Attorneys

Most Commercial Property-Owning Entities and HOAs Must Now Report Ownership Information to the Federal Government Under the Corporate Transparency Act

Ansell Grimm February 13, 2024

By Nicole D. Miller and Melanie J. Scroble

Most entities that own commercial property, as well as homeowner and condominium associations (“Community Associations”), are among the over 36 million other American businesses and organizations that must now provide the federal government with detailed information about their ownership and controlling interests.

That is because the Corporate Transparency Act (CTA), which became effective on January 1, 2024, mandates that all “Reporting Companies” covered by the law disclose “Beneficial Ownership Information” (BOI) to the Financial Crimes Enforcement Network (FinCEN) division of the U.S. Treasury Department.

With an effective date of January 1, 2024, and with mandatory reporting deadlines approaching, commercial property owners and Community Associations need to understand what obligations, if any, they have under the CTA, whether they are a covered “Reporting Company,” and what information they need to provide FinCEN by the applicable deadline.

What Is the Corporate Transparency Act?

Signed into law in 2021, the CTA is part of an expansive federal government effort to crack down on illegal money laundering and “the use of shell and front companies by illicit actors who use them to obfuscate their identities and launder ill-gotten gains through the United States.” Unlike most federal regulatory schemes that primarily apply to larger companies, the CTA targets “smaller, more lightly regulated entities,” according to FinCEN. This focus on small entities is one reason FinCEN estimated that 90% of businesses and organizations in the U.S. are subject to the CTA’s disclosure requirements.

Almost All Property Owning-Entities and HOAs Are Covered “Reporting Companies”

Subject to significant exceptions, as discussed below, a “Reporting Company” that must comply with the CTA is any corporation, limited liability company, or any other entity created by filing a document (e.g., Articles of Incorporation) with a secretary of state or equivalent agency. Entities like general partnerships or sole proprietorships that can be established without such filings are not subject to the CTA’s disclosure and reporting requirements.

Accordingly, individuals and general partnerships that own commercial property have no obligations under the act. But, unless they fall within one of the listed exceptions, all other property-owning entities will need to provide their BOI to FinCEN.

Most Community Associations are “Reporting Companies” under the act since they are usually organized by filing articles of incorporation with a secretary of state. Their tax-exempt status under Section 528 of the Internal Revenue Code does not spare Community Associations from their reporting obligations. While the CTA specifically exempts 501(c) non-profit organizations from reporting requirements, it does not exempt Section 528 organizations.

Entities Excluded From the CTA’s Reporting Requirements

Most entities excluded from the CTA’s reporting requirements are already subject to beneficial ownership reporting and disclosure obligations under other laws, so filing such disclosures under the CTA would be redundant.

As stated in Section(a)(11)(B) of the CTA, these entities do not have to comply with the CTA’s BOI reporting requirements:

Banks.
Bank holding companies.
Credit unions.
Insurance companies.
Issuers of securities registered under Section 12 of the Securities Exchange Act of 1934 or that must file supplementary and periodic information under Section 15(d) of the 1934 Act.
Brokers, dealers, and any other entities registered with the SEC under the 1934 Act.
Registered investment advisors under the Investment Advisers Act of 1940.
Public accounting firms.
Companies employing more than 20 people full-time in the U.S. or that filed a federal income tax return in the prior year showing more than $5 million in gross sales or receipts and have an operating presence in the U.S.
Any entity that:
- Has existed for over one year.
- Has not sent or received funds over $1,000 or experienced an ownership change in the previous 12 months.
- Is not actively engaged in business.
- Is not owned by a foreign individual.

and

Does not otherwise hold any assets, including ownership interests, in any corporation, limited liability company, or other entity.

Disclosures Required About “Company Applicants” and “Beneficial Owners”

In addition to basic corporate information such as name, address, and tax ID number, Reporting Companies must provide FinCEN with BOI about two groups of individuals: “Company Applicants” and “Beneficial Owners.”

As defined in the Final Rule, a “company applicant” is “the individual who directly files the document that first creates the domestic reporting company” and “the individual who is primarily responsible for directing or controlling such filing if more than one individual is involved in the filing of the document.” Effectively, the person who filed the documents required to create the entity will be considered the “Company Applicant,” whose BOI must be reported.

Notably, the reporting of applicant information only applies to Reporting Companies created from and after January 1, 2024. Such new Reporting Companies need not provide FinCEN with updates regarding Company Applicant information after their initial disclosure.

