Sales Are Legal, but Neighbors Flinch at Marijuana Dispensaries

Finding a place to house a medical marijuana dispensary is rarely an easy task, but MariMed Advisors, which specializes in developing cannabis businesses, encountered especially aggressive pushback working for a client in Annapolis, Maryland, last year.

The company reviewed several hundred potential locations for the client’s proposed dispensary before finally finding one that met nearly every one of the strict requirements demanded by officials of Anne Arundel County. It had the proper zoning classification and the necessary road access. It was not within 1,000 feet of a school. And, as an added plus, the storefront was discreet, located below ground level and behind another building.

The only problem was that it sat within 1,000 feet of several houses across a busy highway. The proximity was a county restriction. MariMed applied for a variance, citing the dearth of other options available. In February, a hearing officer granted the request, noting in his lengthy written decision that “no one will see it, hear it or smell it.”

But MariMed’s client will not be pursuing its dispensary there anytime soon — if ever. Since the variance approval, neighboring property owners have filed an appeal, and the county executive, Steve Schuh, has pushed through legislation banning variances for marijuana dispensaries.

What’s more, the hearing officer who granted the variances for MariMed and several other dispensary applications was let go, as Schuh felt he “was granting variances basically to anybody that applied for them in a way that was outside of his judicial function,” according to a spokesman for Schuh, Owen McEvoy.

The case is one of the more extreme examples of the uphill battle to establish a medical marijuana dispensary even as more states are setting up processes to license them. At the local level, would-be dispensary operators routinely encounter layers of regulations, if not moratoriums or outright bans, as well as wary landlords and angry neighbors.

MariMed has had success finding solutions for its licensed partners and distributors in Delaware, Maryland, Massachusetts, Rhode Island and Nevada. For instance, the company helped the First State Compassion Center in Delaware create business plans and submit applications for the state’s first two medical cannabis dispensaries in Wilmington and Lewes.

“We are trying to educate local communities that this pot is not the devil coming,” said Robert N. Fireman, the president and chief executive of MariMed, based in Newton, Massachusetts. “All we really are is a glorified CVS that’s highly regulated and secure. But it’s not getting any easier on the real estate side.”

The resistance seems to run contrary to national trends. More than half of all states have approved marijuana for medical uses. Nine, as well as the District of Columbia, have further legalized it for recreational use. Sixty-one percent of Americans said marijuana use should be legalized in a survey conducted in October by the Pew Research Center, compared with 31 percent in 2000.

But when they turn up in voters’ backyards, dispensary proposals are often as unwelcome as pornography shops and liquor stores. And fear that medical dispensaries will pave the way for retail pot shops is causing many municipalities, especially in Eastern states, to slam the door.

In Massachusetts, for example, where voters approved legalized marijuana in 2016, about 60 municipalities have banned cannabis businesses, and twice as many have temporary moratoriums in place, according to a count by The Boston Globe.

“There is this divide between the theory of legalization and the practice of it locally,” said Kevin A. Sabet, the president of Smart Approaches to Marijuana, which opposes legalization. “Some might say we are losing when it comes to state ballot initiatives, but we are killing it on the local level.” Officials in Westport, Connecticut, spent three years drafting a zoning amendment adopted last year that allows for two medical marijuana dispensaries. The public took little notice until the Planning and Zoning Commission began hearings this spring on five dispensary applications. All needed zoning approval to apply for licensing from the state Department of Consumer Protection, which plans to issue up to 10 dispensary licenses statewide this fall. (The state currently has nine dispensaries for more than 26,000 patients.)

Residents packed the hearings, many vocal in their opposition. “We have opportunists coming into this community to try and play the medical marijuana card to make money,” Jimmy Izzo, an elected member of the Representative Town Meeting, said at an April hearing where tensions ran so high that a police officer had to warn the crowd to “act appropriately.”

Last month, the commission approved a single dispensary application, from a Westport resident who operates a cannabis production facility in West Haven, Connecticut, and formed a partnership with a dispensary operator in nearby Branford. (The proposal still requires state approval.) Another application, from a local pharmacy owner, was denied in a 4-3 vote on the grounds that it did not comply with the requirement that it be 1,000 feet from any public building — in this case, a state-owned sand storage barn and garage with gas pumps.

The applicant, Phil Hein, declined to comment, but his lawyer had argued that the state property should not be an issue because it was not a public gathering space.

Finding a landlord willing to lease to a dispensary can also be a challenge, because many are fearful of federal prosecution, said Morgan Fox, a spokesman for the National Cannabis Industry Association. In January, the attorney general, Jeff Sessions, rescinded a Justice Department memorandum issued during the Obama administration that directed U.S. attorneys not to focus their limited resources on enforcing federal marijuana prohibitions on individuals operating in compliance with state laws.

Lawsuits are also a looming threat, as some property owners are trying to use racketeering laws to go after cannabis businesses. Raj Dhanda, the owner of in several commercial property holding companies in Harvard Square in Cambridge, Massachusetts, filed a federal lawsuit in September accusing a neighboring dispensary, Healthy Pharms, of conspiring to sell marijuana in violation of federal law. The suit also names the dispensary’s landlord, the city, the state health department and the state attorney general, Maura Healey.

The suit claims damages of roughly $27 million, mainly because of reduced property values, but seeks triple that sum, as allowed under the Racketeer Influenced and Corrupt Organizations Act. Similar suits have been filed against cannabis businesses in Colorado and Oregon.

“The ultimate goal is to preserve and protect the value of our client’s significant holdings,” said Scott A. Schlager, Dhanda’s lawyer. “Prospective tenants have decided not to locate. Prospective lenders and equity groups have decided not to invest in improvements. He’s definitely sustained tangible damages.”

Healthy Pharms and its landlord, who is also an owner of the dispensary, are seeking to have the lawsuit dismissed, said Emma Quinn-Judge, their lawyer.

Quinn-Judge called Dhanda’s claim of declining property values “patently absurd,” given the booming Harvard Square real estate market. The appraiser who calculated the damages made a “baseline assumption” that marijuana use carries a stigma in Massachusetts, which is “hard to support” given that voters have approved its legalization, she said.

But Schlager argues that these RICO lawsuits pose a real threat to marijuana businesses — and to their landlords.

“The overarching lesson for real estate owners is to be very cognizant of uses,” he said. “If dispensaries locate next to valuable property, they’re taking a risk.”