Oklahoma’s Legalization of Medical Marijuana created a Seller’s Market that was good for Landlords
When the voters of Oklahoma legalized medical marijuana in 2018, it had a major effect on the State’s real estate market. Suddenly, there was a demand for certain property types that previously lacked demand.
Owners of raw land in rural areas saw price per acre shoot up, as greenhouse operators were coming to town. Indoor growers created a new demand for urban warehouse space, for which demand spiked. And urban landlords with C-Class retail strip centers saw renewed interest from tenants seeking dispensary storefronts.
However, after the initial “green rush,” the oversaturated industry is now in an economic slump. The cannabis industry is experiencing a deep recession, with many operators either going out of business or closing down altogether.
With so many cannabis operators performing very poorly, it is quite natural that Commercial Landlords will at some point need to evict their cannabis tenants. Landlords that have leased property to medical marijuana businesses must act to protect their real property assets.
This article will cover a few different situations.
The process for Commercial Evictions in Oklahoma
Medical Marijuana businesses are commercial entities, and therefore, these types of evictions are governed by commercial real estate law, not residential real estate.
Therefore, the Oklahoma Residential Landlord & Tenant Act does not apply to cannabis businesses. Cannabis Businesses – whether LLCs, Corporations, Partnerships or Sole Proprietors – do not have consumer protections, and will be treated as commercial defendants in Oklahoma courts.
Evicting a Dispensary in Oklahoma City
Medical Marijuana Dispensaries are simply retail stores that sell consumer goods. As such, they tend to have a lot of product inventory, but not much in the way of heavy or specialized equipment. A cannabis dispensary will typically have a show room floor, and an inventory stock room, and perhaps a small office.
The process for evicting a dispensary is to send them a 5-Day or 10-Day Notice to Quit Possession or Pay Rent. The time period for the notice depends on whether they are less than three months behind on rent, or more than three times behind on rent. (This requirement comes from Oklahoma statutes). If the Dispensary Tenant does not pay rent during the Notice period, they may be evicted by the Court.
The next step is filing the eviction lawsuit. There are two types of lawsuits; the first is to obtain possession of the property; and the second is to obtain a judgment for money damages.
You should prioritize possession of the property; and that involves filing the Petition for Forcible Entry and Detainer. At the hearing, which will take place within a couple weeks of filing, the court may award possession of the property back to the landlord. Afterwards, a Writ may be executed by the Sheriff. That means, the Sheriff will come to the property and escort the tenant out, and give the keys and possession back to the landlord.
What to do with the inventory of Medical Marijuana products after evicting the Dispensary?
The things to be concerned about are inventory. Normally, a Landlord maintains a lien on inventory to secure any balance due. But in this case, the inventory is legally considered a narcotic and requires both an OMMA license and an OBN permit to possess and sell. Therefore, as Landlord, you will not be able to liquidate this inventory. You will be forced to notify the Oklahoma Bureau of Narcotics to have them come seize and destroy it.
A better strategy is to execute your judgment on the cash on the premises. If you recover a judgment for past-due rent, a Writ may be executed on the cash-on-hand, including any cash held in a safe or lock box on the rental premises. Being that cannabis dispensaries are mainly cash businesses, this can be a good strategy to use on a dispensary Tenant/Debtor.
Evicting a grow or processing operation in Oklahoma City
The process for evicting a marijuana grower or processor is similar to the way you evict a dispensary. The biggest difference is what happens after you win the eviction and obtain possession of the premises.
This time, you may be able to recover equipment that can be sold to satisfy the judgement debt for the rent arrears. Grow facilities typically have equipment and trade fixtures that can be removed and sold. This would include HPS lamps, dehumidifiers, trimming machines, CO2 burners, stainless steel tables, chairs, shelves and computer equipment and controllers, as well as surveillance cameras and equipment. This property can be seized and used to satisfy the debt.
The Advantages of Evicting Cannabis Businesses
The main advantage a creditor has over a cannabis business that is typically not available when collecting on other businesses, is the fact that the cannabis industry is a cash industry. Therefore, these businesses often have cash reserves on the premises. And those safes and lockboxes can be seized by the Sheriff when executing a judgment.
In order to seize cash on-hand, you must first obtain a judgment for money damages from the District Court. Thereafter, you may motion to have the Court order the Sheriff to execute the judgment. In this case, we want to execute on the cash on-hand. This is called a “Till Tap” or a Writ of General Execution. Quite simply, the Court orders the Sheriff to show up, order the Dispensary to empty their cash register or lock box, and the Sheriff will seize the cash and complete an inventory statement. Thereafter, that money will ultimately be returned to the Landlord/Creditor.
Oklahoma City Real Estate Lawyer handles Evictions involving Cannabis Companies
Travis Charles Smith is an experienced litigator and trial lawyer that handles evictions and other real estate matters for landlords and investors. If you have an eviction with special needs or circumstances, Travis can assist you in recovery of your asset and protection of your rights. Call 405-724-8112 or email us today.