“Beneficial Owner” = 25% Ownership OR “Substantial Control” Over Entity

All Reporting Companies must disclose information about their “Beneficial Owners.” As defined in the Final Rule, a “Beneficial Owner” is any person who, directly or indirectly, either:

Owns or controls at least 25% of a reporting company’s ownership interests; or
Exercises substantial control over a reporting company.

Importantly, ownership interests through intermediary entities qualify as ownership of a Reporting Company. As specified in the Final Rule, a person may be deemed a beneficial owner “through ownership or control of one or more intermediary entities, or ownership or control of the ownership interests of any such entities, that separately or collectively own or control ownership interests of the reporting company.”

“Substantial Control”

Determining whether a person exercises “substantial control” over an entity so they are considered a “Beneficial Owner” involves an analysis of the person’s actual authority and the actions they are empowered to take on behalf of an entity. Under the Final Rule, an individual has “Substantial Control” over an entity if they:

Serve as a senior officer of the entity.
Have authority over the appointment or removal of any senior officer or a majority of the board of directors (or similar body) of the entity or
Direct, determine, or have substantial influence over important decisions made by the entity, such as:
- Entry into and termination of contracts.
- Acquisition, sale, or lease of the company’s principal assets.
- Reorganization, dissolution, or merger.
- Selection or termination of business lines or venture.
- Amendment of any governance documents of the reporting company.

For Community Associations, this means that the voluntary members of the board of directors or board of trustees will be considered individuals with “substantial control” over the covered entity, i.e. the association.

Information That Must Be Reported to FinCEN

Non-exempt Reporting Companies must provide FinCEN with the following information regarding individuals who qualify as Company Applicants or Beneficial Owners:

Full legal name.
Date of birth.
Street addresses (identified as a current residential or business street address).
Non-expired state identification document or passport.

Reporting Deadlines

As noted, the CTA’s compliance deadlines largely depend on when the “Reporting Company” was formed.

Entities Formed in Calendar Year 2024: Covered Reporting Companies created or registered on or after January 1, 2024, and before January 1, 2025, must submit their BOI report within 90 days after the date of the entity’s formation (i.e., the filing date of its Articles or Certificate).
Entities Formed Before January 1, 2024: Covered Reporting Companies formed before 2024 must report their BOI on or before January 1, 2025.
Entities Formed on or After January 1, 2025: Covered Reporting Companies formed after 2024 must file their BOI within 30 days after its date of formation.

Penalties for Non-Compliance

Commercial property owners and Community Associations that fail to comply with the CTA’s reporting requirements face significant penalties. Any entity or person that “willfully provides, or attempts to provide, false or fraudulent information or willfully fails to report when required” faces civil penalties of $500 per day, criminal fines of up to $250,000, and a maximum of five years in federal prison.

Given the complexities in determining an entity’s beneficial ownership and non-compliance consequences, property-owning entities and Community Associations should consult with experienced counsel to ensure they satisfy any reporting obligations under the CTA. For further information and assistance with your entity’s CTA compliance, please contact one of the attorneys in Ansell Grimm & Aaron’s Commercial Real Estate or Community Association practice groups.

New Jersey CRC Adopts Consumption Lounge Regulations

Ansell Grimm February 1, 2024

By Anthony Sango

On January 17, 2024, New Jersey’s Cannabis Regulatory Commission (CRC) adopted new regulations allowing cannabis consumption areas, commonly called consumption lounges. The regulations present a unique opportunity only seen in a few other legal states, including California and Colorado, the flagship states of cannabis legalization.

The new regulations allow the CRC to issue consumption lounge endorsements to both medical and recreational dispensary licensees and cannabis retailers, who may then host consumers in a casual setting to try their goods. The lounges can be either indoor and structurally enclosed or in an exterior structure. The CRC provides numerous requirements for indoor lounges, such as physically separating the lounge from the dispensary. For outdoor lounges, other CRC requirements apply, such as blocking the view from nearby sidewalks. Additional requirements apply to both indoor and outdoor lounges, but most importantly, the consumption lounge must be on the same premises as the dispensary that holds the license.

Other restrictions apply to consumption lounge endorsements, including their inability to serve food. The CRC did not explain why food sales are excluded at lounges, especially since cannabis enthusiasts are historically known for their appetites. Similarly, consumption lounges will not be permitted to serve alcohol – even if the licensee holds a separate liquor license. Interestingly, though, the new regulations also allow hotels, motels, and other lodging facilities to permit cannabis consumption in smoker guest rooms.

