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Legalization of Medical Marijuana Prompts New Notice in Title Commitments

Anyone closely reviewing recent commitments for title insurance may have come across a new notice under Schedule B:

“Notice: Please be aware that due to the conflict between federal and state laws concerning the cultivation, distribution, manufacture, or sale of marijuana, the [Title] Company is not able to close or insure any transaction involving Land that is associated with these activities.” 

On April 17, 2017 Governor Wolf signed the Medical Marijuana Act (the “Act”) that made Pennsylvania the 24th state to legalize medical marijuana.  At the same time, many entrepreneurs seeking to participate in this new industry sought to acquire real estate for potential growing, processing, and dispensary operations.

The Pennsylvania Department of Health oversees the issuance of permits for growers, processors, and dispensaries.  Those interested in applying for the permits were required to supply certain information, including criminal background checks, complete a two (2) hour training course, and submit a $10,000 non-refundable fee, a $200,000 permit application fee (refundable if the applicant did not obtain a permit), and proof of at least $2,000,000 in capital, $500,000 of which must be deposited with a financial institution.

It’s important to remember that the possession, sale, and distribution of marijuana, even if intended for medicinal purposes, is a violation of Federal law.  Furthermore, the Act does not provide any protection for alleged violations of Federal law.  Accordingly, title companies are providing notice to consumers that utilizing the property for the cultivation, distribution, manufacture, or sale of marijuana, although permitted by Pennsylvania law, is a violation of Federal law.  Therefore, any loss of the property as a result of the use would not be covered under the owner’s or lender’s title insurance policies.

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