August 27, 2018

Written by Elizabeth Kozlov

On August 1, 2018, the Los Angeles Department of Cannabis Regulation (“DCR”) began accepting applications for Phase 2 priority processing for select cannabis businesses that were involved in non-retail cannabis activity prior to 2016. This is the second application window the DCR has opened for LA City-level licensing since state legalization. The application window will be open for a limited time, and ends on September 13, 2018, so if you are planning on applying, here’s what you need to know:

Who Qualifies?

In order to qualify for Phase 2 licensing, an Applicant must establish that:

(1) the Applicant was engaged prior to January 1, 2016, in the same type of Non-Retailer Commercial Cannabis Activity for which it now seeks a License;

(2) the Applicant supplied an EMMD prior to January 1, 2017; and

(3) the Applicant qualifies under the Social Equity Program.

Only Non-Retail Cannabis Business applicants that qualify under the Social Equity Program will be accepted. Retail or microbusiness applicants are excluded from Phase 2.

Application Processing

The DCR will process applications submitted within the 30 day window in the order of submission, but don’t expect a speedy turnaround time. To date, the DCR has received hundreds of applications. Also, an incomplete application will further delay processing times.

There is no maximum for Type 6 Manufacturing licenses that can be granted at this time. However, there are a limited number of Cultivation licenses that can be granted in each district of Los Angeles. For example, in the Van Nuys- North Hollywood district, the DCR can greenlight up to 15 Cultivation licenses. Meanwhile in Venice, the DCR will only approve 2 Cultivation applications; thus submittal order is essential for license approval.

Submitted applications will be processed in the following order:

  1. Phase 1 Priority Processing: Existing Medical Marijuana Dispensary Applications
  2. Phase 2 Priority Processing: Non-Retail Applications
  3. Phase 3 General Processing
    1. Retail Applicants: 1 General Applicant Application will be processed for every 2 Social Equity Applicants (Tier 1 & Tier 2 only)
    2. Non-Retail Applicants: 1 General Application for every 1 Social Equity Applicant

Policy: Can Phase 2 Applicants Continue Operation While Their Application is Pending?

This is a trick question.  The city cannot explicitly allow businesses to operate that have not passed city inspections and thus the technical answer is no. However, the city understands that these businesses are operating and will continue to operate and thus seems to be looking the other way when it comes to continued operation.  Accordingly, applicants probably can go without consequence if their location is operational when the inspector comes by.

Once granted temporary approval, and before annual licensure, applicants can continue to operate. However, temporary approval holders must immediately comply with all rules and regulations applicable to the license type for which they have applied- there is no grace period. In other words, once a business has submitted their application, they fall within DCR jurisdiction and enforcement.  Accordingly, the DCR may suspend or revoke temporary approval if the applicant fails to abide by any City operating requirement. Additionally, an applicant must attest that it will cease all operations if denied a State or City License and must obey all non-cannabis laws (including labor laws, LA Fire and Building Codes, and the LA County Health Code).

What to Expect After Submission

Premises inspections! The DCR is entitled to and is required to inspect business premises’ during regular business hours or non-regular hours if violations are alleged to be occurring. The DCR will also investigate complaints from employees, law enforcement, or any other source. Other agencies such as Building and Safety, the Fire Department, the Office of Finance, and Health Services are also entitled to conduct inspections. Denying access to inspectors or a failure to cooperate could result in revocation of a temporary approval. Applicants must pass a pre-licensing fire safety inspection before a license can be issued.

Phase 3

If you did not qualify for Phase 1 or 2 application windows, the DCR will soon accept and process applications for Commercial Cannabis Activity for the general public. Phase 3 will be announced at a later date- and include all license types- stay tuned.

(Once the Phase 2 window closes, it closes for good. If you qualify, it would be a good idea to apply within the next few days.)

Disclaimer: This article has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice.