Marijuana Businesses Not Seeing the Welcome Mat

NEW YORK (TheStreet) -- Marijuana businesses are finding that landlords aren't putting out the welcome mat in Washington. The state expects to begin sales of recreational marijuana in June, but businesses need to have a location nailed down in order to apply for a license.

"We're getting inquiries from potential licensees reporting a "Not Welcome Here" response when applications for space are requested," said Robert Flatt, director of southwest Washington's "We've contacted all the big brokers in the area and it appears they fear problems with occupying tenants not wishing to be associated with cannabis dispensaries."

The problem isn't only in Washington, other heavily regulated marijuana states report the same issues. Not all landlords look favorably on the marijuana industry and some refuse to rent to these businesses on moral grounds. While this angers the pro pot crowd, it isn't unusual for a landlord to prefer certain businesses as tenants. Landlords see a risk that for some isn't worth taking.

The biggest risk is federal confiscation of property. Ultimately, cannabis is still illegal and the Department of Justice could still seize the property. "There's always the risk that the feds say game over," said Justin Abbate, counsel for Zoned Properties, a real estate company that specializes in finding properties that face challenging zoning issues. "But they tend to send a letter in advance giving the business time to move and it's usually because the location is close to a sensitive place, like a school."

The Department of Justice letter from Deputy Attorney General James Cole in August of 2013 outlined guidance regarding marijuana businesses and Abbate said this gives some level of comfort to landlords with regards to confiscation.

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