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4) Financial Security

Tenants will have difficulty obtaining financing from federally regulated financial institutions and could be in default with existing financing due to the institutions’ obligation to comply with federal law. The parties will likely resort to private methods of security to protect the landlord from possible damage arising from federal interference. The security may include obtaining one or multiple guarantors, heavy security deposits or prepaid rent.

5) Real Estate Taxes

Many city ordinances have not been finalized; however, it is known that taxes will be associated with cannabis operations, which could possibly carry over to the landlord. The AIR lease should be modified to shift unknown cannabis tax burdens to the Tenant.

6) Alterations

Most premises are not equipped for the cultivation of cannabis or the manufacturing of cannabis-related products and significant alterations must follow lease execution, such as significant power upgrades and security modifications. The lease must reflect the negotiated level of flexibility in the construction of the alterations.

The above list of key aspects involved an AIR lease transaction contemplating cannabis operations is not exhaustive and an attorney should be consulted to address specific concerns of the parties involved. The lease plays a primary role in setting the parties up for a long-lasting mutually beneficial relationship and should not be taken lightly.

Cole Morgan is a corporate and commercial real estate attorney. He has assisted numerous cannabis and non-cannabis clients in the drafting of leases and purchase and sale agreements in the Orange County and Los Angeles areas. He can be contacted through his email: [email protected]