HOW TO EVICT COMM. TENANT NOW SELLING CBD

Question

We are Res. Landlords, this is our 1st Comm. Property. Tenant started selling/printing T-Shirts now we found out he is selling CBD. By mistake, our Comm. Lease lacks the "Permited Use" clause. Tried to evict but Lawyer says we can not evict because of this loophole in the Lease.

Any ideas?

Timothy VanWingerden · Answer

Is he growing hemp for CBD extraction or is he just selling the oil? With the introduction of the 2018 Farm Bill, hemp has been removed from Schedule I controlled substances making it an ordinary agricultural commodity. While hemp and marijuana are both cannabis, the difference between the two is the level of THC present.

I'm not exactly sure how it works in your state exactly, but in KY, you need to have a permit to grow hemp. The KY department of agriculture will require the coordinates of where the plant will be grown. When it is time to extract, they will inspect and take a tissue culture of the plant to determine the cannabinoids present. If too much THC then the plant will need to be destroyed. There are also a ton of compliance regulations that must be followed. Look at what just happened to CannTrust.

All that to say is you need to find out in your state what the requirements are for growing hemp. I doubt your tenant has any of that documentation present. Maybe you could require an approval letter from the department of Ag so that this doesn't come back to you.

however, like @Ryan Dormond was saying, this is a space with very little regulation and it is going to take some time to get the laws enforced.

Timothy VanWingerden · Answer

CBD is legal. No way law enforcement is going to seize your property because a tenant is selling CBD without the proper credentials.

Dennis M. · Answer

You heard your attorney . What more can we say

Ryan Dormond · Answer

Is CBD production the only reason you want to evict?

California and LA County's laws and regulations surrounding cannabis and CBD is very chaotic and in the middle of drastic changes right now. LA county is not taking any new licenses at the moment, and I assume your tenants are not licensed. But if you haven't asked, maybe confirm if they are licensed or not.

If they are unlicensed, your risk still might be pretty low. There are so many illegal dispensaries and cannabis operations running right now, that there is not enough law enforcement personnel to shut down these shops/operations. Regardless, it's still a risk you would likely be liable for.

If the tenants are taking care of the property, paying on time, and not making any obvious public indication of their potential illegal activity... maybe you want to consider riding out this risk instead of spending excess time and effort to evict.

How long is the tenant contracted to lease your property for?

Michael Gabbard · Answer

I'm an investor in the cannabis space in California. I can assure you that your property will not be seized if he is simply selling CBD oil, flower, trim, or any other finished product containing CBD. The farm bill made CBD federally legal, period. The only scenario i could see where a commercial property would potentially be seized is if the tenant is operating a hemp extraction business without a license and there was proof that you the owner/landlord of the property were somehow involved with the unlicenced extraction business. The reason being, extraction businesses in the hemp industry, as well as the cannabis industry, deal with volatile solvents such as butane and ethanol. Even if your tenant was operating a unlicensed hemp cultivation business out of your building, you still wouldn't be at risk of having your property seized. It would be the equivalent of having a tenant in your building operating a alcohol brewery without a license or someone operating a alcohol distribution business out of your property without a license. I know its hard to get used to but CBD is legal on all fronts, cannabis is not.

However, i highly recommend you do a legal inspection and see what is going on inside your building if possible.

Alex Smith · Answer

If you want this guy out it sounds like your only option is to not renew him come renewal time.

Hubert Kim · Answer

Commercial leases and residential leases are indeed very different. One of the big differences is that, especially in Los Angeles, commercial leases may be very landlord-friendly when compared to residential. It doesn't help you now, but look into revising your current lease or creating a new one for your next tenant.

Angelo Mart · Answer

LA like New Jersey is a Tenant friendly state. I would take the advise of your attorney since that lease holds strong weight

Cesar Acosta · Answer

Thank you very much for your input guys. I really do appreciate all the comments. Our expertise is in Residential properties. This is our very fist light-industrial/commercial property and we are finding out that commercial leases are much more nuanced.

Cesar Acosta · Answer

I forgot to add... At this point in time all we know is that he is selling CBD oil. We do not know if he is growing hemp himself. We have not been back to the property since he is a hostile tenant.

HOW TO EVICT COMM. TENANT NOW SELLING CBD

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