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Tuesday, Nov 29, 2022
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Pot Cops Aim At Landlords

The Los Angeles City Attorney’s office has launched a campaign to combat the problem of unlicensed commercial cannabis sellers, a policy that has special impact in the Valley. This campaign is different from previous attempts to rein in unlicensed dispensaries because officials plan to use the Los Angeles Police Department, L.A. Fire Department and Department of Water & Power to go after property owners where illegal pot shops operate. “Our target is the landowner,” L.A. Police Chief Michel Moore said at a press conference on Aug. 28. “It’s the landlord that is unlawfully allowing that space to be used for this nuisance activity.” According to Los Angeles Department of Cannabis Regulation, there are only 181 dispensaries with temporary approval to sell marijuana legally in L.A., but a thriving black market of illicit dispensaries has cropped up since the January 2018 codification of law allowing recreational marijuana usage in California. The black-market operators avoid taxes and undercut the legitimate shops. And when illegal dispensaries get shut down, they can resurface weeks later, said Christian Hageseth, chief executive of ONE Cannabis Group, a Colorado-based cannabis dispensary franchisor and multi-state operator. The illicit dispensaries are “crippling the industry and lowering the tax revenue,” Hageseth said. “I’m in favor of someone taking a harder stance.” On the day of the press conference, cease and desist letters were delivered to 231 illegal dispensaries and the property owners where the businesses are located. If the letter doesn’t work, the City Attorney’s office can use a new ordinance to order the Department of Water and Power to shut off utilities at the illegal dispensaries. And the City Council is working on a law to allow the Department of Building & Safety to padlock and board up the locations. Council member Monica Rodriguez, who represents parts of the East Valley, has proposed a policy to charge the operators of illegal dispensaries for enforcement costs. Valley issue Among 33 locations specifically targeted by the office of City Attorney Mike Feuer in court filings, roughly a third of the addresses are in the San Fernando Valley area. They include 15238 Saticoy St., 14626 Victory Blvd. and 15201 Oxnard St. in Van Nuys; 12777 San Fernando Road. and 12737 Glenoaks Blvd. in Sylmar; 21044 Sherman Way in Canoga Park; 8717 Woodman Ave. in Panorama City; 10352 Laurel Canyon Blvd. and 9820 San Fernando Road in Pacoima; and 9362 San Fernando Road in Foothill. “Customers patronize illegal shops at their peril and undermine businesses who play by the rules — and whose product is tested to protect buyers’ health,” Feuer said in a statement. The city has previously tried to crackdown on illegal pot shops, but in June, California Minority Alliance, a marijuana trade group, stepped up pressure on Feuer, sending him a letter that said it might sue his office if the agency didn’t step up enforcement efforts against the illegal dispensaries as demanded by L.A. residents who passed Measure M. The 2017 ballot measure authorized new city enforcement tools against lawbreaking marijuana dealers, including fines in excess of $20,000 per day. That letter was supported by United Cannabis Business Alliance, a coalition of licensed L.A. cannabis shops. Retail confusion The state of Colorado is five years ahead of California on the legalization of marijuana. However, ONE Cannabis Group’s Hageseth said that the states have taken wildly different paths on enforcement. “It’s a much different animal,” said Hageseth. “(Colorado) started in the thinly regulated world and have spent 10 years growing. L.A. has to do something about the black market. We’ve done a lot of work in L.A. We walked into one (illegal dispensary) and had no idea it was an illegal storefront. It looked just like a legal storefront, except they only took cash and didn’t charge tax. Otherwise, it’s hard to tell who’s legal and who’s not.” At the press conference, the police department’s Moore also reported that the retail public is confused about illegal operators. “This is an event of entrepreneurship in the worst form,” he said at the event. “Unscrupulous operators recognize that most of the general public is walking around and now knows that adult use of cannabis is lawful. So they see a cannabis retailer and they’re paying little or no attention to fact of whether it’s licensed or not.” For the customer, Hageseth said, the choice to buy illegal pot comes down to price. In a black-market pot situation, the marijuana “is grown cheaper and they don’t pay tax,” Hageseth said. “It’s really going to be cheaper.”

Michael Aushenker
Michael Aushenker
A graduate of Cornell University, Michael covers commercial real estate for the San Fernando Valley Business Journal. Prior to the Business Journal, Michael covered the community and entertainment beats as a staff writer for various newspapers, including the Jewish Journal of Greater Los Angeles, The Palisadian-Post, The Argonaut and Acorn Newspapers. He has also freelanced for the Santa Barbara Independent, VC Reporter, Malibu Times and Los Feliz Ledger.
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