Cannabis Considerations

Last Updated on Wednesday, 18 July 2018 11:48 Written by Chris Griswold Wednesday, 18 July 2018 11:48

Cannabis is the hot topic right now.  Lots of good folks are discussing its in’s and out’s.  I thought I’d mention a few things that affect my industry.  Good stuff for everyone.  See more below (and don’t forget to click on my Facebook or YouTube links below to also see my short video on this material).

Cannabis Considerations

Question #1:  I’m thinking about buying a building that will be used to either grow, sell, manufacture or distribute Cannabis or its oil derivates – is there anything I should know?

Answer:  Well, it sounds like a great idea, and it’s legal now.  Just be aware that title insurance (a requirement of any lender) won’t be available.  Why?  While Oklahoma law permits the sale, etc… of Cannabis, Federal law doesn’t.  So, since title insurance “insures” the buyer that the building will work for that use, and the Fed’s could swoop in at any moment and enforce Federal laws against such use – title insurors bridle at insuring Cannabis uses.

Question #2:  I’m thinking about selling a center that includes one of my tenant’s spaces that grows/sells/manufactures/distributes Cannabis – is there anything I should know?

Answer:  Once again, the looming possibility of Federal enforcement presents the inability to get a title insurance policy in favor of your buyer.  A real fly in the ointment, so to speak.

Question #3:  Is there anything that I, as a possible, future seller of a center that would include a tenant that grows/sells/manufactures/distributes Cannabis – can do to prevent the trouble found above in Question #2?

AnswerYes.  When talking to a prospect Cannabis-user tenant, make their lease either month-to-month (subject to a 30 day termination provision, by either party), or for a short period of time.  That way, if a future sale does arise, the Cannabis lease can be terminated within the due diligence period of the purchase/sale contract, so that the inability of obtaining title insurance isn’t a deal-breaker.

Question #4:  Is there any way around the issues found above in Questions #2 & #3?

AnswerYes.  Pay cash for the property.  If you want an in-kind equivalent to title insurance, get an attorney to do a title opinion for you.  Kelly Miller at Professional Insurors (kmiller@pi-ins.com) and Paul Stuke at Stewart Abstract & Title (paul.stuke@stewart.com) both contributed to the content of this article, thank you gentlemen.

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“Chris is a competent, hardworking attorney.  Chris is always there when you need him and you don’t have to wait a day to get a returned phone call.  He does what he says he is going to do in a timely manner.  He has the expertise to make problems simpler which makes them easier to solve.  He is honest, consistent and reliable.  He loves what he does and is active in the community.”
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Untangling Tenants From their Invitees and Licensees

Last Updated on Monday, 11 June 2018 09:15 Written by Chris Griswold Monday, 11 June 2018 09:15

Tenants in commercial leases are liable for a lot.  In some cases, they’re even liable for the acts, omissions and negligence of their invitees (customers) and licensees (sub-contractors, vendors, kiosk operators, christmas tree/pumpkin parking lot sales outfits, etc…) – but they don’t have to be if the lease is well written.  Good stuff.  See more below (and don’t forget to click on my Facebook or YouTube links below to also see my short video on this material).

Untangling Tenants From their Invitees and Licensees

Question #1:  So what is the big deal for a Tenant to be liable for these groups?

Answer:  Well, ultimately, it’s a mark down on that Tenant’s profitability.  It’s an added cost of doing business, on top of taxes, rent, employee salaries and benefits, CAM, and the list is customarily long.  So, why add one more item to it?

Question #2:  How can a commercial tenant ensure that it’s not liable?

Answer:  The lease has to carve out a Tenant’s liability for these groups.  It’s one thing (and normal) for a Tenant to be liable for its own officers, directors and employees, but, it’s another for that Tenant to be liable for other extended persons which are not under the control or direction of Tenant – that extension/enlargement beyond the Tenant’s officers, directors and employees is what must be examined closely before a lease is finalized.

Question #3:  Is there anything more at risk in this situation?

