The City of Los Angeles recently overhauled its cannabis ordinance, introducing sweeping changes to the Social Equity program, licensing process, and establishing rules for future licensing rounds.
 
 The ordinance amendments went into effect on July 10, 2020.
 
We expect further changes to LA’s cannabis rules in the coming months—in particular, amendments to zoning and sensitive use rules, as well as updated Rules and Regulations, forms, and policies from DCR.

Here are a few big take-aways from the new ordinance:

• Only Social Equity applicants may receive retail licenses (storefront or delivery) until January 1, 2025. “Tier 3” applicants are no longer considered eligible for the Social Equity Program. EMMD applicants will still be able to receive those retail licenses applied for during Phase I.
 
• For Phase 3 Round 1 the DCR will process both the original 100 applications accepted for further processing, as well as the next 100 Phase 3 Round 1 applications (200 in total). The original 100 applications accepted for further processing in 2019 will not be included in the Undue Concentration calculation. The additional 100 will include those applications originally knocked out of the running for Undue Concentration or for proposing a premises within 700 feet of another Phase 3 Retail Round 1 Type 10 Retailer applicant’s proposed premises.
 
• Applications for the Phase 3 Round 2 Storefront Retail licensing round will be accepted by lottery. Again, only Social Equity applicants can participate. Social Equity applicants for this round must have an owner who meets a new definition of “Social Equity Individual Applicant” which is defined as an individual: (1) with a prior California cannabis arrest or conviction, and (2) that qualifies as either (a) Low-Income (as defined); or (b) with 10 years’ cumulative residency in a Disproportionately Impacted Area (here, a Police Reporting District). Social Equity applicants will have one year to find a suitable property. 
 
• Two other licensing rounds are teed up, and the DCR has discretion to commence those rounds at any time:
 
• Non-Storefront Retail Licenses. Social Equity applicants who submitted a complete application in Phase 3 Round 1, but did not move forward due to Undue Concentration noncompliance, will receive priority processing.  
 
• Non-Retail Licenses. This non-retail round is restricted to Social Equity applicants . 
 
• The DCR adopted a new definition of “Equity Share” that greatly strengthens the ownership and operational rights of an applicant’s verified individual Social Equity owner. To better facilitate the goals of the Social Equity Program, the City now requires that those verified Social Equity individual owners retain “unconditional ownership” of the licensed entity, among other rights and powers. Violations of the Equity Share rules are now grounds for a lawsuit in LA Superior Court and suspension or revocation of an application or license.
 
• Phase 3 Round 1 licensees will not receive a Temporary Approval without showing compliance with the new definition of “Equity Share.” Many Social Equity applicants likely must re-negotiate foundational business documents prior to becoming operational. And, all must amend founding documents to include verbatim certain language provided in the new ordinances.
Otherwise, Phase 3 Round 1 applicants may receive Temporary Approval to operate if:
  • The applicant pays the appropriate fee;
  • Receives authorization from the State;
  • The premises passes an initial inspection;
  • There are no fire or life safety violations at the premises;
  • The applicant submits all required attestations, as determined by DCR; and
  • The applicant indemnifies the City on a form provided by DCR.
 
• Applicants and licensees can relocate–but limitations apply. Non-volatile manufacturers, non-storefront retailers, and distributors may relocate anywhere else in the City, assuming compliance with zoning and sensitive use rules. Storefront retailers, cultivators, and volatile manufacturers, however, cannot relocate outside of the Community Plan Area of the current premises. Additional rules apply where an applicant or licensee located within a Community Plan Area through the PCN process.
 
• The PCN process is clarified. PCN applicants must seek written input from certain key stakeholders for the proposed relocation area. A PCN application will be automatically denied if the City fails to act on a referred application within 90 days.
 
• New rules clarify the process for critical application or license modifications —such as licensed premises expansion and ownership changes.
 
• DCR likely will oversee CEQA compliance.
 
Broadly, we note that DCR’s forthcoming implementation policies will have a tremendous impact on the timing and effectiveness of the new streamlined licensing process.
This email is provided as informational only and does not constitute legal advice. 
If you have any questions about any of the above, please contact your attorney directly or call our main line at 877-257-2442.