8 May 18

More “Unintended Consequences!”

This from an attorney friend and colleague in WI:

“I am in the process of reviewing title-work in order to insure the purchase of commercial property for one of our clients.

I ran into this ‘exception clause.’

It is new! I’ve never seen it before:

‘Notice: Please be aware that, due to conflict between federal and state laws concerning the cultivation, distribution, manufacture, or sale of marijuana, the Company is not able to close, nor insure, any transaction involving property that is associated with these activities.’

This is a big deal, and I’m not at all sure many in the real estate industry are even aware of it yet.

But, they will be!

It means that a marijuana-growing operation, or establishment that ‘dispenses’ marijuana, cannot get title insurance for their property, making it nearly impossible to sell the property. Note that the clause above does not enumerate any kind of time limit!

When you can’t get title insurance, you can’t get a loan!

I’d hate to be a landlord who has a ‘dispensary tenant,’ looking to refinance, only to anguishingly discover his otherwise-valuable property is permanently ‘contaminated,’ and thus effectively worthless, maybe forever!”

Comment: That landlord would probably be better-off if his property were contaminated with plutonium!

With this inherent and unresolvable state/federal law conflict, suddenly lawyers, realtors, landlords, underwriters, bank presidents, et al are faced with the prospect of an inadvertent mis-step that leads to them spending “quality time” in federal prison!

They predictably respond by washing their hands of the entire issue, and nervously writing “exception clauses,” as we see above.

“Public acceptance” of casual marijuana use is decades away, and it well may never happen, no matter what state legislatures do or don’t do.

In the interim, which probably includes the remainder of our lifetimes, significant risk will continue to attach,

… and not just for actual users, as we see!