AnswerYes.  If Tenant fails to eliminate this extension of liability, it will cost not only Tenant, but possibly the Tenant’s Landlord as well, unless the Landlord puts language into the same Lease that makes the General Liability coverage that Landlord carries subject to carve-outs that Landlord’s General Liability coverage shall all be secondary, non-primary, excess and non-contributory to Tenant’s coverage, as well as making Landlord’s coverage further subject to a Waiver of Subrogation clause in the Lease.

Question #4:  What should Landlord’s really do?

AnswerIn diametric opposition to the statements in Question/Answer #2 above (which are to Tenant’s favor), Landlord’s shouldn’t let a lease get written that allows Tenant to avoid liability for the acts, omissions and negligence of such Tenant’s invitees and licensees.  In other words, Landlord wants Tenant to be liable for these – or they become Landlord’s liability.  Remember, leases are the product of good negotiation and the parties need to know what points are really important to them, and then act accordingly.

Question #5:  Will Landlord or Tenant win?

Answer:  Unless the Tenant is a huge anchor in the center, Landlord will usually win (because Landlord’s insurance underwriter will require Tenant to be liable for its own licensees and invitees, at least in situations involving accidents occurring within the demised premises itself).

What My Clients Are Saying

 “Chris is a business-minded attorney who negotiates with the client’s goals in mind.  He is a knowledgeable and constructive participant in deal negotiations… loyal to his clients but practical in his approach.”
Bond Payne, Jr. / Vice Chairman of Corporate Development, Argent Financial Group / Oklahoma City, Oklahoma

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Understanding Legal Terminology Used In the Uniform Commercial Code

Last Updated on Thursday, 8 March 2018 12:32 Written by Chris Griswold Thursday, 8 March 2018 12:32

The commercial transactional world is driven by certain, basic, legal terminology that appears in many contracts.  Understanding some of these better helps everyone.  In the world of commercial transactions (between commercial parties), there are actions and behaviors that have previously occurred either between the same or different sets of commercial parties (which are commercial buyers and sellers of goods – and all governed by the Uniform Commercial Code) that, over time, come to govern the future actions and conduct of such commercial parties, in the event of a dispute that later occurs between such parties.  Good stuff.  See more below (and don’t forget to click on my Facebook or YouTube links below to also see my short video on this material).

Understanding Legal Terminology Used In the Uniform Commercial Code

Question #1:  What does “course of performance” mean? 

Answer:   In the event of a later dispute between two commercial parties, the court can look towards the past behavior of such, same two parties which has occurred over the course of time on the same deal.  For instance, if a buyer has been taking delivery of certain goods from the seller on a certain calendar date of the month for a long period of time, then, the failure of the seller to deliver on such date or the buyer to accept delivery on such date (whether or not the calendar date is set forth in the written contract, if any) shall be very persuasive in such later dispute.  In other words, the failure of either party to perform on such calendar date, after having performed on such date over a long period of time, disturbs the status quo of the relationship – a bad thing; the Court having jurisdiction over the dispute will view things through this lens.

Question #2:  What does “course of dealing” mean? 

Answer:  Same fact pattern as above, however, the Court can instead look at the past behavior of the same two parties which has occurred over the course of time on other deals (not the same deal).  In other words, the failure of either party to perform on such calendar date will be compared against how the parties have gotten along, for example, the twenty years before on other deals that they’ve done together.  Why the change?  Well, it might be because the matter at issue has never occurred on the same deal in question, but it has happened on other deals they’ve done together….

Question #3:  What does “usage of trade” and “industry standards” mean? Why would they be used? 

Answer:  Same fact pattern as above, however, in the absence of any deal history between the same two parties at issue which might serve as a guiding light in the matter at issue, the court will look at how other, similar parties behave under the same circumstances.  The way such other, similar parties behave can be discovered by: 1) looking at “usage of trade” (which is how certain business terms and dates are generally defined or handled by other, similar parties who conduct the same sort of trade together), and/or 2) by looking at the prevailing “industry standards” which are common and prevalent in the same industry at issue – that they can persuasively settle or resolve the matter at issue.  In such a situation, the Court uses these external customs, terms, practices or methods to resolve the matter at issue between such two commercial parties.

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