Los Angeles Cannabis Regulations Commission Announces Recommendations for Phase 3 Processing

Posted by Margolin & Lawrence on March 11, 2019

The Cannabis Regulations Commission met on March 5th and presented their recommendations to the City Attorney that would establish policies for processing phase 3 applications. Phase 3 would begin with a 60-day pre-vetting process of social equity applicants to verify Tier 1 or Tier 2 qualification. Verified Tier 1 or 2 applicants will then be eligible to move forward into the first phase of the licensing process. The DCR will issue 100 licenses in this initial phase allocating 75 to qualified Tier 1 applicants. Qualified Tier 1 applicants would receive priority receiving 75% of the available licenses during this initial phase so long as all basic application requirements are met including:

 

  • A signed lease with proof of payment or deposit, or a property deed
  • Meet all sensitive use requirements, including undue concentration
  • Payment of required license fees
  • Ownership organizational structure
  • Financial information
  • Proposed staffing plan
  • Indemnification
  • Complete and detailed diagram
  • Proposed security plan
  • Radius map
  • Labor peace agreement
  • Current Certificate of Occupancy
  • Compliance with the Equity Share Rules

 

Second phase 

The second phase will allocate an additional 100 licenses establishing no priority between Tier 1 or Tier 2 applicants. The second phase will establish a “first-come, first-serve” process that will allow the first 100 qualified applicants will move forward. Basic qualifications required to be met are payment of the required license fees or deferment approval; ownership organizational structure; financial information; indemnification; and, labor peace agreement. The remaining qualifications mentioned above would be required within 90 days.

 

The Commission also recommended the implementation of a pilot program for Type 9 Retail Non-Storefront delivery services. A total of 40 licenses would be available allocating 20 licenses to pre-vetted Tier 1 Social Equity applicants. The pilot program will also allow verified applicants who could not obtain a Type 10 retail license due to undue concentration limits will receive priority for a Type 9 delivery license. This will allow licensees to remain in their building and operate as a non-storefront retailer in lieu of having to locate and secure another compliant location. Eligible phase 2 applicants will also have an opportunity to amend their application to include delivery so long as they are compliant with the city’s zoning and regulatory requirements.

Phase 3 Licensing Estimated Timeline


 

Phase 3 Application Processing

60 day Pre-Vetting Period

  • Basic Tier 1 or Tier 2 qualification
  • Indemnification

 

 Phase 3A:

14 day application window

  • Qualified Tier 1 or Tier 2 applicants will be processed for 100 retail licenses (75% reserved for Tier 1 applicants). Pre-vetted applicants will receive 15 days notice of when the first phase application window is to open.
  • Deficient applications will have 5 days from the start of their application to rectify insufficiencies or issues with the basic qualifications.

 

 Phase 3B:

30 day application window

  • Pre-vetted Tier 1 or Tier 2 applicants who meet basic qualifications (see above) on a “first-come, first-serve” basis.
  • Applicants will have an additional 90 days to submit the remaining application requirements
  • Deficient applications will have 5 days from the start of their application to rectify insufficiencies or issues with the basic qualifications

 Delivery Pilot Program:

  • Pre-vetted Tier 1 or Tier 2 applicants will receive 15 days notice for when Type 9 delivery licenses will become available
  • Pre-vetted Tier 1 or Tier 2 applicants subjected to undue concentration limits will have priority
  • Eligible phase 2 applicants will have opportunity to amend their application to include delivery
  • Deficient applications will have 5 days from the start of their application to rectify insufficiencies or issues with the basic qualifications

LA Cannabis Update: New Recommendations from the Los Angeles Department of Cannabis Regulation

Posted by Raza Lawrence on February 15, 2019

Cannabis attorney Raza Lawrence attended today’s special meeting of the Los Angeles Rules, Elections, and Intergovernmental Relations Committee. At the meeting, the discussion focused on three main points:

  • The City of LA is considering and discussing different possible ways to process Phase 3 applications, including a first-come first-served method, a lottery, a “merit-based” system, or some combination of these three methods.

  • It’s possible that the city will lower the percentage of a Tier 1 or Tier 2 social equity business that is required to be owned by the individual who satisfies the social equity criteria.

  • The DCR’s lack of funding, and the need for more funds in order to move forward and process all the applications from Phases 1, 2, and 3.

The current situation with regard to cannabis retail is tense – the city has considered cracking down on non-compliant businesses by shutting off their water and power, among other methods.

