Can I Have a Commercial Lease for my Cannabis Business?

Many medical marijuana businesses are operating within medical marijuana laws in Michigan and are in the process of obtaining their Michigan Medical Marijuana Business License pursuant to the MMFLA. As marijuana business attorneys, we are often asked whether it is “legal” to lease to a medical marijuana business or whether a medical marijuana business can seek the protection of the court system to protect their tenancy rights under a commercial lease.

To answer those questions, we must look at the interplay between state and federal law. Under federal law, specifically the Controlled Substances Act (“CSA”) and the Sessions Memo regarding the federal Department of Justice’s view on medical marijuana law, it is clear that marijuana is still considered illegal on the federal level. It is also a well-established principle of Michigan contract law that the courts will not enforce contracts for illegal conduct as a matter of public policy. So can a tenant enter into a commercial lease that conducts an “illegal” medical marijuana business? And more importantly, will a Michigan court enforce that commercial lease if things go sour between a landlord and a tenant?

While the Civil Asset Forfeiture Reform Act of 2000 states that the federal government could potentially seize real property in connection with violations of the CSA, federal enforcement of the CSA against medical marijuana businesses has been considered a low priority for years. This position was formally codified into law under the Rohrabacher-Farr (also referred to as the Rohrabacher- Blumenauer) Amendment, which prevents the Department of Justice from spending money to prevent states from implementing their own legal medical marijuana framework, essentially taking a hands-off approach – while the substance remains federally illegal federal law enforcement will not actively pursue mairjuana in states that have implemented legalization programs.

Ultimately, state courts are responsible for ruling on the enforcement of commercial leases. In other words, with more states legalizing medical marijuana, state courts have the final decision when interpreting and enforcing state law – including state medical marijuana regulations and state contract and real property law. As Michigan courts are making rulings based on state law, and medical marijuana is legal in Michigan, a commercial lease involving the growing, processing, or dispensing of medical marijuana would almost certainly be held enforceably valid in Michigan courts. 

While Michigan has no court case directly on point at the time of this article, there was an out-of-state court case in Arizona that directly addressed this issue in 2017. The court in that case concluded that the lease should not be void simply because the tenant was in violation of the CSA. The court reasoned, in part, that voiding leases relating to property used for marijuana dispensaries could lead to unjust enrichment or “an unconscionable windfall” for the person who leased the property to the violating tenant in the first place:

“To allow a landlord carte blanche to void the lease simply because it might violate the CSA, even though the landlord knew the proposed use of the land when he entered into the lease, would undermine the sanctity of contracts and leave a dispensary without a remedy for any monetary losses caused by the breach. Conversely, it would allow lessees to breach leases when it suited their needs to relocate.” Green Cross Medical, Inc. v. Gally (April 2017).

While Michigan contract law does vary from Arizona, it is possible that Michigan courts would look to the Arizona court’s decision in making their determination on the same issue. Accordingly, leasing commercial property to or from a medical marijuana facility will not prevent you from being able to access Michigan courts to enforce the lease. It may, however, prevent you from finding a willing mortgage lender for the property, but that is a separate and equally complex issue.

If you have questions regarding the terms of your commercial lease for a Michigan medical marijuana company, you should consider hiring a firm that specializes in Marijuana Business Law to look over the terms of your lease to make sure that both landlord and tenant are fully protected.Not sure who to trust? Call our experienced Michigan Cannabis Law Team at Scott Roberts Law Firm today at (248) 234-4060 and schedule a FREE consultation!