Adult Recreational Use Retail Licenses under NY’s MRTA

By dan - In

What is it? What does a retail license allow?

§ 72 of the MRTA provides that “A retail dispensary license shall authorize the acquisition, possession, sale and delivery of cannabis from the licensed premises of the retail dispensary by such licensee to cannabis consumers.”

Pretty straightforward. The retail license permits the holder to sell cannabis to end consumers in a physical store (and to deliver) subject to restrictions placed in the law and forthcoming rules and regulations.

Limitations

Can’t get more than 3 licenses (can’t have more than 3 locations, as one license = one location).

If you get a retail license, you can’t get an adult-use cultivation, processor, microbusiness, cooperative or distributor license. You can’t own part of a company that does, either. They are making great efforts in the bill, which we can expect to continue through the promulgation of rules and regulations, to prevent vertical integration (with the exception of the registered organizations; i.e., existing medical marijuana providers).

You will need to get your products from a licensed distributor, a cooperative, a registered organization, or a microbusiness. You cannot directly purchase products from cultivators or processors.

Application Fees

No one knows what the applications and license fee will be yet. We will wait for the Office of Cannabis Management to provide more information.

However, we can glean from the bill that retail licenses should be less expensive than licenses higher up the vertical, as the bill aims to include small businesses and entrepreneurs, and a retail operation has less upfront costs and barriers to entry than those higher up the vertical. Further, applicants who meet criteria for preferential licensing consideration (social equity applicants), may also have their fees reduced or even waived. The OCM will also be putting together an incubator program, and potentially have low-to-zero cost loans available for social equity applicants.

Licensing Requirements and Considerations

You will need to either own the retail premises or have a lease in place for longer than the license term (2 years) – but, you can show a proper lease within 30 days of license approval.

The premises must be 500 feet away from schools, 200 feet from houses of worship, must be at street level, and zoned for business, trade, or industry. Keep in mind, this is just the zoning limitation in the bill – some local municipalities already have, and many others surely will, place further restrictions on where a retail storefront can operate.

Between 30 – 270 days before applying for license, you must notify your local municipality of your intent to file the application. Notice is to be given to the clerk of the village, town, or city. If you are in New York City, you give notice to the community board established pursuant to section twenty-eight hundred of the New York city charter with jurisdiction over the area in which the premises is located shall be considered the appropriate public body to which notification shall be given. Whether the local jurisdiction supports or opposes the application will be considered, but it is not determinative. It is likely, however, that significant weight will be given to the support, or lack thereof, from the local municipality.

There is a stated goal that at least 50% of licenses will be granted to Social Equity Applicants. Further, the Board “shall” waive or reduce licensing fees for Social Equity Applicants.

Social Equity Applicants are:

(a) individuals from communities disproportionately impacted by the enforcement of cannabis prohibition;

(b) minority-owned businesses;

(c) women-owned businesses;

(d) minority and women-owned businesses

(e) distressed farmers; and

(f) service-disabled veterans.

Further favorable consideration will be given to an applicant who:

(a) is a member of a community disproportionately impacted by the enforcement of cannabis prohibition;

(b) has an income lower than eighty percent of the median income of the county in which the applicant resides; and

(c) was convicted of a marihuana-related offense prior to the effective date of this chapter, or had a parent, guardian, child, spouse, or dependent, or was a dependent of an individual who, prior to the effective date of this chapter, was convicted of a marihuana-related offense.

Considerations that will be made by the Board in evaluating applicants (with notations):

(a) the applicant is a social and economic equity applicant (see above);

(b) the applicant will be able to maintain effective control against the illegal diversion or inversion of cannabis;

(c) the applicant will be able to comply with all applicable state laws and regulations;

(d) the applicant and its officers are ready, willing, and able to properly carry on the activities for which a license is sought including with assistance from the social and economic equity and incubator program, if applicable;

(e) where appropriate and applicable, the applicant possesses or has the right to use sufficient land, buildings, and equipment to properly carry on the activity described in the application or has a plan to do so if qualifying as a social and economic equity applicant;

(f) the applicant qualifies as a social and economic equity applicant or sets out a plan for benefiting communities and people disproportionally impacted by enforcement of cannabis laws;

(g) it is in the public interest that such license be granted, taking into consideration, but not limited to, the following criteria:

(i) that it is a privilege, and not a right, to cultivate, process, distribute, and sell adult-use cannabis;

(ii) the number, classes, and character of other licenses in proximity to the location and in the particular municipality, subdivision thereof or geographic boundary as established by the board (looking to avoid congestion);

(iii) evidence that all necessary licenses and permits have been or will be obtained from the state and all other relevant governing bodies;

