Controlled Substances & Regulatory Practice

Commercial Property Owners Must Address Unique Issues Before They Lease to Cannabis Dispensaries

Ansell Grimm March 28, 2024

The cannabis industry has been legalized at the state level in New Jersey for some time now as licenses continue to be applied for and distributed. While some cannabis businesses are purchasing their own properties at which they can operate, many are seeking leases from local commercial property owners. These commercial landlords are jumping at the chance to take advantage of the lucrative opportunities in leasing their premises to cannabis businesses for rental rates much greater than market in the areas permitting this use. However, the inherent conflict and contradictions between federal and state cannabis laws, as well as other industry-specific concerns, must impact the decisions of landlords considering doing business with cannabis enterprises.

The overwhelming majority of marijuana businesses lease their spaces rather than own them. According to the National Association of Realtors (NAR), the share of NAR members reporting purchases of real property by marijuana businesses over leasing dropped from 29% to 18% since 2021. But even as more commercial property owners become comfortable with the idea of leasing to a cannabis dispensary, they also recognize they need to carefully tailor their leases to address the legal, financial, and practical concerns unique to the cannabis industry. Failure to account for these issues could expose landlords to potential civil and criminal liability, conflicts and defaults with lenders, and the loss of substantial cash flow.

While commercial property owners should always consult with experienced counsel before leasing to a cannabis dispensary, the following are just a few of the many matters that should be addressed before signing on the dotted line.

Lender/Mortgage Concerns

If their property is secured by a mortgage, owners should carefully review their loan documents to ensure that renting their property for purposes that remain illegal under federal law does not constitute a default. Loan documents often contain language stating that the loan may be accelerated if the real property is used in connection with illegal activity. Leasing space for a federally prohibited purpose could also trigger any “bad boy” covenant in a personal guaranty and make it more difficult to refinance in the future as there could be issues finding a new lender and obtaining a loan title policy due to the federally illegal use.

Use of Premises

The lease should clearly define the permitted uses of the leased space, limiting it to the specific nature of the cannabis business allowed by the license obtained by the cannabis operator. In addition, the landlord will want to make sure that the company complies with all state and local laws, including confirming that the local municipality has approved the use. As to licensing specifically, the landlord will want to make sure that the tenant always complies with the terms of its state-issued license and continues to renew it as required by law. When it comes to the particulars of the use itself, the landlord may want to specifically prohibit the onsite use of cannabis products anywhere on the landlord’s property or other considerations based upon the nature of the property.

Cash/Rent Payments

Robust security should be a necessity at any premises involved with the cannabis industry due to the cash-intensive operations (another consequence of the failure to modify federal banking laws to accommodate cannabis businesses). The landlord may want to limit the amount of cash that is kept at the premises at any given time or require the tenant to remove such cash from the premises at specific intervals. And that cash, derived from the sale of cannabis products, should not be used to pay rent as that could be deemed a violation of the federal Controlled Substances Act. The landlord will want to require all rental payments to be made by check or wire transfer. For similar reasons, commercial landlords should never use a percentage rent formula on their dispensary leases, as it could potentially be deemed to be income from federally illegal activities.

Termination of Lease/Surrender of Premises

The commercial landlord should require that its departing tenant remove all cannabis products remaining on the premises upon the expiration or earlier termination of the lease, as a landlord never wants to be in possession or have to dispose of illegal substances. As such, typical abandonment clauses would not be ideal in this situation.

If possible, the landlord may also want to consider an early exit clause in the event of any changes in the current applicable federal laws and regulations that trigger an increased risk to the landlord or its ownership of the property.

As noted, these are the broad contours of only a few issues that commercial property owners need to consider and incorporate into their leases with cannabis operators. If you would like to discuss leasing your property to a cannabis business or need assistance drafting a lease, please contact Melanie Scroble at Ansell.Law.

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.

We Congratulate Our Client for Securing Its Latest New Jersey Cannabis License

Ansell Grimm January 19, 2024

Ansell.Law is delighted to congratulate its client, Mule Extracts LLC, on securing a cannabis license from the New Jersey Cannabis Regulatory Commission. Previously awarded a Conditional Class Two Manufacturer License, Mule Extracts recently obtained its Class Two Annual Manufacturer License, allowing it to operate in New Jersey. A highly nuanced and multi-step process, we guided Mule Extracts in obtaining both its early licenses and submitting the Conversion Application.

