On September 21, 2016, Governor Rick Snyder signed the “Medical Marihuana Facilities Licensing Act” (MMFLA) to provide for state licensing of facilities for the cultivation, processing, transporting, testing, and sale of medical marihuana in the State of Michigan. This Act vested the Department of Licensing and Regulatory Affairs (LARA) with the power to administer the Act and to promulgate rules to “implement, administer and enforce the Act.” On December 4, 2017, the LARA Bureau of Medical Marihuana Regulation (BMMR) issued 42 Emergency Rules to implement the Act until permanent rules are adopted. This budding industry is in its very early stages of development and we anticipate significant changes to Michigan marijuana regulations as the year rolls on.
There are important items in the Emergency Rules regarding real estate to keep in mind, in addition to the obvious provisions of the MMFLA.
1. The concept of “Co-Licensure” is adopted (Rule 24). This allows any combination of Grower, Processor, and Provisioning Center to occupy and operate at the same location. This option is subject to local municipal zoning approval. Some have adopted this concept. The operations can share one structure if areas are kept separate. Sometimes there has to be common ownership of these facilities. Read the Ordinance for specifics before buying property.
2. Interestingly, security concerns for licensed facilities are minimally addressed in the Emergency Rules except for retail Provisioning Centers (Rule 25). BMMR seems to have left security concerns for other facilities to the municipalities and the whims of the licensees. If you are uncertain, contact the security professionals to assist with the Premises Security Plan being requested by BMMR in connection with Part II of the application.
Michigan Marijuana Regulations and Buffer Zones
3. The Emergency Rules do not address the issue of buffer zones between licensed facilities and adjacent nearby properties. Thus the municipalities themselves are addressing the issue of buffer zones in their respective opt-in ordinances. Each is different and must be carefully reviewed when planning where to have a facility. We have seen ordinances using churches, daycare centers, and parks, in addition to schools, playgrounds, and libraries. The range of buffer zones often goes from 500 – 1000 – 1500 feet, usually measured from property lines. Some others are measured door-to-door or have left the method of measurement out. Read carefully and ask planning professionals to assist. Is a parsonage located on a separate parcel of land adjacent to the church part of the church property, thus a church? What about a daycare center located in a manufacturing or office facility? What about a cosmetology school?
4. Rule 11 establishes “Capitalization” requirements for applicants to operate and maintain a proposed marihuana facility. Rule 11(3)(b) allows “equity in real property” to be included. However, Rule 11(4) requires the applicant “provide proof that there is no lien or encumbrance on the asset provided as a source of Capitalization.” As to real estate, there is the statutory lien for unpaid real property taxes on July 1 and December 1. Is that not a lien? What about deferred water or sewer assessments? What about homeowner or condominium association fees and special assessments? When one talks about “equity in real property” doesn’t that generally mean that there is a mortgage? So let’s suppose your proposed facility (land and building) is worth $1,000,000 but has a mortgage on it for $100,000. Under the rules isn’t the land disqualified because it has a mortgage on it? That mortgage is a “lien or encumbrance.” Sufficient cash gets you over the hump without having to worry about those conflicts in that Rule.
5. Rule 8 establishes in greater detail the requirements for a description to BMMR of the proposed facility. Carefully note subparagraph 4 dealing with state and local fire codes and requirements. The newer ordinances are incorporating this too.
6. The Secured Transporter need have only a license for its primary place of business. Thus, secondary places of business do not seem to require a license. Let’s say the main hub and office is in City A. Thus, a secondary place of business one hundred miles away from where numerous vehicles are stages/stored would not seem to need to be licensed. Is that municipality going to claim otherwise? Be prepared to litigate that one. Furthermore, Rule 25 (2) makes clear that the Secured Transporter passing through various municipalities do not need to be licensed in those municipalities.
7. The Statute and Rules require two individuals in a Secured Transport vehicle – so much for autonomous (self-driving) vehicles, which would be safer for the individuals.
8. An interesting one from the perspective of a burden on the licensee and the potential for enforcement is Rule 23(1). “Any change or modification to the marihuana facility after licensure…requires the approval of the Department before any changes or modification.” Does this mean, if you decide to move a wall, put up a cabinet in a bathroom, put linoleum tile instead of hardwoods, or add some lighting? The rule does not contain words like “reasonable,” “substantial,” or “material.” There will be a lot of interpretation of this as the industry moves forward and interacts with BMMR on these various points.
The legal side of the cannabis industry in the State of Michigan is in its embryonic stage. We anticipate lots of changes to the Michigan marijuana regulations, particularly for the real estate portion of the facilities and licensing, as MMFLA grows.