Cannabis Licenses Not Turnkey in California

Business and Marketing Legal
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If you are considering the purchase of real estate in California for use a licensed cannabis industry business, you need need to be aware that licenses are not transferrable.

Just for perspective, I am a CPA with thirty-seven years in practice and >40 cannabis licensees in Humboldt County and extensively engaged with the cannabis regulatory agencies and CDTFA. At the present time, as the factual statement, cannabis licenses whether temporary or annual are NOT transferable. There is NOTHING in the regulations or anything that we have seen anywhere in an official source that offers any prognostication on transferability. I can pretty much repeat word for word what John Ford or Michael Richardson with Humboldt County Planning would say about the topic as well.

You may very well be proven correct some years from now, but anyone considering the purchase of property needs to be aware that at the present time, there is no such thing as “turnkey” cannabis licensing in California. If you have doubts about my background with this please look at my profile.

Let’s be very clear, I doubt that there is anyone that wants all of this to succeed more than we do. However, having seen numerous situations repeated over and over again when we have to explain to the purchaser that they have to start the licensing process from scratch, PLEASE CONSIDER CAREFULLY PROVIDING AN ACCURATE UNDERSTANDING OF THE SITUATION TO PROSPECTIVE PURCHASERS.

Just so there is no question about the veracity of what I am stating, here is another well-known attorney stating the same thing. California Cannabis: Scams and Schemes of the Week, Part 3

There is a difficult balance to be had here…that between the efforts to help sellers of property, and the needs of purchasers that may not have the knowledge to understand what they are getting into.

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Once again…a form is not authoritative. As I previously stated, having had numerous conversations with John Ford, the Humboldt County Director of Planning and Michael Richardson of his staff. This is the actual text of an email we had sent to Mr. Ford and his response.

From: Jordan Zoot
Sent: Wednesday, February 14, 2018 9:34 AM
To: Ford, John
Subject: Humboldt County Planning - Policy & Procedure For California Bureau of Cannabis Control “BCC” License Applications

Mr. Ford,

We are a CPA firm that represents a number of Humboldt County businesses in the cannabis industry that have applied for temporary licenses with BCC. The specific businesses have commenced the process of obtaining all of the various permits, licenses, and documents with Humboldt County Planning and any other associated county and state agencies. We have received denials from BCC for the temporary licenses due to the lack of final approvals from Humboldt County. My understanding, from a number of sources is that where a business has filed with the county, and has made a good faith effort to move as quickly as possible to complete the requirements that supposedly, your office has issued some type of interim permit or “special” permit to the business, or contacted BCC directly to inform them of sufficient progress and approval from your agency so that the BCC, CDPH or CDFA would issue a temporary license.

We fully understand that such “interim” or special permit or the equivalent would not in any way change any of the obligations and responsibilities that the business would have viz Humboldt County Planning or any other agency. However, being able to obtain that type of document from your office would provide a substantial and important assistance to the business in its efforts to fulfill its obligations.

Rather than approach you with a dozen or more specific business’s application, though it would be much more efficient to request broad guidance which we can take back and apply to an entity by entity basis. We would appreciate your guidance, which we would obviously treat as non-binding and for informational purposes for:

Applicants for Cultivation License
Applications for Micro Businesses that may involve cultivation together with Manufacturing, Distribution or Retail
Any one of the Manufacturing, Distribution or Retail

I am licensed as a California CPA # 132647 and a substantial portion of our practice involves Humboldt County businesses, so we want to do everything we can to assist your effort. Thank you in advance for your time and attention. If it would be easier, my direct dial phone number is xxx-xxx-xxxx.

His response was:

Ford, John JFord@co.humboldt.ca.us
Feb 20
to me
Hi Mr. Zoot:

The following summarizes each category you listed:

· Applicants for Cultivation License – We have offered Interim Permits to applicants whose applications for existing cultivation were deemed complete prior to July 14, 2017. We are in process of modifying the cannabis ordinance to allow interim permits to the remaining existing cultivators whose applications are deemed complete. These are being used to obtain state licenses.

· Applications for Micro Businesses that may involve cultivation together with Manufacturing, Distribution or Retail – The current ordinance does not provide for a Micro Business as a use type, so unless the applicant has obtained separate permits for all the applicable uses associated with a Micro Business we are not clearing approval of state licenses for Micro Businesses.