To help streamline the city's regulations and ameliorate the pressure that cannabis businesses currently face, the DCR released a report including a set of recommended amendments to the city’s cannabis procedures. The recommendations, as filed with the city, are as follows:

1. REQUEST the City Attorney, with the assistance of the Department of Cannabis Regulation (DCR), to prepare and present an ordinance to amend Section 104 of Article 4 of Chapter X of the Los Angeles Municipal Code and the Rules and Regulations as necessary to:

a. Modify the definition of “owner” in conformance with state regulations, including clarifying that the meaning of “owner” does not apply to the managers, officers, directors, and equity-holders of the management company.

b. Allow DCR to grant Temporary Approval to a Phase 3 storefront retail license applicant after DCR recommends that the Commission issue the applicant a license.

c. Amend “Program Site Specific Conditions” from the Social Equity Applicant to allow for site specific conditions only as required by CEQA, public health and safety, or as necessary under a DCR, State of California, or City enforcement action in conformance with other sections of the rules and regulations.

d. Eliminate a Tier 2 applicant’s obligation to provide business, licensing, and compliance support to a Tier 1 applicant.

e. Require Tier 3 applicants with Temporary Approval to enter into a Social Equity Agreement within 60 days of the enactment of this ordinance or from the time of application, whichever is later.

f. Allow DCR to issue non-storefront retail licenses in the manner provided in LAMC Sec. 104.06(b) and exempt non-storefront retail license applicants from the community meeting requirement in LAMC Sec. 104.04.

g. Clarify that DCR may require an applicant to submit additional information documents after DCR deems an application complete as necessary to make a licensing decision.

h. Remove the requirement in Regulation No. 10 D. 4. that a retailer store all cannabis goods in a vault or safe during non-retail hours.

i. Revise Regulation No. 7 to provide that DCR shall process applications for licenses in a manner consistent with LAMC Section 104 and these Rules and Regulations.

j. Conform the City’s delivery regulations with state regulations with respect to operational requirements.

K. Allow DCR to enter into Social Equity Agreements with a Tier 3 applicant without Commission approval.

l. Clarify LAMC Section 104.20(i)(9) to state that after the term of a Social Equity Agreement is completed, a Tier 1 or Tier 2 Social Equity Applicant license holder may only transfer control or ownership of a License after first providing the other ownership interests in the business the right of first refusal to buy, at market-rate.

m. Clarify the definition of limited access areas to only include those areas required under the rules and regulations of the State of California.

n. Clarify that any applicant or landowner with evidence against them with respect to illegal cannabis activity at any time since January 1, 2018 will be banned from participation in Phase 3 retail and delivery processing.

2. INSTRUCT the DCR to report back at the next Rules, Elections, and Intergovernmental Relations Committee meeting with a further analysis of the recommendations for Phase 3 Storefront Retail processing and Non-storefront Retail processing, including consideration of a social equity applicant registry platform similar to the City of San Francisco.

3. INSTRUCT the DCR to suspend any Phase 3 processing until the enhanced Social Equity analysis for the San Fernando Valley, Boyle Heights, and Downtown Los Angeles is completed.

4. INSTRUCT the DCR to provide an updated map online within two weeks oft he Council action with respect to the current locations of all Phase 1 and Phase 2 applicants that have received local authorization, temporary approval, or any form of local and state licensure. This shall also include an online document with respect to undue concentration areas by community planning areas, and the capacity left for Phase 3 applicants.

5. INSTRUCT the Department of City Planning (DCP) to include amending the pending draft ordinances pertaining to cannabis in conformance with state regulations with respect to alleyway access, ingress, egress, and door location.

6. INSTRUCT the DCP to include amendments to the pending draft ordinances pertaining to cannabis in a similar manner to the City of Seattle, Washington in which two retail establishments may co-locate within 1,000 feet of each other, and the next retail establishment must be 1,000 feet away from both retail establishments.

7. INSTRUCT the City Clerk to hold Council File No. 14-0366-S5 open and active, including the DCR report on file, for further deliberations by the Rules, Elections, and Intergovernmental Relations Committee.

Everything You Need to Know from the Pasadena Application Workshop

Posted by Raza Lawrence on November 14, 2018
On Tuesday   night, the city of Pasadena hosted a presentation on cannabis licensing with a planning consultant. Here is what we learned from the meeting.  
 
Regulations for cannabis businesses were voted in on   June 5th  by Pasadena voters. As a pragmatic and conservative city, Pasadena's licensing focuses on exercise of local control – with the aim of protecting its residents from secondary effects through land use regulation. 
 
The application period is from   January 1st to January 31st at   11:59 p.m.  There will be a notice of the 30-day period on   December 14th. Currently there is a draft of the review criteria available. The final criteria will be released on   December 14th.  
 