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 Kelsey Barber if you have questions about this evolving area of law.

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.

Joshua Bauchner and Kelsey Barber Present on New Jersey Marijuana Business Operations

Ansell Grimm July 20, 2023

Shareholder Joshua S. Bauchner and associate Kelsey M. Barber will present during the National Business Institute’s Marijuana Operations in New Jersey seminar. They will address critical human resources, labor, and employment issues affecting marijuana and cannabis businesses operating in New Jersey. Their session includes key considerations for hiring and training employees, navigating 401k issues specific to the industry, and understanding corporate governance. Bauchner and Barber also will provide an ethics presentation exploring rules of professional conduct, the duty to pursue justice, attorney use of cannabis, and attorney ownership of cannabis businesses.

The full-day seminar will be offered live online on August 21, 2023, and available to view on demand. Learn more and register for this information-packed program presented by cannabis industry leaders.

As one of the most rapidly evolving industries today, lawyers in the cannabis space must be educated on licensing, operations, and employment issues such as drug testing. Contact an attorney in our Controlled Substances and Regulatory Law Practice Group with any questions about this emerging area of law.

In Major Advancement, FDA Issues First-Ever Draft Guidance on Clinical Trials for Psychedelic Drugs

Ansell Grimm July 10, 2023

By Josh Bauchner –

Maligned, stigmatized, and marginalized for decades, psychedelic drugs have long been off-limits for researchers and others who wanted to explore the potential therapeutic uses of these substances for various conditions, including PTSD, depression, substance abuse, and anxiety. Now, in a significant step that offers the promise of new medical treatments and advancements, the U.S. Food and Drug Administration (FDA) issued its first-ever guidance for those wishing to study and test psychedelics for medicinal use.

Released on June 23, 2023, the FDA’s draft guidance contains non-binding recommendations for designing clinical trials for psychedelic drugs. According to the FDA, the draft guidance aims to “advise researchers on study design and other considerations as they develop medications that contain psychedelics.” As used within the guidance, the term “psychedelics” refers to “‘classic psychedelics,’ typically understood to be drugs such as psilocybin and lysergic acid diethylamide (LSD) that act on the brain’s serotonin system, as well as ‘entactogens’ or ’empathogens’ such as methylenedioxymethamphetamine (MDMA).”

The guidance discusses basic considerations throughout the drug development lifecycle, including trial conduct, data collection, participant safety, and new drug application requirements. Emphasizing psychedelics’ potential for abuse and psychoactive effects such as hallucinations and mood and cognitive changes, the FDA notes that this creates “a drug safety issue that requires careful consideration and putting sufficient safety measures in place for preventing misuse throughout clinical development.” This includes addressing potential interactions with drugs like antidepressants or lithium and “the role of psychotherapy in psychedelic drug development, considerations for safety monitoring and the importance of characterizing dose-response and the durability of any treatment effect.”

Outlining the needed steps for psychedelic drug testing and study, the FDA provides recommendations for nonclinical safety and toxicology studies, with examples of when extensive previous trial data could substitute typical animal toxicology testing in trials under an Investigational New Drug Application (INDA). The guidance notes that since psychedelics are Schedule I controlled substances, activities associated with investigations under an INDA must comply with applicable Drug Enforcement Administration regulations.

The FDA released its guidance days after legislation was introduced in Congress with bipartisan support directing the agency to do so. While it is unclear what the guidance will look like in its final form after the 60-day public comment period, the legislative and regulatory movement to allow for more research and testing of psychedelics for therapeutic use is a positive development for individuals seeking relief from a wide range of debilitating conditions.

If you have questions or concerns about the FDA’s draft guidance, please contact an attorney in Ansell.Law’s Controlled Substances and Regulatory Law Practice Group.