Much like cannabis licenses, the CRC gives local governments a great deal of authority to adopt ordinances or regulations that restrict or outright ban consumption lounges. However, the ordinances cannot conflict with the CREAMM Act. We can expect the same or greater setbacks and minimum distance requirements from consumption lounges and sensitive places, like schools, daycare centers, playgrounds, and houses of worship.

Local governments also have an opportunity to review consumption lounge applicants – even if the town or city allows consumption lounges. After a consumption lounge application is submitted to the CRC, the town or city determines whether the application complies with local ordinances and regulations. Then, the town or city can notify the CRC of its position. If the local government does not take a favorable position and denies the request for an endorsement, the applicant can demand a hearing and plead their case.

Our Controlled Substances and Regulatory Practice attorneys understand the complex laws related to the production, sale, use, regulation, and legalization of controlled substances, including hemp, cannabis, and psychedelics. A multifaceted area of the law with conflicting regulations from different governing bodies, we help our clients navigate all aspects of this emerging field. Contact us if you have questions about this evolving area of law.

The Cost of Victory: What Business Owners Should Consider Before Filing a Lawsuit in a Commercial Dispute

Ansell Grimm January 17, 2024

By Seth M. Rosenstein

A wise person once said, “Litigation is the basic legal right which guarantees every corporation its decade in court.” While likely said facetiously, the fact is that business litigation often comes at great expense to the company and individuals involved.

The costs of vindicating and protecting a company’s rights – in time, money, disruption, reputation, and commercial relationships – along with the inherent risk and uncertainty involved in all litigation, can lead even a victorious plaintiff to ask whether their victory was worth the destruction it wrought.

Undoubtedly, there are situations where litigation is a company’s best or only path forward in a commercial dispute, whether it is with a customer, competitor, or business partner. Sometimes, a lawsuit is the last resort after other attempts to reach a resolution have failed or the only way to bring the other side to the negotiating table. Other times, quick intervention by a judge is necessary to prevent irreparable harm to the business. In those situations, your company will want and need an experienced and strategic litigator who stands ready to vigorously pursue your claims.

But even after the dogs of litigation have been unleashed, most commercial lawsuits settle or are otherwise resolved before trial for many of the same reasons cited above – the expense, disruption, and risk involved in entrusting the outcome to a judge or jury.

That is why, regardless of the perceived strength and merit of their claims, business owners should think carefully and consider the possible negative implications of litigation before telling their attorney to run to the courthouse and file a lawsuit. Here are three things to factor into your decision-making before pursuing business litigation:

Even the Most Straightforward Lawsuit Can Take Your Business Down a Long and Winding (and Expensive) Road

Lawyers are sometimes accused of making simple matters needlessly complicated. But for attorneys representing defendants in business litigation, making things complicated is often a feature, not a bug. Part of the defense’s strategy, especially when faced with a strong or straightforward claim, can include using any means to make litigation as drawn-out, convoluted, costly, and painful as possible for the plaintiffs.

Unfortunately, the wheels of justice are extremely amenable to a commercial defendant who wants to slow a plaintiff’s roll. The system isn’t designed for speed to begin with, and even if your attorney does everything in their power to speed your case along, there are plenty of ways a defendant can stretch your simple case out for years.

They may file multiple motions regarding various issues, most of which will require the submission of briefs and the time needed to prepare them. A lengthy briefing schedule could be followed by a hearing or ruling even further into the future, all delaying the suit’s progress until the motions are resolved.

Discovery, the process of requesting and exchanging documents, gathering evidence, and taking witness depositions, also offers ample opportunity for delay and added costs. It can take a while and cost lots of money to produce a voluminous amount of material in response to a party’s request. Depositions may be held in distant locations and involve significant travel costs (including fees for the attorney’s travel time) and complicated scheduling conflicts. You may also need to retain paid experts to testify or prepare reports.

But it is more than fees, expenses, and delays that can make discovery costly for a business plaintiff. Owners, executives, and employees who would otherwise be doing their jobs may need to divert their time, effort, and productivity toward handling document requests or preparing and sitting for their depositions. These disruptions should be factored into your litigation calculations as well.

