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‘Toking’ action: City Council unanimously approves stiff fines on landlords who rent to unlicensed cannabis shops

Jun. 22, 2023 By Ethan Stark-Miller

Amid a push to further crackdown on illicit cannabis sales, the City Council on Thursday unanimously passed a bill barring landlords from knowingly leasing commercial space to stores that sell unlicensed marijuana or tobacco products.

The legislation, sponsored by Council Member Lynn Schulman (D-Queens), overwhelmingly passed the council by a 47 to 0 vote margin, with one abstention. Under the bill, landlords found to be renting space to unlicensed marijuana and tobacco purveyors will first be served a warning and then hit with steep fines if they continue to rent to the illicit businesses.

The measure is a response to roughly 1,600 shops selling pot products without a license that have cropped up across the five boroughs since the substance was first legalized by the state legislature in 2021. The unlicensed stores have taken root as the state has been slow to launch a functioning legal market — so far there are only 15 legal dispensaries open statewide, five of which are in New York City.

The main concern is that the stores are selling unregulated products that could be dangerous to those who use them and their presence undermines the burgeoning legal market, which is supposed to prioritize those who went through the criminal justice system for decades old marijuana-related offenses. The “Marijuana Regulation and Taxation Act,” the state legislation that legalized weed for adult-use, was designed to first direct dispensary licenses to those negatively impacted by the “War on Drugs.”

Queens City Council Member Lynn Schulman.Credit William Alatriste/NYC Council Media Unit

During a press conference preceding the bill’s approval, Schulman charged illegal weed shops are selling potentially dangerous products, marketed to minors, while robbing the state of much needed tax revenue.

“We’ve seen a proliferation of illegal weed shops throughout the city,” Schulman said. “The shops are unregulated. They are selling adulterated products. They’re selling to minors. They are evading sales tax and they are over-saturating the market for legal cannabis shops, many of whom were impacted by the prohibition of cannabis, making it nearly impossible for legal shops to flourish.”

Schulman said the fee structure contained in the legislation — which includes a $5,000 fine for first offenses and $10,000 fine for subsequent violations — aims to hold landlords accountable and discourage them from leasing space to unregulated pot shops.

“This will create a penalty structure to hold landlords accountable for knowingly leasing commercial premises to illegal businesses, such as unlicensed weed shops and e-vaping shops,” she said. “Our hope is that this legislation will incentivize landlords to do the right thing and keep our community safe by only leasing commercial space to legal licensed businesses.”

The fines will be levied by any state or city agency empowered by the mayor to conduct inspections of the illicit businesses, including OCM and New York City Sherrif’s Office, Schulman said.

The fines only come after a warning that is given by the Sheriff’s Office if it finds a store is selling weed illegally during an inspection. The Sheriff first gives the landlord a letter notifying them they’re leasing to an illegal business, the landlord can then move to evict the illicit stores as a way to avoid further penalties.

“Once we start fining them, the landlords, then they would start eviction proceedings, and slowly but surely, we’ll get rid of those illegal weed shops as we ramp up the legal ones,” she said. 

The illegal sellers have become the target of public outcry and entered the crosshairs of many elected officials, including Governor Kathy Hochul and Mayor Eric Adams. Last month, Hochul signed legislation as part of the Fiscal Year 2024 state budget allowing the state Office of Cannabis Management (OCM) to levy fines of $10,000-a-day against stores selling unlicensed weed products, which can be upped to $20,000-a-day for the repeat offenders. 

We’ve got a new process to shut down illegal operators and it keeps them shut until the fines are paid,” Hochul said.Photo by Dean Moses

On Thursday, Hochul announced the new measures have OCM and the state Department of Taxation and Finance (DTF) to conduct 33 inspections of unlicensed businesses in New York City, Ithaca, and Binghamton. Those raids have led to the issuance of 31 violations and the capture of a minimum 1,000 pounds of illicit weed worth nearly an estimated $11 million.

The governor’s action also gave OCM the power to request a court order to shutter businesses that repeatedly violate the law.

The state and city have partnered to conduct raids of illegal weed shops across the five boroughs over the past several months through the Cannabis NYC Interagency Enforcement Task Force that includes the Sheriff’s Office, OCM, NYPD and FDNY. Adams’ office also partnered with Manhattan District Attorney Alvin Bragg back in February to 400 businesses suspected of selling marijuana without a license, warning they could be evicted for continuing to skirt the law.

In a statement, a City Hall spokesperson thanked the council for its shared committment in establishing an “equitable” legal market by shutting down illicit establishments. They, however, didn’t indicate where the mayor stands on the legislation itself.

“As Mayor Adams has repeatedly stated, the administration supports the creation of an equitable legal cannabis market – but we will not tolerate establishments that threaten the health and safety of New Yorkers, or that aim to cut the line and undermine the legal market,” they said. “We thank the Council for their shared commitment to a fair, equitable, and safe legal cannabis market.”

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