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Cannabis

Concerning Cannabis

In 2012, the citizens of Colorado voted decisively to become the first jurisdiction in the world to allow legal adult possession, use, growing, and retail sales of cannabis (marijuana). Colorado has had legal medical marijuana since 2000. The 2012 amendment to the Colorado Constitution (Amendment 64) also set forth retail marijuana sales rules, a taxing structure that provides for revenue to schools, public and youth education regarding cannabis, and the production of industrial hemp.

Colorado became ground zero for cannabis reform and many other states and municipalities have since been looking to Colorado for guidance and example. Colorado citizens, in greater numbers all the time, have supported this groundbreaking change and the legislature, regulators, and industry have been working diligently to construct a business and legal framework within which to operate.

Cannabis reform is also sweeping the nation. Thirty-three states and the District of Columbia currently have passed laws broadly legalizing marijuana in some form, and the 2018 Farm Bill set the framework for legal industrial hemp nationwide. This movement will continue and the Federal government will catch up or be forced to approve and adapt in time as reform states lead the way. The latest Gallup poll on cannabis shows 66% of all Americans across the board support full legalization of this ancient plant. Canada has had legal hemp since the 1990s, and last year they legalized marijuana nationwide.

hemp

Colorado has managed this matter pretty well by writing good laws, monitoring the law’s status and effects, and adjusting regulations as needed to mitigate unanticipated issues for regulation and law enforcement while addressing the needs of the ancient industry. The entire conversation has changed in our state – fewer talk of fears and pot jokes and more talk of business opportunity. In short order, legalization has brought about normalization. For example, in Denver proper, there are more dispensaries than Starbucks.

Retail cannabis sales in Colorado began in 2014. Last year, the adult use (recreational) sales alone topped $1.5 billion, with tax revenues of over $266 million in calendar year 2018. Since 2012, the cannabis industry has created over 2,500 new jobs in the state; jobs that are home grown (pun intended) and won’t be exported overseas.

Colorado studies have shown little impact to law enforcement due to adult use, declining use by youth under 21, increased tourism, and tax revenues in excess of predictions. Appropriately, marijuana is regulated by the Marijuana Enforcement Division of the Colorado Department of Revenue and industrial hemp is regulated by the Colorado Department of Agriculture.

Other states have recognized the futility and costs of cannabis prohibition and are beginning to realize that it is a product that is best regulated, taxed, and properly controlled rather than treated as a criminal matter. Idaho, Kansas, Iowa, Texas, Nebraska, Wisconsin, and South Dakota are the remaining states that have resisted cannabis reform and several of those are either reexamining their status or have citizen-driven initiatives attempting to modernize the regulations in their jurisdictions.

Current legal retail marijuana sales in the US are approximately $6 billion. With recent legalization in California and Michigan, those figures are expected to grow exponentially. The estimated total marijuana demand in the US (including black market) is $50-$55 billion, which is the potential under nationwide legalization. The hemp products industry is hovering around $620 million and is estimated to exceed $5 billion by 2020. Clearly, this is an exciting growth industry with much opportunity. There are numerous impacts of the changing laws to the real estate industry, including land brokers, and it is a billion plus dollar industry that should not be ignored.

“Thirty-three states and the District of Columbia currently have passed laws broadly legalizing marijuana in some form, and the 2018 Farm Bill set the framework for legal industrial hemp nationwide.”

At some point, it is likely that we as real estate brokers in reform states will encounter a cannabis issue in the course of daily business. It could be an inspection issue for a home grow, a request for cannabis appropriate properties, warehouse or retail facilities, leases, hemp production farms and processing, or a myriad of other possibilities. Whether this poses a difficulty or an opportunity, you should be aware of the rules and regulations of the industry.

Hemp and marijuana are the same plant: cannabis sativa. The cannabis plant contains over 60 compounds known as cannabinoids which are unique to the plant. Hemp is a variety of cannabis sativa that contains less than 0.3% of delta-9 THC (tetrahydrocannabinol), the component of cannabis that produces the high from marijuana.

cannabis field

Hemp has been a historically important crop and was widely used in industry prior to being made effectively illegal under the Marihuana Tax Act of 1937 and rendered completely illegal under the Controlled Substances Act of 1971. Hemp has a long list of useful applications: fiber, cloth, paper, oils, plastics, lubricants, cosmetics, food products, bio-diesel and ethanol, insulation, and building materials. It has more than 25,000 documented uses, but will not produce a high.

Industrial hemp was first addressed in the 2014 Farm Bill, which allowed interested states to establish programs for research of propagation, growing, utilization, and marketing of hemp. The first seven states that chose to participate gained a head start in developing a robust hemp industry.

The 2018 Farm Bill, passed last December, made major changes to the law:

  • Defines hemp as any part of the cannabis plant containing 0.3% THC
  • Removes hemp, as defined, from the Controlled Substances Act
  • Provides that raising hemp will not impact participation in Farm Service Agency programs
  • Provides that hemp can be included in Federal Crop Insurance programs
  • Requires each state to propose a state plan or operate under Federal rules
  • Allows states to opt out of hemp production
  • Allows interstate transportation of hemp and hemp products

The passage of the new 2018 Farm Bill has really energized interest in the crop; however, full codification, rule writing, and promulgation and implementation of all elements of the new law will take time. Most Federal rules will not be complete until the 2020 crop year, and some issues like crop insurance could take longer. Some farmers have tried hemp production and have decided to wait until the rules are clear and the markets settle before planting again. Processors are still catching up with growers, leaving some farmers with a harvested crop with nowhere to go. I always advise a producer to secure the sale before planting the seed.