Of course, the end of your case may not be the end of your case if one side appeals the judgment, which can keep the attorney’s fees meter and litigation clock running and even lead to another trial.

There Are No “Slam Dunks” in Business Litigation

Just as there is no crying in baseball, there are no slam dunks in business litigation. When you put your fate in the hands of a judge or 12 random people sitting on a jury, there is no guarantee they will see your case the way you and your lawyer do. There is always – always – a risk of an adverse ruling, no matter how strong your case appears to be.

Not only may your company lose on its claims (while still being on the hook for attorney’s fees and costs), but it may be exposed to liability and a judgment if the defendant files and prevails on a counterclaim. And if a contract or statute provides that the losing side in litigation must pay the winning side’s attorney’s fees and costs, the monetary hole can be even deeper.

A Judgment Is Not a Check

For all the risk of losing that is inherent in litigation, there is an equally inherent likelihood your company will prevail on its claims and obtain a substantial monetary judgment against the defendant. But no matter how many zeros that judgment contains, it could ultimately be worth far less – or nothing at all.

First, subtract all the amounts your business paid its lawyers from your judgment. That could shave tens or hundreds of thousands of dollars off that top-line figure. And those fees may keep coming if your attorneys have to spend time and effort trying to collect the amounts due from the defendant. Judgment debtors can engage in plenty of moves and tricks to hide assets and make collection efforts as difficult as possible.

Of course, nothing makes collecting on a judgment more challenging than an insolvent judgment debtor. If the defendant is actually broke, even the most talented litigator cannot get blood from a stone.

Again, as noted, sometimes litigation is the right or only way to resolve a business dispute despite the risks and costs it may involve. But before shooting first, you should ask your lawyer questions about the best path forward for your company, which may include pre-litigation demands, negotiations and non-binding mediation.

If you are involved in or anticipate a business dispute, please contact Ansell Grimm & Aaron Litigation Partner Seth M. Rosenstein.

Recent Success Stories

Ansell Grimm January 17, 2024

Jennifer Krimko Secures Planning Board Approval of Client’s Plan for Monmouth Mall Redevelopment

On December 4, 2023, the Eatontown Planning Board granted preliminary and final site plan approval to Krimko’s client, Eatontown Monmouth Mall, LLC (Kushner Companies), paving the way for the redevelopment of the existing 1.5 million square foot Monmouth Mall in Eatontown. The proposed development, to be known as Monmouth Square, will consist of approximately one million square feet of commercial space along with 1,000 luxury apartments with a clubhouse and amenities for the residents, public open space, and related site improvements. Monmouth Square will be a pedestrian-friendly, true town center environment where people can live, dine, and shop all on one property.

Jason Klein Closes Financing and Acquisition of Over 75 Global Quick Service Restaurant Stores

In December, Ansell Grimm & Aaron’s Jason Klein consummated two major asset transactions on behalf of two separate purchasers of over 75 quick-serve restaurants. The purchasers are franchisees of a global quick-service restaurant behemoth.

In one transaction involving the acquisition of over 50 stores and three separate parcels of real estate, Klein spearheaded the negotiation of the purchase and sale agreements for both the assets and real property, the acquisition of the assets and the properties, and the loan transactions. In the other transaction, Klein’s efforts and direction resulted in his client’s successful acquisition of over 20 stores and the acquisition of one parcel of real property.

New Jersey Enacts Stringent New Inspection, Evaluation, and Maintenance Requirements for Condominium and Co-Op Buildings

Ansell Grimm January 11, 2024

By Elysa D. Bergenfeld and Nicole D. Miller

On January 8, 2024, New Jersey’s already-stringent building codes for residential construction became even more so when Gov. Phil Murphy signed S2760/A4384 into law. The sweeping legislation establishes additional requirements for the regular inspection, evaluation, and maintenance of certain types of condominiums and cooperative apartments in the state.

The new law was enacted in the wake of the 2021 condominium tragedy in Surfside, Florida, where 98 lives were lost due to structural issues that were not addressed. Accordingly, much of the law focuses on early detection of potential structural flaws and deficiencies.

Owners of property covered by the law must now ensure their buildings undergo routine structural inspections to ensure the safety and stability of the building. These inspections must be performed by licensed engineers and architects and adhere to industry best practices and standards. The law requires periodic reserve studies and allows for a ten-year “catch up” for reserves.

