, and we’re ready to do all the homework for you to ensure a seamless purchase.

We help you think through all the relevant details to having a successful location, from whether the dispensary is easy to get to, all the way down to the parking situation. We know what you’re able to do within each state and will work tirelessly to help you position your cannabis business for success. Once you acquire the ideal facility for your cannabis business, we continue to work with you to set up your facility. Our consulting services extend beyond property to equipment, materials, marketing, and even human resources. The end-to-end support our experienced team at INSO provides can help you get your cannabis business up and running. Contact us today to learn more about how we can support you through this intricate process.

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