It’s been a while since we wrote a “brass tacks” post on Oregon cannabis licensing. This blog post will cover some FAQs, from the perspective of an attorney who has worked on hundreds of these deals, since the very first licenses were transferred.
Is OLCC issuing new marijuana licenses?
Yes, but on a “one in and one out” protocol. The only way to acquire a cannabis license in Oregon is to find a willing seller, and enter into a coordinated transaction with that seller and OLCC. This protocol has followed Oregon’s robust secondary market for “naked license” transfers since January 1, 2022, when the OLCC stopped taking new license applications due to a saturated market and administrative backlog.
What types of cannabis licenses are available?
OLCC issues five main marijuana business licenses: producer, processor, wholesaler, retailer and laboratory. Producer licenses are offered at various canopy sizes, both indoor and outdoor—and a buyer is allowed to scale up or down. In other words, a micro-tier producer can agree to “sell” its license to an incoming licensee at a Tier I or II designation.
For the sake of completion, there is also a research certificate. Those are available from OLCC directly, and not subject to the “one in one out” policy.
How do I find a license?
You need to find a seller. Sometimes that happens through word of mouth and networking; other times, people source these deals through brokers. We recommend CannXperts as the gold standard there. We also recommend, very strongly, to never sign any type of “license sale” agreement offered by a broker. It’s a sad fact of life in my office that we deal with messed up broker situations on a weekly basis.
What do licenses cost?
Prices have fluctuated over the years. Today, we are seeing producer licenses trade hands in the $90K – $120K range. Processor licenses are selling for $25K – $30K. Wholesalers are going for that or less. And retail licenses are generally priced in accordance with a store’s performance. A store humming along at $1.5M in annual sales, for example, will sell for much more than a store doing $500K.
What does a license purchase agreement look like?
Most of them take the form of an asset purchase agreement, and may include additional assets (e.g. equipment, inventory), in addition to the license transferred. Less frequently— but especially for larger deals—we’ve structured these as stock sales. There’s typically an escrow component, as well, with an escrow agreement.
Prior to all of this, there is often a (non-binding) LOI, and sometimes even a non-disclosure agreement. It’s critical to have attorney eyes on anything you hope to sign; or better yet, have an attorney do the drafting so you don’t waste time and money fighting terrible forms.
Can my license issue in a new location?
Yes. Many of these deals have a change-in-location component, as well as a change-in-ownership. Either way, OLCC requires a land use compatibility statement (LUCS) for the incoming licensee, and will also require a notarized proof of landlord consent in the context of producer and processor licenses. The outgoing and incoming licensees will also need to pass an inspection by an OLCC inspector, at each relevant location.
What should I do first?
Once you find a willing seller, it’s time to do some basic diligence. This can occur prior to signing a purchase agreement, or in a defined, post-signing window. Some diligence will be basic, like whether a seller is a business in good standing with the Oregon Secretary of State (some aren’t), and whether the person representing the seller does, in fact, have authority to sell (some don’t). Other diligence will be specific to the license type: for example, in the case of retail, the seller will need to acquire a Certificate of Tax Compliance from the Oregon Department of Revenue.
How do I apply? And what documents are required?
You apply through OLCC’s CAMP online portal. If you’d like a preview of what is required, the forms are here. Certain owners will need to submit to a background check, which includes fingerprints and such.
After creating a CAMP account and uploading your application documents, you pay the applicable fees, and respond to any follow-up requests from the Commission. Those will typically come after your file is assigned to an investigator, which is happening within a week of completed applications at this point.
Anyone working on site, including owners, will also need to acquire a marijuana worker permit.
How much does it cost?
Costs vary by license type and, in the case of producer licenses, by canopy size. There is also a $250 application fee across all license types. Beyond that, OLCC publishes a comprehensive list of fees on its site—just click the “Fees” link under the “Other Forms and Resources” header. Finally, be aware that certain jurisdictions, like the City of Portland, have their own licensing requirements and annual fee schedules. Those requirements are mostly ill-conceived and redundant, but you have to comply regardless.
What happens after I submit?
After submission, OLCC reviews the application and may request more information. If the application clears the initial review, the agency can conduct an inspection or otherwise verify compliance before issuing the license, and background checks are part of the overall review process for applicants.
How long does it take?
Timing depends on the license type, the completeness of your application, and availability of inspectors in the relevant region. We’ve seen organized transactions sale through in two or three month timeframe. It’s also worth noting that all applicants must complete the application process within 60 calendar days of investigator assignment. Otherwise, OLCC will “unassign” the application, which can cause real issues in respect of purchase agreements.
What mistakes should I avoid?
I covered the broker thing already. Another problem we see frequently is outgoing licensees handing over the keys prior to approval, sometimes under the purview of a services agreement, at which point financial considerations may become muddled, and compliance issues often accrue. Another problem relates to landlord negotiations and assuming a lease will be assignable when it isn’t. But, the biggest problem of all is just handing money over without protections, for any number of reasons. Unfortunately, it happens a lot.
Bottom line
The secondary market for Oregon cannabis license transfers is robust. From this lawyer’s perspective, the process is straightforward with no need for undue complexity. OLCC is easy to work with nowadays, and these deals have straightforward protocols from start to finish.
That said, there are also numerous pitfalls, and no shortage of unscrupulous characters. It’s best to work with someone who does this every day, to make sure you get in (or out) with minimal friction, and the best possible protection. Call us if you sizing up a deal.
The post How to Acquire an Oregon Cannabis License appeared first on Harris Sliwoski LLP.
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