As outlined in the law, its requirements apply to any residential condominium or cooperative building with a primary load-bearing system comprised of a concrete, masonry, steel, or hybrid structure including, but not limited to, heavy timber and a building with podium decks, but not including an “excluded structure” as defined in the law.

All condo and co-op boards in New Jersey should consult with experienced community association counsel to determine whether the new law applies to their buildings and what to do to ensure compliance. If you have questions or concerns, please contact one of the attorneys in Ansell Grimm & Aaron’s Community Association Law practice group.

Ansell.Law Elevates Seth Rosenstein and Tara Walsh to Partners

Ansell Grimm January 2, 2024

Ansell.Law is pleased to announce that Seth M. Rosenstein and Tara K. Walsh have been elevated to partners.

Seth enjoys a diverse practice handling litigation, controlled substances and regulatory law, and residential real estate matters. A savvy negotiator, Seth appears in state and federal courts and before the American Arbitration Association (AAA) and Financial Industry Regulatory Authority (FINRA) arbitration panels. He is licensed in New Jersey, New York, and Pennsylvania.

Before Seth joined Ansell Grimm & Aaron, he practiced in the Manhattan office of a national litigation firm. He earned his Juris Doctor from Benjamin N. Cardozo School of Law and his Bachelor of Arts from American University.

Tara specializes in criminal defense and municipal court defense and has taken several cases through trial. She has also handled high-profile criminal cases before the Monmouth County Superior Court Criminal Division. Tara frequently speaks on municipal court defense and criminal defense developments.

Dedicated to serving the greater New Jersey legal community, Tara is on the Monmouth Bar Association’s Municipal Court Committee and is an Inns of Court barrister. She also devotes significant time as secretary and board member of the Associate Board of Court Appointed Special Advocates for Children. Tara earned her Juris Doctor from New York Law School and her Bachelor of Arts from Syracuse University.

Celebrating the Life of Peter S. Falvo, Jr.

Ansell Grimm December 19, 2023

We are deeply saddened to share that Peter S. Falvo, Jr., a Shareholder Emeritus of Ansell.Law and the former Chair of the Firm’s Land Use & Zoning Law Department, passed away on December 18, 2023.

Peter was a loyal friend and colleague whose legal career spanned more than 50 years. He joined Ansell.Law in 2001 after founding and growing his own law firm. Peter made an immediate positive impact at Ansell.Law. He added depth and expertise to our Commercial Real Estate, Land Use & Zoning Law, Residential Real Estate, and Wills, Trusts & Estates Departments and brought in many distinguished clients, many of whom we continue to serve.

“Peter was the consummate dapper gentleman with inimitable style and wit. Despite his many accomplishments, Peter was unassuming and humble all while handling significant and complex legal matters,” said President and Managing Shareholder Michael V. Benedetto. “I’m honored to have had the opportunity to call him my partner and friend. He will always be loved and missed by everyone at Ansell.Law, past and present.”

Peter’s practice and talents were multi-faceted. In addition to being a skilled counselor, he was instrumental in the growth of our Land Use Department and unofficially known as the “Dean of Land Use” in Central New Jersey. He was an important part of our culture and never failed to bring humor to every interaction he had.

Peter was also active in his community, serving on the boards of many professional and charitable organizations.

We will miss Peter and his many contributions to the Firm. As a mentor to a generation of Ansell.Law attorneys, his skills and influence will live on at the Firm for decades to come. On behalf of the entire Ansell Grimm & Aaron family, we extend our sincere condolences to Peter’s wife of almost 60 years, Chris, and their entire family.

Click here for visitation and mass information.

Tigger Stavola Foundation Honors Mitchell Ansell

Ansell Grimm December 11, 2023

Celebrating their 10th anniversary this year, the Tigger Stavola Foundation recently honored Shareholder Mitchell Ansell. Involved since the foundation’s 2013 inception, Mitchell was recognized for his unwavering support and efforts to increase awareness of opioid addiction’s tragic effects. Aside from his personal connection to the Stavola family, he vigorously defends parents and children affected by substance abuse when they face legal challenges. Mitchell has donated his time to educate students about underage drinking, DWI, and possession of controlled dangerous substances during prom season for nearly 20 years.

As chair of the Firm’s criminal defense department, Mitchell devotes his practice to criminal defense and municipal court defense. Over three decades of practice, he has worked with well-known clients on high-profile cases. Mitchell is a past president of the Monmouth Bar Association and actively gives his time to various local charities.

