In recent weeks our office has experienced an increase in marijuana licensee client requests—via the Washington State Liquor and Cannabis Board (WSLCB)—for documentation confirming ownership of property and land owner consent to leases and subleases of premises for marijuana operations. Such requests from the WSLCB have been a surprise to some clients because they are not linked to property related applications—such as changes in ownership, adding a financier, or changes to the operating plan.
As a brief background, prior WSLCB approval is required for most changes to marijuana licensee business ownership structures and operations. Depending on the desired change, a specific form is submitted to the WSLCB (or Washington State Business Licensing Services (BLS)) and thereafter the WSLCB contacts the licensee to request certain information to validate and approve the change.
For example, a licensee seeking to add or change the existing ownership structure will submit a “Change in Governing People, Percentage Owned and/or Stock/Unit Ownership” form to the BLS for processing, and thereafter a WSLCB licensing specialist will contact the licensee and request information to verify the person or persons being added to the business meet the requirements to have an interest in a marijuana license. Such a change in no way has any bearing on the operations of the licensee (outside of potential corporate governance matters) or the existing property rights of the company (whether leasehold or otherwise). However, recent practice has shown the WSLCB is using such a change in ownership to initiate an inquiry into licensee’s rights to the real property on which the company operates. More specifically, the WSLCB wants to confirm that all parties with a right to the land on which the licensee operates, which (where applicable) includes the landowner, building owner, and all landlords and potential sublessors, are aware of and have consented to the licensees use of the premises for marijuana operations.
Our theory is a recent uptick in situations where the landowner or building owner has consented to the sublease of their property, but either have not consented to (a) subsequent subleases of the premises or (b) the use of the premises for marijuana operations. The result is a licensee without a valid right to the property on which the license is situated and therefore a marijuana license that does not meet the minimum regulatory requirements.
To be certain, the WSLCB has the discretion to request information from a licensee at any time and a licensee is required to have all the necessary consent to operate on its premises, but it can be unsettling and inconvenient to receive any unanticipated request for information. It is important for licensees to be aware of the happenings at the WSLCB and Halverson Law takes all necessary steps to be current on all regulatory changes, and perhaps more importantly, all WSLCB enforcement priorities.
Chris Larsen
Transactional Attorney