The hemp plant has about a third less moisture and nutrient requirements than corn and far less, if any, pesticides. It is an annual plant that grows rapidly to a height of 8 to 12 feet with large seed heads, a fibrous stalk, and tap root. About 40% of the plant material is returned to the soil, adding organic matter. Hemp is a dicot plant with a deep tap root that improves soil aeration and water permeability, particularly in compaction prone soils. The crop is harvested for seed (used as seed stock and a source of oils and food products), fiber (for cloth, paper pulp, rope, insulation, building materials), and production of CBD (cannabidiol), a non- psychoactive substance used medically to suppress seizures, reduce anxiety, pain relief, and other uses. The cannabis plant is resilient and grows well in several different soil types.

As commodity prices for traditional crops remain at 30-year lows, hemp is poised to be a viable, productive plant for continued agricultural production and has raised major interest from all sectors of the agriculture industry. Every hemp meeting for farmers that I have attended has been a standing room only crowd. Approximately 78,000 acres of hemp were grown in the US in 2018. Of that, 70% was grown for production of CBD; 10% for grain; 10% for fiber; and 10% for other uses or crop loss. Some states have opted out of hemp production so far, including Kansas, Nebraska, and Idaho. Over exuberant and uninformed law enforcement has caused several instances of hemp transporters being arrested and detained on marijuana charges. These arrests are examples of some of the rough spots that may occur during the transition to a legal cannabis economy.

I have developed a four-hour course entitled Cannabis Country that goes deeply into the topics addressed here plus an in-depth history of cannabis prohibition, the multitude of uses of the plant, phytocannabinoids, endocannabinoids, legislation, propagation, markets, and the future of cannabis in the US. Watch for it near you or contact me for information and scheduling.

This article was originally published in the Summer 2019 Terra Firma magazine.

Kirk Goble, ALCAbout the author: Kirk Goble, ALC, has been a Colorado licensed real estate broker since 1988 and founded The Bell 5 Land Company in 2000. He specializes in farm, ranch, land, and water brokerage. He is a member of the National Association of REALTORS®, The Greeley Area REALTOR® Association, and the REALTORS® Land Institute. Goble was awarded the Land REALTOR® of America by the REALTORS® Land Institute in 2013 and is a LANDU instructor for RLI.

The Scary Side of Land

Forget goblins and ghosts – these are the really scary parts of October. These land nightmares can cost you time, money, clients, and even your reputation as a land expert. Read on to find out some of the scariest things that can happen to land professionals and to see how you can avoid falling prey.

Buying A Property From Someone Who Doesn’t Actually Own It

One thing that every land expert fears is helping a client sell a property for a seller that doesn’t actually have a clear title to the property. This can create a horror show of legal battles and thousands (even millions) down the drain.

Sometimes, a seller doesn’t have legal rights to a property because they didn’t know enough about the history of the land and genuinely thought they owned it. It is important for agents to secure a title proving ownership before moving forward with a client.

Less scary: For those of you that are newer to the land industry, a title search is the process of retrieving documents about the history of a property. Title searches are the best way to know exactly who owned the property when.

Finding Out Too Late That There Is Something Wrong With Your Property

Just because a property looks perfect doesn’t mean that it is. There is nothing worse than buying what seems to be a flawless property only to find out after the check clears that there are environmental hazards lurking in your land.

Less scary: Soil tests do take time and money, but they are the best surefire way to weed out anything that could lower the value of your land. These tests can show a variety of things, from nutrient content and composition to other important characteristics such as the acidity or pH level. Nutrients in the soil can vary depending on depth and the timing of when the sample was taken so it is important to make sure you have a recent test.

Soil tests are especially important when building a structure or planting crops. You’ll want to make sure you have the right soil type for your produce.

Buying A Property With No Access

This might sound ridiculous, but there are thousands of landlocked properties with no access. As Future Committee Leaders member, Eric Leisy, ALC, pointed out in his guest post for RLI, “not having deeded access to a property can cause the value to plummet.”

Less scary: If your dream property is landlocked, you do have options. You can go to court to try and get an ingress and egress easement or purchase deeded access from whoever holds it.

“It is best to sit down face to face with the landowner that you are requesting the access easement from,” said Leisy. “Calmly go over the process, and explain why it is needed. Most people will respond much more positively to this type of meeting over a cup of coffee rather than getting a letter or email. You might be pleasantly surprised at the end result.

Buying Land Zoned Wrong

There’s a common misconception that the strictest land zoning happens in urban areas. In reality, zoning regulations can be just as strict for agricultural and rural land, especially when it comes to the livestock.

Less scary: Do your research on the area’s zoning laws. Local jurisdictions determine zoning requirements such as minimum farm size, number of non-farm dwellings, density of development, and land use.

Be sure to also check if the land is zoned as being in a 100-year flood zone. You don’t want to wake up to see the structures you’ve built on the land have floated away!

Buying Land Without An ALC

We saved the scariest for last! Accredited Land Consultants bring decades of experience, in-depth knowledge, and a network of other professionals to every land deal. Working with an ALC is a surefire way to avoid all the other land horror stories (and even some we couldn’t think of) mentioned in this article.

Less scary: Always work with an ALC! Use the Find A Land Consultant tool to find a qualified land agent in your area.

Being trapped in a land horror story will cost you time, money, and more. Be sure to keep your land and money protected by always working with a professional. Happy Halloween!

About the Author: Laura Barker is a freelance writer based out of California for the REALTORS® Land Institute. She has been with RLI since October 2017.