In Part 1 of this series, I discussed some key leasing concerns for landlords and tenants in the psilocybin industry which included: 1) institutional lenders, 2) permitted use clauses, 3) compliance with law clauses, and 4) federal enforcement guidance. Here are additional issues which should be carefully considered:
Psilocybin businesses will be forced to deal mostly in cash. Some credit unions in Oregon have been banking marijuana businesses for several years, but lack of banking and lending in the marijuana industry is still a huge problem. The credit unions which are accepting deposits from marijuana business are operating under guidance from the enforcement arm of U.S. Treasury and that guidance is specific to the marijuana industry. Pursuant to the requirements of Measure 109, Oregon has requested guidance on banking from the federal government but has not received a response. Landlords and tenants need to address this banking problem in the lease. Before agreeing to accept cash, a landlord should consider whether depositing cash each month will jeopardize its current banking relationship. Tenants should require language in the lease that will allow rent payments in cash if necessary.
2. Arbitration Clause
Keeping disputes out of court, especially federal court, is a good idea. Adding an arbitration clause in the psilocybin lease will keep disputes confidential and avoid the court system.
3. Federal Illegality
Both parties should represent and warrant to the other that they will not use an illegality defense to avoid their obligations in the lease. We have seen numerous court cases where one party to a marijuana lease attempts to use federal illegality to break their lease.
4. Force Majeure
Specific language should be added to the force majeure clauses which will allow the parties to terminate the lease in the event there is a federal law enforcement against the psilocybin tenant or a change in state law which makes the operation of a psilocybin business illegal.
With the upcoming election, participants in the psilocybin industry will finally have certainty about where they can launch their business. Once that perfect location is determined, a strong lease narrowly tailored to the psilocybin industry is important to success of both the landlord and the tenant.