Nipping a Budding Industry: Regulation of Cannabis in Commercial Condominiums

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After the initial rush for implementing cannabis smoking rules in units has passed, condominium corporations should begin to shift some focus to regulating cannabis-oriented activity in commercial condominium units. With over a month since the Government of Canada legalized recreational cannabis use on October 17, 2018, the Government of Ontario has so far only legalized cannabis sale through the Government’s online store, Ontario Cannabis Store (OCS). However, the Government is planning on legalizing and regulating brick and mortar stores April 1, 2019.

Come April 1, 2019 businesses will likely be able to sell cannabis from physical stores to the general public if the business has a license to do so. A business could operate such a store in a commercial condominium unit if there are not any prohibitions in the condominium documents preventing or regulating the sale of cannabis and cannabis related products.

What brick and mortar stores mean for condominiums:

If unit owners want to prohibit cannabis-related business in commercial units, then condominium corporations should strive to set limitations or restrictions for cannabis-related business before any commercial units are purchased or leased for such activity.

A purchase or lease of a commercial unit may take place before April 1, 2019, so it is important that condominium corporations act quickly if the corporation plans to prevent cannabis-related businesses. Failing to prohibit the use of a unit before a person enters into an agreement for the unit may lead to that unit being grandfathered as a cannabis-related commercial unit (which would limit the ability to prevent or remove the business).

Creating the restrictions:

If the required 80% approval can be obtained, then an amendment to the declaration is a strong way to limit commercial activity in a unit as such a change does not require a provision to be reasonable. A rule could be created, however, a rule is subject to more challenges as a rule must be considered reasonable.

Many condominium declarations regulate the type of businesses allowed within the commercial condominium units of the respective condominium plan. The declaration is able to set out the guidelines for what type of commercial activities are permitted in the commercial units, and specifically list the type of commercial activities not permitted within the commercial units. An amendment to the declaration could prevent cannabis stores from operating in units.

Condominium corporations should also be mindful that a business may attempt to set up a cannabis-related business in a commercial unit with an intention not to distribute cannabis but to sell cannabis related products. Such a related business could include the sale of smoking and consumption apparatuses or other products related to the cannabis consumer culture. If a condominium is looking to amend a declaration to prohibit cannabis distribution, the corporation may also want to prohibit all related business activity.

Further, although cannabis lounges are in a legal grey area, condominium corporations should again act pre-emptively and prohibit such a business in the event that the Government of Ontario passes legislation to allow businesses to create places for individuals to consume cannabis.

The question of whether to make changes to condominium documents is really dependent on the views of the unit owners. For some condominiums it might make sense to prohibit cannabis stores, but for others it may be beneficial to allow such stores.