Cannabis was the new goldmine for many years. I always am entertained by the chart…
If you don’t recall, last year a worker at Loveland ski resort was crushed to death while servicing a magic carpet. Osha reviewed and fined Loveland for violating various safety violations. There is one twist in the case that could set some interesting precedent and have an impact on real estate owners.
Shortly after the accident, the state performed toxicology tests and found that the deceased worker had smoked marijuana at some point (no way to know when since current tests can detect use from a couple weeks ago). There is no way to determine if he was impaired at the time of the accident. Yet the state has halved the widow’s benefits.
Colorado law allows state workers’ comp companies to cut benefits by 50-percent if tests return positive for marijuana or any other controlled substance.
“As it stands now, with a positive test result, an employer has the right to reduce those benefits,” said John Sandberg, an administrative law judge with Colorado’s Department of Labor.
What does this have to do with real estate? Before discussing the impact on real estate, it is important to note that Cannabis is still considered a controlled substance under Federal law. Interstate commerce is bound by federal law and therefore inherent conflicts are inevitable. The case above is just one example of the conflict, but similar situations can/will be seen in litigation in the near future.
Real Estate and related businesses are impacted by the precedent set in this case and need to be cognizant of the new liability issues. I’ve broken down a couple of different groups that could be the most impacted:
Dispensary/producers of marijuana: This is the obvious one, dispensary owners are at risk based on what their patrons do after they leave their facility. For example this is similar to a bar/tavern where if someone leaves the premises intoxicated, many times the bar/tavern is involved in litigation if they served to much or didn’t take other steps. The same is true for dispensary owners. There are two recent examples where dispensaries/manufactures where sued due to effects from their products. The most notable one was where a man killed his wife after he had consumed an edible, the family sued the manufacturer (See CBS story)
Construction industry/ real estate service industry: The liability from marijuana as highlighted in the ski worker case is just starting to emerge. As a business owner you can be liable for your employees’ actions. What happens if you are contractor and one of your employees is driving a truck that causes a major accident. The injured parties sue your firm/insurance and they discover marijuana consumption by your employee which is a controlled substance. This drastically increases your exposure as a business owner. I was talking with a small business owner and drug tests all employees and will not hire anyone that shows marijuana or any other controlled substance due to the liability issues.
Real Estate owners: Regardless of who is at fault, litigation always targets the deepest pockets. Undoubtedly real estate owners have exposure due to the cannabis conflicts of state and federal law. For example, if you have a tenant that is a marijuana social club and someone gets injured, the injured will undoubtedly sue the property owner along with the business owner.
The Cannabis industry is rapidly evolving as lawsuits are just beginning to address who is liable in various circumstances. Now is the time to evaluate your liability because of the recent lawsuits and takes steps to mitigate your exposure to protect your business and your real estate assets.
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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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