Manhattan District Attorney Threatens Legal Action Against Landlords in Connection with Unlicensed Cannabis Dispensaries

Authors: Joshua D. Roth, Janice Mac Avoy, Stephen M. Juris, and Alexandra N. Getsos

Last month, Manhattan District Attorney Alvin L. Bragg, Jr. sent letters to approximately 400 unlicensed cannabis dispensaries and their landlords regarding “concerns… about illegal activity occurring in smoke shops across the five boroughs.”[1] The letter explained that the District Attorney’s Office “is prepared to use [its] civil authority under Real Property Actions and Proceedings Law (“RPAPL”) § 715(1) to require…landlords to commence eviction proceedings of commercial tenants who are engaged in illegal trade or business, and to take over such eviction proceedings if necessary.”[2]

In a related press release, District Attorney Bragg stated that, “[f]or nearly two years, we’ve seen a proliferation of storefronts across Manhattan selling unlicensed, unregulated, and untaxed cannabis products. It’s time for the operation of unlicensed cannabis dispensaries to end.”[3] The press release further stated that “[o]ver the coming weeks” the District Attorney’s Office would work with its law enforcement partners to identify unlicensed cannabis dispensaries, notify landlords of their obligations to commence eviction proceedings and, if landlords fail to do so, initiate its own eviction proceeding.[4]

Evictions Based on an “Illegal Trade or Business”

Under RPAPL § 711(5), a landlord can commence eviction proceedings to remove a tenant where the “premises, or any part thereof, are used…for any illegal trade or manufacture, or other illegal business.” If a landlord fails to commence eviction proceedings on its own initiative, RPAPL § 715(1) gives law enforcement agencies (along with landlords and tenants of neighboring properties, among others) the authority, after notice to the landlord, to initiate eviction proceedings on their own in the name of the landlord.

RPAPL § 715(1) also provides that tenants and their landlords shall be made respondents in any proceeding initiated by law enforcement agencies, and RPAPL § 715(4) allows that a court granting an eviction petition pursuant to this section may impose up to a $5,000 civil penalty on the respondent(s), along with payment of the law enforcement agency’s reasonable attorneys’ fees and costs.

The Marihuana Regulation and Taxation Act

Among other things, as a matter of state law, the Marihuana Regulation and Taxation Act (“MRTA”) legalized cannabis use for adults and created a comprehensive regulatory framework governing the production, distribution, sale and taxation of cannabis. Under this framework, the New York State Office of Cannabis Management (“NYSOCM”) is responsible for issuing Conditional Adult-Use Retail Dispensary (“CAURD”) licenses for the operation of retail cannabis dispensaries. A CAURD is required to legally sell cannabis in New York.

As of March 2, 2023, NYSOCM has reportedly issued 66 provisional CAURD licenses.[5] While NYSOCM is considering increasing the total allotment of CAURD licenses from 150 to 300 (or from 70 in New York City to 140), the approval process has moved very slowly.

Because of the apparent demand for cannabis and the limited number of licensed dispensaries, a large number of unlicensed (but very public) dispensaries have opened throughout New York State, including in New York City. Currently, the total number of unlicensed dispensaries in New York City is estimated to be between 1,400 and 1,500; however, there were only three licensed dispensaries in New York City as of February 24, 2023.[6]

Recent Enforcement Actions

On the same day that District Attorney Bragg announced this new initiative, New York City filed four nearly identical lawsuits in New York State Supreme Court against the landlords for four allegedly unlicensed cannabis dispensaries in Manhattan. Local residents reportedly brought the unlicensed dispensaries to the attention of the New York Police Department (“NYPD”). According to the complaints, NYPD then arranged for auxiliary police officers to purchase small quantities of cannabis at these various locations. Among other things, the complaints sought “closing orders,” seeking the closure of the premises for a full year on the grounds that the operation of unlicensed dispensaries constitute a public nuisance under the New York City Administrative Code.

More recently, New York City filed a very similar complaint, based on the same legal theories, against a landlord relating to the purchase and sale of stolen property by a tenant.  This suggests that New York City may be increasingly looking to landlords to ensure that their tenants are complying with applicable laws beyond cannabis.

Recommendations

The initiatives and enforcement action described above provide a timely reminder that the unlicensed sale of cannabis (despite being ubiquitous) is still illegal under New York law, and that operators and landlords can be held responsible for the illegal operation of unlicensed dispensaries. When dealing with potential tenants that may sell cannabis (or cannabis-adjacent products), landlords need to take reasonable steps—prior to entering into leases and periodically thereafter—to ensure that tenants are complying with all applicable laws relating to the sale of cannabis.