Cannabis business could be deal breaker for prospective building buyers, sellers
Q: Is there anything people should know if they’re thinking of buying a building that will be used to either grow, sell, manufacture or distribute cannabis or its oil derivates?
A: Just be aware that title insurance (a requirement of any lender) won’t be available. While Oklahoma law permits the sale, etc ... of cannabis, federal law doesn’t. So, since title insurance “insures” the buyer that the building will work for that use, and the federal government could swoop in at any moment and enforce federal laws against such, title insurers bridle at insuring cannabis uses. It’s the same if you’re thinking about selling a center where one tenant may have grown, sold, manufactured or distributed cannabis. The looming possibility of federal enforcement presents the inability to get a title insurance policy in favor of your buyer.
Q: Is there anything that someone, as a possible, future seller of a center that would include a tenant that grows, sells, manufactures or distributes cannabis to prevent such trouble?
A: Yes. When talking to a prospect cannabis-user tenant, make their lease either month-to-month (subject to a 30-day termination provision, by either party), or for a short period of time. That way, if a future sale does arise, the cannabis lease can be terminated within the due diligence period of the purchase/sale contract, so that the inability of obtaining title insurance isn’t a deal-breaker.
Q: Is there another way around these issues?
A: Yes. Pay cash for the property. If you want an inkind equivalent to title insurance, get an attorney to do a title opinion for you.