The whole application, as well as payments, may be submitted electronically. Pasadena's selection committee will not give special weight to applications submitted on   January 1st  versus   January 31st, and will not look at anything until the application window closes. The application fee will be approximately $10,000 per category. 
 
The application requires qualifications of the operator, cover letter, business plan, background, experience dealing with government agencies, neighborhood compatibility and enhancement, and security plan. The limit is 50 pages of text and images. You do not have to have a confirmed site in order to apply. 
 
When the application portal closes, there will be an initial screening of applications - did the applicant answer all questions? is the application in full compliance? - to ensure the application is complete and responsive. 
 
Once applications are scored, top applicants will be notified and will have the  opportunity to go forward and secure land use permits and public  health permits – this is period when you need to lock down your sites,  look at buffer zones, and so on.  These sites must also be located at least 1,000 feet from  any other cannabis retailer.
 
All the scoring will be based on written submissions, but the city reserves the right to start an interview process of the final applicants. 
 
Pasadena will allow up to 6 retail permits in the city, one per council district, so long as they meet the required separation from schools, parks, and residential properties. 
 
Another point about delivery: people with licenses in other cities are allowed to deliver in Pasadena. Pasadena will not have separate delivery licenses, but the retail licenses will allow both storefront and delivery. 
 
Pasadena will allow up to 4 cultivation sites in the city, indoor only. These cultivation sites must be in commercial general and industrial general zones. 
Pasadena will also allow 4 testing laboratories in the city where other medical labs are allowed. 
 
For more information from the workshop, see the handouts at the City of Pasadena website. These include details of the proposed scoring system. 
 

New Cannabis Legislation

Posted by Margolin & Lawrence on October 1, 2018

Allison Margolin, founder and partner of Margolin & Lawrence, spoke on Wednesday about dosing regulations at the State of Cannabis conference in Queen Mary, Long Beach. The maximum dosage is 100 mg of THC for packaged edible products, and each serving can contain no more than 10 mg. This was established in the final re-adoption of the emergency regulations (CCR, Title 17, Division 1, Chapter 13, §40305), and while these limits may frustrate consumers with a higher tolerance, larger doses of concentrated cannabis products are allowed in non-edible forms. Under §40306 of the regulations, topical products, concentrates and other non-edible products (including tinctures and capsules) may be sold in amounts up to 1,000mg per package. a special recommendation to get a larger dose (up to 1,000mg) without medical prescription. Up to 2,000mg per package is also permitted under this provision, but only for medicinal-use customers and with appropriate labelling.

What Should I Know for My Cannabis Business?

Posted by Margolin & Lawrence on September 18, 2018

The logistics of running a legal cannabis operation involve many questions that may seem surprising or daunting to both current and aspiring business owners. As a California cannabis law firm, here are a few of the issues that we’ve seen cannabis businesses need answers for. If you’ve found yourself asking any of these questions about your own operation, our lawyers may be able to help.

How much can I expect to spend?

At present, the capital requirements to start a cannabis business are very high; on top of the normal costs of starting a business, like buying real estate and hiring employees, the industry is very tightly regulated, and it’s not possible to get an outside loan. That means your business has to be privately fundraised, so it’s important to figure out exactly how much money you have and how much you’re willing to spend.

The application fees alone for cannabis licensing are often several thousand dollars, and many jurisdictions require both proof of funding and a detailed business plan before they consider a cannabis licensing application complete. A cannabis lawyer can help you find this information in order to start your licensed operation.

Is my property in an eligible location for cannabis business?

Zoning requirements vary widely based on your jurisdiction and which type of cannabis activity you’re interested in, so it’s not always easy to tell whether a given property or address is eligible for a particular activity. In addition to restrictions on which zones a given activity can be located in (for instance, cannabis cultivation might be banned in commercial zones but allowed in industrial ones), many municipalities have setback restrictions that prevent cannabis businesses from being located within a certain distance of schools, parks, residential areas, or other cannabis businesses.

Interpreting the local zoning regulations to determine for what activities your business is eligible is another service that cannabis lawyers can provide.

What information do I need to apply for a cannabis business license?

Applying for a cannabis business license isn’t just a matter of filling out an application form – most state and local licensing authorities will require a large amount of information about the business and its owners, including a complete operating plan describing how your establishment will meet all legal requirements for cannabis business activity.

On top of this information, you’ll also need to have business documents such as a seller’s permit, federal employer ID number, and certificate of good tax standing in order. On top of that, most applications will require you to provide accurate financial information, insurance documentation, and enough personal documentation for each member of your business to pass a full background check.

Finding these documents and preparing them for your final application is just one service that cannabis lawyers can provide for your business.