The Tigger Stavola Foundation is dedicated to combating the opioid epidemic and changing the stigma surrounding addiction. Following the devastating loss of Tigger to an accidental overdose, the Stavola family created the foundation to raise awareness and save lives in their Monmouth County community. Learn more about the organization here.

Zoning: Is Cannabis the New Alcohol in New York and New Jersey?

Ansell Grimm November 15, 2023

By Anthony Sango

On December 5, 1933, the United States rejected years of moral panic and repealed alcohol prohibition by passing the 21st Amendment. Just under 88 years later, on November 3, 2020, the people of New Jersey rejected decades of a similar moral panic by voting “Yes” on Public Question 1, legalizing recreational cannabis. Five months later, on March 30, 2021, New Jersey’s neighbor, New York, approved legislation to legalize recreational cannabis. These two states were part of a wave of legalization in late 2020 and early 2021, with six other states and various tribal nations reflecting what so many Americans already knew: cannabis is safe, commonplace, and ordinary to consume.

Though New Jersey and New York both legalized cannabis around the same time, the two states took different approaches on the path toward legalization and destigmatization. By regulating cannabis similarly to alcohol, New York seems to acknowledge the reality that cannabis is the second most commonly used recreational drug after alcohol. New Jersey, on the other hand, has chosen to treat cannabis differently than it treats alcohol, though there are threads of alcoholic beverage control in its cannabis regulations. These divergent regulatory approaches are reflected in how each state addresses the zoning and regulation of cannabis businesses.

New York: Following the Cannabis Golden Rule

New York abides by cannabis advocates’ Golden Rule: treat cannabis as you would want the state to treat alcohol. The Marihuana Regulation and Taxation Act (MRTA) repeatedly mentions maintaining equal or comparable regulations for the two substances. In fact, cannabis and alcohol are so intertwined that the state’s Office of Cannabis Management was established within the Division of Alcoholic Beverage Control.

Local Zoning and Fees

The MRTA and its regulations govern how a city or town can zone for and tax cannabis businesses. For example, a town or city can only impose fees on a dispensary or consumption lounge in a similar amount and manner as it would on a liquor store, bar, or club. The MRTA also prohibits special fees and taxes for cultivation, processing, manufacturing, and distribution businesses unless those special fees and taxes are also applied to similarly situated businesses. The best point of comparison is cultivation: a town or city can only impose a special fee or tax on a cannabis grower if that town or city imposes the same special fee or tax on a farm, plant nursery, or similar agricultural business.

Similarly, as with bars and liquor stores, dispensaries and consumption lounges are restricted from operating too close to houses of worship, schools, and public facilities used by youths. The distances range from 200 feet to 500 feet, measured from the center of the door of the cannabis business to the nearest entrance or structure of the restricted facility. What constitutes an “entrance” depends on the building’s specific use and design.

Consumption Lounges

No, your neighbor didn’t run over a skunk – that might be the new consumption lounge in town. Unlike their smoke-free, alcohol counterparts, consumption lounges emit the characteristic, potent, and familiar smell of cannabis, presenting a unique challenge for regulators.

To address this issue, New York borrowed from laws governing another commonly used recreational substance: tobacco. In New York, a town or city can impose ventilation and odor control laws on indoor consumption lounges only insofar as those laws apply to cigar lounges or any other business that permits smoking or vaping tobacco. In fact, the MRTA specifically invokes the Clean Indoor Air Act. Outdoor consumption lounges get more leeway – they only need to maintain a setback of 20 feet from a public walkway or road.

However, regulators borrowed the permitted hours of operation from bars and clubs in regulating consumption lounges. A consumption lounge – whether indoor or outdoor and regardless of the size of the city or town – must be closed between 4:00 a.m. and 8:00 a.m. This mirrors the restriction on bars and clubs, requiring them to have last call at 4:00 a.m. (or earlier if desired by the local government).

Overall, New York’s approach to regulating cannabis seems to acknowledge its legal status, widespread use, and acceptability in American life and society, just like alcohol, while maintaining comparable restrictions for the public’s health.

Lack of Guidance and Clarity in New Jersey Cannabis Zoning Regulation

New Jersey takes a different approach to cannabis zoning and regulation than the Empire State. With no explicit language instructing towns and cities to treat cannabis like alcohol (or at least not placing any unusual and onerous fees, taxes, and regulations on cannabis), New Jersey’s Cannabis Regulatory Enforcement Assistance and Marketplace Modernization Act (CREAMM Act) provides towns and cities – as well as courts – with a lot of leeway as to the interpretation of the law and regulation of cannabis.

