As Arizona draws up regulations to accommodate the new marijuana-use law, Tucson commercial real estate tenants must assess how they will be affected.

After waiting 11 days after the election, Arizonans found out they passed Proposition 203, which allows the use of marijuana for certain medical conditions. Now that it’s official, we at Commercial Real Estate of Group of Tucson recommend that all tenants of Tucson retail space, Tucson industrial space or Tucson office space determine how this affects them and their businesses.

The state has until February to establish regulations for registering both patients and dispensaries. It may start issuing registration cards and permits, respectively, in April. Local governments also are finalizing laws to govern the location of dispensaries.

You’ll need to decide if you’re willing to accept a medical marijuana dispensary operating in the same building where you lease space.

What the Arizona Medical Marijuana Act says

Patients with one of nine specific medical conditions can register to use marijuana if their doctors recommend it as beneficial to the patient. The patient receives a card allowing them to buy or grow marijuana.

The state may issue a permit for one dispensary for every 10 pharmacy permits it issues. Dispensaries

•  must operate on a not-for-profit basis
• may grow marijuana only in an enclosed, locked facility
• must comply with local zoning and other governing laws.

Patients who do not live within 25 miles of a dispensary may grow their own marijuana only in an enclosed, locked facility. Patients may also furnish marijuana to a dispensary, but cannot be compensated for it.

The law and commercial real estate

Local governments are passing and implementing zoning rules that dictate where dispensaries can locate, such as within commercial areas; away from schools, churches and other facilities, and some distance from another dispensary.

Additionally, the state law specifically protects

•  the prohibition of smoking in a public place
• reasonable restrictions on use and storage of medical marijuana in residential or inpatient health-care facilities
• the right of a private property owner to prohibit the use of marijuana on that property.

Areas of concern for tenants

While each state’s laws are different, these issues surrounding dispensaries have popped up in states where medical marijuana use has been legal for a while.

Business operations

•  Strong odors from growing marijuana could create an unpleasant environment for employees and customers.
• Insurance companies may increase rates for all tenants in a property that has a medical marijuana dispensary.
• Landlords may pass along to tenants their own increases in insurance and other common area maintenance expenses that result from a dispensary tenant.
• Marijuana-growing operations use lots of water, the cost of which could be borne by the other tenants on the same water meter.
• Industrial areas will see heavy visitor traffic and parking at the dispensary compared to what is generated by other industrial tenants.
• Potential business-image issues can cause reluctance by your customers to visit your business.

Health and safety

•  Dispensaries could be targets for robbery of cash and marijuana products and plants.
• Dispensaries could be magnets for the illegal purchase and use of marijuana on the property.
• Mold contamination from the growing process could create a health hazard within your business location.

Other issues that a landlord faces—the ability to get loans, the financial riskiness of a dispensary as a tenant and the reaction of other tenants to a dispensary as a neighbor—can affect the landlord’s ability to maintain the space and lease you have.

Start investigating your options

We suggest you work with your tenant representative to determine the

•  potential for a dispensary to be located in the building where you lease space
• financial implications of having one as a neighbor
• strength of provisions of your lease that deal with how your business relates to other tenants in your building.

Commercial Real Estate Group of Tucsonspecializes in representing tenants and corporate users across the United States. For more information call 520-299-3400.