Week in Review: Maryland medical marijuana downshift, Toronto crackdown & MA logjam

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By Omar Sacirbey and John Schroyer

Maryland’s fledgling medical marijuana program downshifts, Toronto dispensaries brace for a crackdown, and a licensing bottleneck in Massachusetts throws the state’s MMJ program into disarray.

Here’s a closer look at several notable developments in the marijuana industry over the past week.

First gear in Maryland

A spokesman for the Maryland Medical Cannabis Commission said the state’s MMJ program won’t be “fully up and running” until the middle of next year.

State officials initially planned to have the program – by far the largest on the East Coast – serving patients by the second half of 2016.

The latest timeline puts hundreds of entrepreneurs who applied for medical marijuana business licenses last fall in an unenviable position. They’ve been waiting since November to hear whether they’ll receive a permit.

Consider Brian Fox, CEO of Cannavations, who applied for four dispensary licenses and one processing license.

The Missouri-based cannabis entrepreneur dispatched a team of Maryland residents to scout numerous properties that could potentially house a dispensary. They chose four.

Naturally, Fox didn’t want to start paying rent before receiving a license. But he did sign a “letter of intent” for each of the four properties, essentially reserving them until he lands an MMJ license.

Small problem: The agreements were signed last fall. And while the properties may still be available, Fox said he didn’t expect the owners to honor the agreements forever.

“The timeline has obliterated those agreements,” Fox said. “If a property owner has been sitting on an empty building for a long time and someone comes along and wants to lease it, I can’t stop that.”

Three of the properties Fox earmarked were vacant buildings. The fourth was a functioning store that the owner planned to turn over to Fox once he received the license.

Fox hasn’t spoken to the property owners in months. And he didn’t know whether they still considered the letters as valid. He plans to contact them as the winner-announcement date draws closer.

“It is a pain,” Fox said.

Trouble in Toronto

News that Toronto authorities plan to crack down on unlicensed medical cannabis dispensaries didn’t surprise one local attorney who works with the city’s MMJ industry.

The city estimates roughly 80 dispensaries are operational. They should have seen the crackdown coming, the lawyer argued.

“A lot of them have operated on the basis of: ‘Let’s make money now and the rules will have to accommodate us eventually,’ which is a dangerous game to play, especially with controlled substances,” said the attorney, who requested her name be withheld.

“They’ll fight it. But I don’t think they’ll fight in an organized manner, which means they won’t fight it well.”

The city will issue fines of up to $50,000 to dispensaries for breaking zoning laws in the hope that will force many, if not all, to close. That will likely prove an effective tactic.

But even more effective will be threats against landlords, the attorney said.

“The nature of the letters that have been delivered to landlords suggest that law enforcement will take action, up to and including confiscation of property. And of course that’s a lot scarier than fines,” the attorney said.

That, she predicted, will likely lead to landlords expelling dispensaries from their current shops in order to comply with the city’s demands, leaving many dispensaries homeless – at least temporarily. As a result, many simply may not be able to find a storefront for selling to customers.

Massachusetts bottleneck

Licensing continues to be a big problem in Massachusetts, where the number of registered medical marijuana patients is surging.

The problem: Not enough dispensaries have opened to meet the demand. Statistics show that through April 30, 7,273 – or 30% of the state’s 24,196 MMJ patients – have not bought medical cannabis from a dispensary.

Why? Some observers reckon it’s because many patients don’t live close to one of the state’s six open dispensaries. At the same time, it doesn’t appear that those dispensary numbers will improve much anytime soon.

Two businesses, Garden Remedies in the tony Boston suburb of Newton, and Ermont, in the eastern town of Quincy, have their approvals to cultivate. But they’re awaiting their final approvals to sell, and it’ll be at least several weeks before they start serving customers, observers said.

(A message on the Ermont website said the company  is “moving through the Department of Public Health registration process” and expects to open this spring.)

Another 11 companies are in the so-called provisional stage, which means they essentially passed the application process but are waiting for approval to grow, followed by approval to sell. Seven of the 11 companies have been stuck here since 2014.

Attorney Adam Fine, who manages the Boston office of the law firm Vicente Sederberg, said part of the problem is staffing. “They’re very thorough, to their credit, but they need to hire more people,” he said of state regulators.

The bigger bottleneck is at the local level, Fine added. Marijuana business license applicants need letters of approval from the governments of towns in which they want to operate before they can reach the provisional level of the application phase. But many local officials are saying no.

Of 168 applications that have been submitted since June 29 of last year, only 29 have received local approvals.

“Municipalities are just refusing to even entertain the idea of having a dispensary,” Fine said. “We’ve had mayors tell us we’re wasting our time talking to them, because they’re going to say no.”

Omar Sacirbey can be reached at omars@mjbizdaily.com

John Schroyer can be reached at johns@mjbizdaily.com