The theme throughout the CREAMM Act is deference to the local government. For example, as in New York, the CREAMM Act allows towns and cities to require cannabis businesses to be set back from certain sensitive areas. Unlike the MRTA, however, the CREAMM Act provides no guidance regarding how to measure those setbacks. Effectively, towns and cities are left to decide for themselves how to do so. The CREAMM Act similarly provides almost no guidance on consumption lounges and instead leaves it up to local zoning boards to regulate these businesses.

Unfortunately, because part-time members run most local zoning boards, measurement guidelines and other minor but essential guidance are often treated as afterthoughts or left unaddressed. If zoning boards do not provide a clear method for measurement, some courts have turned to a “reasonable pedestrian” standard that measures the distance borrowed from cases involving the Alcoholic Beverage Control Board. But as anyone who has ever driven in our crowded cities and towns knows, otherwise reasonable people can become unreasonable pedestrians, jaywalking, cutting through parking lots, or even hopping over fences. Courts will strain to find some definition or guidance in the ordinance itself.

The CREAMM Act also fails to define what an entrance is – further complicating any setback measurements. Similarly, local ordinances often forget to define “entrance,” leading some courts to assume that any exterior door constitutes an entrance. Many cannabis businesses have faced challenges to their Resolutions of Support because their entrances were deemed too close to sensitive areas or because the board tried to reassign or redefine what an entrance is.

For example, challengers have claimed that a building’s “emergency exit” is, in fact, a regular entrance and that the “emergency” designation was just a way to circumvent a setback requirement. In other instances, cannabis businesses seeking to comply with a setback requirement have reassigned an emergency exit as the entrance with mixed results.

The situation for consumption lounges is no better. The only zoning requirement in the CREAMM Act for a consumption lounge is that a town or city issue an endorsement for a consumption area in or adjacent to a dispensary. Curiously, the CREAMM Act allows a dispensary-turned-consumption lounge to sell a customer as much cannabis as the customer is otherwise permitted to buy at a dispensary. This stands in contrast to bars, where a bartender would likely refuse to serve a patron several beers at once unless that patron had several friends with him. But just as bar patrons can’t walk out of the bar with a half-finished beer, the CREAMM Act prohibits consumption lounge patrons from leaving with leftover cannabis.

New Jersey cannabis businesses are left with generic ordinances that may mirror alcohol ordinances but lack the explicit instruction to treat cannabis like alcohol or to measure setbacks in specific ways. The patchwork of local cannabis regulations creates a maze of red tape for even the savviest cannabis business entrepreneur. As a result, New Jersey courts have been flooded with lawsuits challenging so-called Resolutions of Support for cannabis businesses that allegedly violate one local ordinance or another.

While New York has been more orderly in defining zoning considerations for the legal cannabis industry, New Jersey has been more hands-off, leaving it to the towns and cities – and the courts – to determine what it means to comply with the CREAMM Act.

If you have questions or concerns regarding zoning or other regulatory issues involving cannabis in New York or New Jersey, please contact Anthony Sango. Join Anthony and Kelsey Barber on December 18, 2023, as they present at the National Business Institute’s Marijuana Business Operations in New York program. Learn more about the full day continuing legal education seminar and register to attend.

Asbury Park Zest Profiles Michael Benedetto in Fall Green Life NJ Edition

Ansell Grimm November 15, 2023

President and Managing Shareholder Michael V. Benedetto is featured in the Fall/Holiday 2023 Green Life NJ edition, published by Asbury Park Zest. A prominent lifestyle publication, Asbury Park Zest was created to highlight one of the most unique oceanfront cities in America and the businesses and people who call it home.

In this issue, Michael sat down with the magazine to discuss the sprawling, diverse real estate landscape along New Jersey’s coastline. He shares his insights on recent trends, the importance of building trust with his clients, and what makes New Jersey such a special place. Read the interview here.

In addition to his Firm leadership role, Michael serves as co-chair of the Commercial Real Estate and Corporate, Finance & Banking Departments. He has built a distinguished practice working with clients throughout the northeast and across the country, focusing on complex commercial real estate, corporate and commercial matters, business organizations, and banking matters.

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