Navigating New York’s Cannabis Application

The State of New York’s adult-use cannabis license application window opened last week on October 4. Five license types are up for grabs: cultivator, processor, distributor, retail dispensary, and microbusiness. To help applicants understand the application process, I asked New York cannabis attorneys to break down some of the critical components of the application process.

Cannabis Application Deadlines

Applicants should be aware of two deadlines at a minimum: November 3, 2023, at 5 p.m. EST and December 4, 2023, at 5 p.m. EST. David Holland, Partner at Prince Lobel Tye LLP, explained the significance of both dates in a recent email.

“The 60 day application window to apply for cultivation, processing, distribution, microbusiness, and retail dispensary licenses closes at 5pm on December 4, 2023. Prior to submitting, a retail dispensary and microbusiness engaging in retail sales to consumers must give at least 30 days notice to the municipality where they intend to open shop PRIOR TO submitting the application. If a licensee has “site control” meaning that they have a deed or a lease to a physical location then they can get priority review provided they file their application by November 3rd and have given prior municipal notice,” he says.

According to Holland, retail and microbusiness applicants may apply for a provisional license even if they haven’t purchased or leased property at the time of application submission.

“For those that do not have site control yet, they can apply for a “provisional” license which demonstrates that the applicant meets the qualifications for licensure and they will have 12 months from the issuance of the provisional license to secure and open a retail location. No provisional licenses will be available to the supply side cultivators, processors, and/or distributors,” he says.

Real Estate Concerns

Applicants ineligible to apply for a provisional license must act fast to lease or purchase viable real estate if they plan on applying during the current window, according to Fatima Afia, a cannabis attorney at Rudick Law Group, PLLC.

“Due diligence is needed on municipal zoning and regulations, a binding option or lease or deed have to negotiated, and a Notice to Municipality needs to be submitted 30 days before application submission. That’s quite a bit to do over the next 30-60 days,” she says.

Are applicants seeking priority review already past the thirty-day municipal notice requirement? Afia suggested that New York regulators may grant leniency with this requirement due to compressed timelines.

“And because OCM didn’t publish the updated Notice to Municipality form until September 29th with the application window opening only a few days later, which gave applicants seeking priority review a limited time within which to submit their notice to municipality, there’s also a chance that OCM may give some flexibility to those who missed the October 3rd notice to municipality deadline for priority apps by only a few days,” she explains.

Local Approval

Applicants should also be aware of local government‘s role in the New York cannabis licensing process before selecting real estate. Some jurisdictions, like California, don’t grant cannabis licenses without local approval. According to David Feder, a cannabis business, licensing, and litigation attorney, New York is taking a different approach.

“Although there are towns which have “opted out,” there’s no such thing as local approval requirement. The application requires sending notice to the municipality 30 days prior to applying for certain licenses, however the municipality’s approval is not a requirement. Even if the municipality votes to oppose a proposed dispensary or on-site consumption business, the OCM is not required to deny the application based upon same, rather they simply take it under advisement in consideration of the broader application as a whole,” he says.

However, that doesn’t mean localities cannot impact an applicant’s chances of receiving a cannabis license, according to Feder.

“A town can adopt local rules regarding “community facilities” and potentially block applicants from applying within 500 feet,” he says.

Application Processing And Review

How applications will be processed and reviewed has been an ongoing conversation amongst the New York cannabis community. Alana Hans-Cohen, an associate at Pashman Stein Walder Hayden, P.C., provided the details.

“Applications are collected during the specific windows, and they’re grouped by the type of license you’re after, your Social and Economic Equity (SEE) certification, and provisional status. For retail dispensary licenses, they’ll be divided right down the middle, with half allocated to New York City and the other half scattered across the rest of the state.,” she says.

Hans-Cohen also explained the order in which the applications will be reviewed.

“Once the window closes, that’s when things are going to get interesting. Applications “will be queued (ordered) in their distinct pools using a randomized process. This process is bound to take center stage and be heavily scrutinized. Finally, remember that also it’s possible that not all applications will be reviewed before all the licenses are claimed,” she explains.

Does that mean there’s no advantage to applying early? According to Hans-Cohen, unless an applicant is after expedited review, there may not be.

“Timing can make all the difference, but only if you are eligible for the expedited review window. Otherwise let’s call this what this is – a lottery,” she says.

Litigation Concerns

Litigation concerning New York’s Conditional Adult-Use Cannabis Retail Dispensary rollout has been well documented. Should applicants expect litigation related to the current application window? David Holland gave his take via email.

“We expect that given the municipal notice requirement for retail shops which must occur 30 days prior to applying for the license that many will not wait the time period required and will file prematurely. I expect that someone denied a license will file a challenge to those that jumped the gun and will attempt to litigate their way into a license,” he says.

Litigation may also have an impact on existing small cannabis businesses, according to Alana Hans-Cohen.

“But it’s not just the licensing process that’s affected. As these legal battles persist, they can create serious financial pressures on small businesses. Picture this: you’ve got a small, innovative cannabis venture, and you’re all set to take off. Then, a litigation storm rolls in, soaking you in delays and uncertainty. It’s like trying to keep a candle lit in a hurricane – it’s tough,” she says.

This impact could lead to market consolidation over time, according to Hans-Cohen.

“Well, we might see an increase in market consolidation as these larger companies take advantage of the turmoil. It’s like a game of Monopoly, with some players holding all the prime properties and others struggling to pass go,” Hans-Cohen predicts.

DISCLAIMER: Information contained in this article does not constitute legal advice or create a lawyer-client relationship. The information contained herein is also not guaranteed to be up-to-date or complete. Readers should not act upon the information contained herein without first speaking with a qualified professional.

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