· Any one of the Manufacturing, Distribution or Retail – There are no interim permits for these activities, but he has placed a priority on getting these processed.

I hope this answers your questions

John

We can leave it to anyone reading this to reach their own conclusions about my background vs the “California Cannabis CPA”. My concerns are for the industry as a whole, rather than seeking to sell a particular piece of real estate. It would be fascinating to see the extent to which your sell would be willing to provide reps an warranties with respect to zoning and license approval in a purchase contract…but that clearly goes to a specific transaction which isn’t where this discussion should be headed.

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At this point, I think you’ve been missing the point the whole time. She never mentioned transfer of cultivation licenses once. She only mentioned that the property up for sale currently has a licnece. If somebody is looking to purchase a property like this, that information can be enticing to a buyer because they know the farm was compliant before and there will be minimal investment needed in order to have the new license approved.
I think that we can also decide, at this point, that you do know how to speak in a professional manner (as evident in your emails, which trust me, in this industry, talking to politicians is part of the game, you’re nothing special for it. I’m speaking to mine almost weekly it seems), and I would suggest you translate that ability into your interactions on this website.

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I love how eloquent and polite everyone is being in this conversation. We may not always agree on the issue at hand, but we always remain respectful, professional and courteous here at GNET.

I have learned so much about current California regs just from these two threads alone! It may not be the most harmonious discourse, but it sure has been informative!

Thanks for helping us all to me more informed @jszesq, @420_Estates, and @bryan.eden!

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If a property is listed for sale with factual information such as:

  • Property is currently being used for a cannabis activity such as cultivation
  • Property is currently compliant and has local approvals in place [zoning, water access, power access]
  • Current owner is compliant and has xxx type of state cannabis licenses

All of that information is absolutely helpful. A prospective purchaser has the obligation to undertake appropriate due diligence prior to making a purchase.

However, any implication that an operation is “turnkey” suggesting in any way that the state licenses to operate any type of cannabis-related operation without having to complete the California state level licensing process is misleading. I would take exception to the statement that the expense of any interaction with the state regulatory authorities is going to be minimal.

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That information is all provided in the property listing description. Love being able to respond to these points you bring up.

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It’s also the purchasers due diligence to fact check. If the purchaser was buying to enter the Cannabis market, then it would be assumed that this individual or entity would know about relations related to their pruchase. As I read her original statement as a future farm owner, all I see is a functioning farm for sale. I didn’t see the licences for sale, nor would I assume they would be due to the fact that (assuming I’m actually up to par with CA regs, which I’m not even close) i know going into the purchasing conversation that the licence is non-transferable.
My point is this; she posted something on behalf on her client, which means she needs to word it in a way to will attract people like me to enquire for more information.
You asked for clarification on the subject, she delivered as requested. But what she delivered to you was a loophole in a way the license could be transferred. Welcome to cannabiz, the world of loopholes. You yourself sir are working in a loophole. You represent people in a federally illegal market which could send you to prison for money laundering really easily, however your loophole is that you are a state lincesed representative and therefore are not operation under federal jurisdiction. They can still get you, but you have a bonified loophole in which you can operate in.

It’s no different in this conversation.

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Actually, as a tax practitioner, I am most certainly subject to oversight by the US Dept. of the Treasury, Internal Revenue Service Office of Professional Responsibility [“OPR”].

A much more detailed discussion of the issue exists at Regulation of Tax Professionals.

That should clarify the question of being subject to “federal jurisdiction”.

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Thanks so much Bryan! I actually provided the form that Humboldt County issued to allow property and permit transfers. Each person will still have to submit their info and do background checks for licensing purposes, but property transfers can happen with the proper documentation. Thank you again for your thoughts in response to this thread!

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You only rectified my point of you working in a loophole.
Like you just said, you’re subject to oversight from the federal government (same thing as I said about you being subject to federal prosecutuon) and therefore work exlusivly in a loophole type legal system. You wouldn’t continue your practice of it was blatantly illegal would you? While what you’re doing is federally deemed illegal, you must have found a loophole allowing you to avoide prosecution up to this point right?
My assumption for the loophole would be the fact that you have a state license.

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I think this thread has gotten a bit out of hand, so locking for now.

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