Should I get a license for medical-use or adult-use cannabis?

At the present moment, many states and municipalities have separate regulatory regimes for medical-use and adult-use cannabis, often with very different legal requirements. For your cannabis business to succeed, you’ll need to decide which license (or combination of licenses) is best for your business, then master the licensing and compliance processes for the type of cannabis business you choose. A cannabis lawyer can help guide you through this process, from choosing the right activity to applying for a license to remaining in compliance with the law once your business is operational.

What cannabis activity should I apply for?

In addition to medical-use and adult-use, cannabis business licenses are broken down into different activities, such as cultivation, manufacturing, and retail. Additionally, many of these categories are split into subcategories such as indoor and outdoor cultivation or storefront and non-storefront retail. As with medical and adult-use cannabis, these different types of cannabis activities often have very different requirements.

Some jurisdictions also offer boutique categories with special requirements such as Microbusiness, impose restrictions on how many licenses can be granted, or limit which types of licenses a single business can hold simultaneously. For your cannabis business to succeed, you’ll need to optimize which activities to apply for – another task that a cannabis lawyer can help with.

How can I ensure that my business is licensed as quickly as possible?

Given that legal cannabis licensing is a complex, highly regulated bureaucracy currently receiving a large number of applications, it can be difficult for a cannabis business owner to predict how long it will take their business license application to be approved, or to optimize their application in order to be licensed and operational as soon as possible.

Some areas offer a fast track to licensing under their Social Equity Program, in order to ensure that business owners who are disadvantaged or disproportionately affected by the War on Drugs have a quicker path to licensed operation than other applicants. Our cannabis lawyers can help you find out whether you qualify for one of these programs.

Whether or not you qualify for a Social Equity Program, the best way to ensure that you’re licensed as soon as possible is to choose the right license for your business and make sure that the information in your application is complete and correct.

What license should I apply for if I plan to expand my operation?

Especially for new cannabis businesses, the size of a cannabis business at the time of initial licensing might not be the same as the size of the business you hope to run in two or three year’s time. However, cannabis license application fees often vary based on the size of the operation in question, and applications often require businesses to provide details that depend on the size of their operation, including what types of equipment they plan to use, their planned hours of operation, and how many employees they’ll hire (including their labor practices and management structure).

Our cannabis lawyers can help you figure out how to reflect your long-term growth plans in your licensing application, including the multi-year pro forma budgeting and income documents that many municipalities require.

Will I need to apply for additional licenses or permits?

For many businesses, the cannabis license itself is only one of a number of licenses you’ll need for a fully licensed operation. To begin with, new cannabis businesses will need to apply for their tax registrations and seller’s permits. Additionally, depending on your activity, you may need to apply for Conditional Use Permit or Land Use Permit from your local planning department before you can apply for a cannabis business license.

For some activities, like outdoor cultivation, this may require further permits, such as for diversion of water, tree removal, or environmental review. On the other hand, businesses located in cities may be required to apply for enrollment in local Social Equity or community benefits programs. Our cannabis lawyers can help you find out what additional permits you need and help you apply for them.

Do Free Samples get Taxed?

Posted by Margolin & Lawrence on May 1, 2018

 

Update: This blog post does not apply to Los Angeles, as the distribution of free samples is non-compliant under the LA Ordinance 185344 Rules and Regulations for Cannabis Procedures, Regulation No. 10. Operational Requirements and Violations. Section D.

 

Since the pot-prohibition era has ended, there has been much ambiguity around the transition from an illegal market to one that is becoming strongly regulated. The cannabis tax rates for California were definitely met with much opposition, with both merchants and customers appalled by the exorbitant tariffs on California’s favorite vice (read more here).

I Have My Temporary Distribution License. Now What?

Posted by Margolin & Lawrence on March 13, 2018

The state of California has officially begun to grant temporary licenses for cannabis distribution, pending applications and processing of full state licenses. Temporary licenses are “a conditional license that allows a business to engage in commercial cannabis activity for a period of 120 days.” They can only be granted to businesses which have already received their local licenses, and are intended to allow locally-licensed businesses to operate while waiting for their full state license to be reviewed.

When it comes to record-keeping, in particular, the requirements of temporarily-licensed cannabis distributors are different from those of annually-licensed ones. The reason for this difference is that the track-and-trace system which California will use to record the movements of cannabis products has yet to be fully implemented. While annual license holders will be required to use this system, based on the Franwell METRC software, to keep track of their inventory, CalCannabis states that temporary license holders must manually document their sales using “paper sales invoices or shipping manifests”.