Congratulations to Joshua S. Bauchner on His Achievements as the New Jersey State Bar Association’s Cannabis Law Committee Co-Chair

Ansell Grimm June 9, 2023

Ansell Grimm & Aaron, PC congratulates shareholder Joshua S. Bauchner on his many achievements as co-chair of the New Jersey State Bar Association’s Cannabis Law Committee. Along with co-chair Lisa A. Gora, a partner at Epstein Becker & Green, Joshua led the Committee in making significant advancements, including:

Hosting eight CLEs at the Law Center on a range of cannabis-related topics.
Hosting three CLE panels at the State Bar Convention.
Expanding the Committee to include psychedelics.
Preparing two Reports and Recommendations to the New Jersey Cannabis Regulatory Commission on its initial Rules and Regulations.

The Committee also laid the groundwork for new initiatives in the 2023-2024 term, including promoting expungements of cannabis-related convictions and developing guidelines for Workplace Impairment Recognition Experts (WIREs).

We commend Joshua Bauchner and Lisa Gora, and all of their colleagues on the Committee, and thank them for their leadership and commitment to the practice of controlled substance and regulatory law. You can read their letter to the Committee here.

The New Jersey State Bar Association’s Cannabis Law Committee was formed to bring together attorneys to examine the many legal issues that stem from the medicinal and adult-use access to cannabis.

New Jersey State Bar Association Cannabis Law Committee Announces New Initiatives

Ansell Grimm June 8, 2023

The New Jersey State Bar Association recently welcomed new co-chairs of its Cannabis Law Committee. The Committee also announced vital new initiatives related to the cannabis industry which are being pursued in the 2023-2024 term. The committee was previously co-chaired by Ansell Grimm & Aaron shareholder Joshua S. Bauchner and Epstein Becker & Green partner Lisa A. Gora. Bauchner and Gora chaired the Committee for two terms concluding on June 30, 2023.

The new initiatives, announced at the May NJSBA convention in Atlantic City, will promote expungements of cannabis-related convictions and develop guidance for Workplace Impairment Recognition Experts (WIREs). The new committee co-chairs also plan to support increased education at local bar associations. Bauchner, in his role as outgoing co-chair, is quoted in an article discussing these new appointments and initiatives. Read the article here.

As one of the most rapidly evolving industries today, lawyers in this space must be educated on licensing, operations, and employment issues such as drug testing. Contact an attorney in our Controlled Substances and Regulatory Law Practice Group with any questions in this emerging area of law.

Joshua S. Bauchner Named a NJ Cannabis Insider 2023 Award Finalist

Ansell Grimm May 1, 2023

Ansell Grimm & Aaron is pleased to announce that Joshua S. Bauchner is a finalist for the NJ Cannabis Insider 2023 Awards! He has been nominated in the Excellence in Cannabis Law: Employment Lawyer category.

Voting is now open and can be done once per day through May 8, 2023. Please join us in supporting Josh by submitting as many votes as possible for him. Click here to cast your vote.

As head of the Controlled Substances and Regulatory Law Practice Group, Josh co-hosted on behalf of the Firm the first-ever Cannabis Symposium in New Jersey which drew nearly a thousand people (two other Symposia followed). He is co-chair of the New Jersey State Bar Association Cannabis Law Committee, a member of the NORML Legal Committee and Amicus Committee, has spoken at the Cannabis World Congress and Business Expo at the Jacob Javits Center, and has presented CLE’s on cannabis at the NY and NJ State Bar Associations, among other fora across the country. He also was honored with the New Jersey Law Journal’s Innovator of the Year Award for his work in the cannabis space and also publishes regularly on the topic.

The attorneys in the group 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.

Ansell Grimm & Aaron Congratulates Clients for Securing Cannabis Licenses

Ansell Grimm March 8, 2023

Ansell Grimm & Aaron, PC is pleased to congratulate its latest clients to secure annual cannabis licenses from the Cannabis Regulatory Commission. The Social Leaf, LLC was awarded an Annual Class Five Retailer License, and CSDE Manufacturing, LLC was awarded an Annual Class One Cultivator License. The Commission issues licenses for medicinal and recreational cannabis business operations in New Jersey. We proudly support these developing businesses.

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. We are committed to helping our clients understand their rights and opportunities in this evolving area of law.

Controlled Substances & Regulatory Practice

By Josh Bauchner –

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