(iv) effect of the grant of the license on pedestrian or vehicular traffic, and parking, in proximity to the location;

(v) the existing noise level at the location and any increase in noise level that would be generated by the proposed premises;

(vi) the ability to increase climate resiliency and minimize or eliminate adverse environmental impacts, including but not limited to water usage, energy usage, carbon emissions, waste, pollutants, harmful chemicals and single use plastics;

(vii) the effect on the production, price and availability of cannabis and cannabis products;

(viii) the applicant’s history of violations and compliance with the laws of another jurisdiction, in which they operate or have operated a cannabis license or registration, related to the operation of a cannabis business;

(ix) the applicant’s history of violations related to the operation of a business, including but not limited to, violations related to labor laws, federal occupational safety and health law and tax compliance; and

(x) any other factors specified by law or regulation that are relevant to determine that granting a license would promote public convenience and advantage, public health and safety and the public interest of the state, county or community.

(h) the applicant and its managing officers are of good moral character and do not have an ownership or controlling interest in more licenses or permits than allowed by this chapter, or any regulations promulgated hereunder;

(i) the applicant has entered into a labor peace agreement with a bona-fide labor organization that is actively engaged in representing or attempting to represent the applicant’s employees, and the maintenance of such a labor peace agreement shall be an ongoing material condition of licensure. In evaluating applications from entities with twenty-five or more employees, the office shall give consideration to whether applicants have entered into an agreement with a statewide or local bona-fide building and construction trades organization for construction work on its licensed facilities;

(j) the applicant will contribute to communities and people disproportionately harmed by enforcement of cannabis laws through including, but not limited to, the social responsibility framework as provided in section sixty-six of this article and report these contributions to the board;

(k) (inapplicable);

(l) the applicant satisfies any other conditions as determined by the board; and

(m) (inapplicable).

Many of these considerations pop back up in the renewal consideration process; importantly, 1) a labor peace agreement is maintained; and 2) the applicant executes on their plan to contribute to communities and people disproportionately harmed by enforcement of cannabis laws.

Locality Restrictions

Beyond the above notice requirement, retail operations (and on site consumption operations) will potentially be limited by the ability of local jurisdictions to “opt out.” What this means is that local governments have the ability, before December 31, 2021, to disallow a retail or on-site consumption license from being granted in its jurisdiction.

Thus far, only Lynbrook and East Rockaway have opted out. However, as they did so without passing a local law or subjecting it to referendum, this author would argue their opt outs were null and void under the law, but that is a different article. The important thing is to stay apprised of local support or detraction from the new law, and make your voices heard to local government officials.

Importantly, local governments can only opt out of having retail or on-site consumption locations. They cannot prevent delivery into their jurisdiction. So if your preferred town is looking like they will opt out, or stand against you in the licensing process, it may be wise to take your business, and ultimately your produced tax revenue, to the next town over.

Ongoing, Miscellaneous, and Other Costs and Considerations

While laboratory testing requirements typically fall upon the processor segment of the vertical, licensed retail dispensaries are required to maintain accurate documentation of laboratory test reports for each cannabis product offered for sale to cannabis consumers. Such documentation must be made publicly available by the licensed retail dispensary. In practice, the testing literature should simply travel with the product from processor to distributor to retailer; however, failure to have it available at the retailer’s location will subject the retailer to discipline and license risk. Retailers must also have educational material available as prescribed by the board.

A retailer cannot sell to those under 21 years of age or to those who are visibly intoxicated.

No sales of alcohol on premises.

Advertising restrictions to be determined through rules and regulations. No signs for brands, etc. allowed on exterior.

Prices need to be prominently displayed.

Additional rules and regulations will likely address security requirements, physical layout, and product tracking compliance.

Action Steps

Figure out corporate structure and ownership. There are tremendous benefits to having social equity applicants as primary business owners.

Start reaching out to local officials and making your intent known, now. This can at best start a collaborative process which results in local support, and at worst, give you the knowledge that you need to start looking at other locations.

Start planning what a “plan for benefiting communities and people disproportionally impacted by enforcement of cannabis laws” will look like. This is extremely broad as written, and creativity may be useful here, in addition to whatever programs the OCM ultimately requires.

Be proactive about union relations (if in NYC or Long Island, most likely Local 338) and be prepared to deal with issues surrounding the labor peace agreement requirements.

Start investigating premises. Check the local zoning laws to make sure it will work. Speak with commercial landlords who may be willing to offer leases contingent on an approved license.

Get your team in place. Get to know those intending to enter the industry in higher parts of the vertical, particularly distributors who will fill your shelves.

And talk to a lawyer!