For the temporary distribution licensee, then, keeping in compliance with state regulations is not only about following the operating requirements, but also about keeping track of a relatively complicated set of information for the sake of record-keeping. Distributors need:

  • Local cannabis recordkeeping requirements (usually keeping business, inventory, & patient records for a several-year period)
  • State cannabis record retention requirements (listed in California Code of Regulations, Title 16, Division 42, §5037) – financial, personnel, training, security, etc.
  • The California Board of Equalization’s general record-keeping requirements for businesses (keeping track of the sales & use taxes, receipts, deductions, and purchase prices for 4 years).
  • Paper sales invoices or shipping manifests for all sales
  • A resale certificate for all sales intended for resale

If a distributor plans on reselling cannabis rather than just distributing it, they’ll need to make sure their seller’s permit is in order as well. For more information on resale certificates, check our recent post on the subject.

While all this paperwork may seem daunting at first, a licensed distribution operation should be more than qualified to handle it – and, once the California METRC system is implemented, keeping records of sales and inventory should be streamlined considerably.

How Do I Find a Compliant Cannabis Property in Los Angeles?

Posted by Margolin & Lawrence on January 25, 2018

As cannabis entrepreneurs and investors learn about the legal requirements to operate a compliant cannabis business, the next question many arrive at is - so how do I find a compliant property?

L.A. Cannabis Update: Who Can Apply for a License Right now?

Posted by Margolin & Lawrence on January 11, 2018

While Jeff Sessions made his announcement last week that he was repealing the Cole Memo, Los Angeles opened their online portal for recreational cannabis applications. The conflict of law continues, but many operators in Los Angeles just want to know - “when can I get my license!?”

Currently, only cannabis retailers who qualify for Measure M Priority Processing are eligible to apply for licensure. Measure M Priority is limited to those operators who have a Business Tax Registration Certificate (BTRC) from 2015, 2016, or 2017 that is categorized as L050. This group is more expansive than just “Pre-ICOs” and will allow for newer businesses that have not been operating in Los Angeles for over a decade, in fact, you could have even opened a store a little over a year ago and qualify (you can read more in our previous post).

If you qualify for Measure M priority, you are considered an EMMD (existing medical marijuana dispensary) by the City. EMMDs numbers will not count towards the neighborhood caps that will be established for undue concentration or the limit on the number of licenses that will be issued for dispensaries in the City (around 390). They will receive licenses before anyone else in the City of Los Angeles, and will also be able to obtain their state licenses once they receive local authorization from the City.


Los Angeles will be issuing the first temporary licenses for Measure M Priority Dispensaries within the next couple of weeks. The temporary license is free to apply and you will need your BTRC number, a site plan, a lease, and identifying information for the owners of the operation. The Los Angeles Department of Cannabis Regulation has not given guidance as to when the annual license applications will be open for EMMD cannabis retailers in the City.


The next wave of applications will be Phase 2, when the City will be rolling out its Social Equity Program. Many of the details for the program are still being ironed out and we expect to hear more from the LA DCR in the coming weeks.

Ask A Cannabis Trademark Lawyer: How Do I Apply For A State Trademark?

Posted by Margolin & Lawrence on January 9, 2018

 As of January 1st, 2018, the long wait is over: cannabis business owners can apply for California state trademarks. The application form can be obtained here: http://bpd.cdn.sos.ca.gov/ts/forms/tm-100.pdf. Because cannabis is still federally illegal and cannabis products themselves cannot be trademarked, this is a viable avenue for many California cannabis brands that will protect your business marks within the state. You can read our prior post about USPTO Trademarks here.

According to the website for the Office of the California Secretary of State:

“Beginning January 1, 2018, customers may register their cannabis-related Trademark or Service Mark with the California Secretary of State's office so long as:

1.The mark is lawfully in use in commerce within California; and 

2.Matches the classification of goods and services adopted by the United States Patent and Trademark Office.  

If the application submitted to register a Trademark or Service Mark is found deficient, the application will be returned to the registrant for correction.

Note: Not all cannabis-related products can be registered under current law due to the inability to meet federal classifications.”

This means that in order to obtain your state marks, you must be lawfully using the marks in commerce at the time of the application. Therefore, you will need to be licensed in compliance with SB 94,  both at the local and state level, before you’re eligible for trademark approval. Otherwise, if you claim an unlicensed use, you may run into issues with the Secretary of State. Further, once your license is obtained, you must also show that you’re making actual, bona fide use of the trademarks on your products in the stream of commerce. That means that customers are identifying you by your brand when they purchase your goods or services in the marketplace.

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This blog is not intended as legal advice and should not be taken as such. The possession, use, and/or sale of marijuana is illegal under federal law.