Today’s Title Tip is a weedy issue if you’re considering a
different kind of ‘joint’ ownership. It involves getting title insurance for a
property being acquired to use for marijuana-related business enterprises.
While medical or recreational use of marijuana is not legal
in Texas, there are plenty of folks who think it could be some day. Lots of
forward-thinking investors might look at real estate for growing, processing,
or selling marijuana if it becomes legal here. Or they could be looking to buy
similar property in a state where it is legal.
There are 22 states that allow legalized medical use and
nine more than allow both recreational and medical use. This growing industry
is attracting real estate-minded buyers. But your plans could quickly go up in
smoke.
Title insurance agencies and underwriters are turning away
from the idea of issuing title insurance or closing these properties. And
without title insurance, lenders are disinclined to finance and investors are
hesitant to put money in a pot farm or cannabis dispensary. This restriction
comprises all properties “including but not limited to the cultivation,
storage, distribution, transport, manufacture, or sale of marijuana and/or
products containing marijuana.”
Why be such a drag on the wacky tobacky business? Blame the
Feds. Although some states allow it, marijuana remains illegal under the
Federal Controlled Substances Act. And the federal government can seize
property related to federally illegal enterprises.
Additionally, the Feds can seize money involved in illegal
activity transactions. The current conflicts between state and federal law
regarding marijuana make insuring property transactions related to this
business precarious. I don’t know of a title company that wants to insure such
an investment or risk having their escrow accounts seized.
And since we don’t like to leave any stone unturned when it
comes to title work, this issue pertains to both past and future use. Not only
will title agencies not insure a property to purchase as a marijuana -elated
business, but they don’t want to insure the purchase of property has been used
in the past in connection with the marijuana business, even if you don’t intend
to continue using it for that purpose. The long arm of the law can go back too
far for comfort.
The latest title insurance bulletin I’ve seen – marked
confidential – does not demand that title agents become pot detectives. But we
are to be alert to transactions with companies that bear marijuana-related names
or for people and entities known for their marijuana or cannabis businesses. We
have ways of sniffing those out.
Marijuana laws are still changing in our country and the
title insurance restrictions will change with them. Until then, take this ounce
of advice before putting your cash in the grass business. It could end up a
bust.
The opinions expressed are of the individual author for
informational purposes only and not for the purpose of providing legal advice.
Contact an attorney to obtain advice for any particular issue or problem. [where: 75230]
Dec 29, 2018
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