By: Scott F. Roberts
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Update on Illinois Recreational Cannabis: November 2020
Facing lawsuits from angry applicants and public outcry on the apparent unfairness of the licensing process, the Department of Agriculture has provided additional clarification as to the requirements for State of Illinois cannabis applications.
Last month, the Department of Agriculture posted changes and updates to the application process for craft grower, infuser, and transporter licenses. One of the biggest clarifications the Department made was to inform applicants, both existing and future, that there is no requirement for them to own or lease property in order to apply for an adult-use cannabis license in Illinois. This update directly addresses one of the biggest complaints of current applicants who feel they are unable to keep up with property carrying costs while waiting for licenses to be awarded.
Last month the Illinois Craft Cannabis Association filed suit in Cook County demanding that licenses to be awarded sooner rather than later. This is the second lawsuit filed against the State of Illinois in relation to the awarding of Illinois adult use cannabis licenses. During the delay, applicants for all license types have been continuing to pay property costs associated with renting, purchasing, or reserving the property they plan use for their proposed marijuana establishment. With an uncertain timeline, applicants are concerned that they will not be able to continue paying the high costs associated with these desirable properties, especially with cannabis lending being especially hard to obtain at reasonable interest rates.
The Department of Agriculture states that applicants are merely required to identify the location of a proposed facility in order to demonstrate that the proposed location is suitable for effective and safe cultivation and production of cannabis infused products. As Illinois cannabis attorneys, we see the issue with this and understand the competitive nature of the cannabis industry, especially in limited license scenarios. Once property is determined to be properly zoned for cannabis use the overall value of the property substantially increases. This type of property cannot just be put on hold for a potential buyer to someday purchase it, if awarded a license. Instead, owners of these parcels want cash in hand in the form of earnest money deposits and due diligence extension payments.
However, once the craft grower, infuser, and cannabis transporter licenses are awarded, applicants who are unable to remain at their initially proposed property have one more option available to them. A licensee may submit a request for a modification through the department. This modification would allow the licensee to request a new location for operation be approved by the Department. While this may not undue all the financial damage done during the COVID pandemic, it does allow those who were forced to give up their property a chance to hold on to their awarded license.
Not surprisingly, several of the Department’s updates come as a response to the COVID pandemic. Some of the hardest hits dealt by this virus have been to employees and small businesses, including Illinois cannabis applicants who have been left in limbo.
The Department understands that several applicants hired employees in anticipation of being awarded a license as well as in order to qualify as a social equity applicant. One of the ways an applicant can meet the definition of a qualified social equity applicant is by hiring at least 10 full time employees, with 51% of these employees must either residing in a disproportionately impacted area, having a marijuana conviction, or coming from an impacted family.
Unfortunately, due to COVID, many employers, especially those awaiting a license, have been forced to lay off several of their employees. For the licensees who fall into this category and receive their social equity status by hiring at least 10 full time employees, the Department has provided a small window of time for hiring efforts to take place. Once awarded a license, the licensee would need to submit an attestation to the Department of Agriculture informing them of the situation. The licensee would then be required to hire the necessary number of qualifying employees within 60 days.
As for small business owners, the continued delay to be awarded a license topped with the economic struggles felt due to COVID may prevent several from being able to generate product by the deadline set by the state. This type of situation would directly violate the Cannabis Regulation and Tax Act. For example, a craft grower licensee is required to begin production within 6 months of being awarded a license. However, the Department of Agriculture has provided a rare exception to the rule. Those who are awarded a license but unable to begin production within 6 months are able to submit a written request for an extension accompanied with supporting sufficient justification. Sufficient justification may include unforeseen events, acts of nature, and other events that prevent a good faith effort. Given the immense amount of effects stemming from the COVID pandemic, including construction delays, many new licensees will likely need to apply for this extension.
The wait to be awarded a cannabis license can feel never-ending. However, applicants are encouraged to remain hopeful, especially given how lucrative an Illinois craft grower license will likely be. As Illinois cannabis attorneys, we are here to help applicants and licensees get through this process.
Mr. Roberts is the founder and managing member of Scott Roberts Law, a Detroit-based Cannabis Business Law Firm founded in 2014. Scott has spent his entire career representing businesses and helping them comply with municipal, state and local regulations, as well as assisting on transactional corporate and real estate matters. Scott is an accomplished attorney, author and public speaker, having spoke at CannaCon, Cannabis Industrial Marketplace, CannabisAid, and 420 Canna Expo, to name a few. He has also taught Continuing Legal Education on Marijuana business matters, meaning other attorneys see him speak to learn about the nuances of cannabis business law.