As announced by Rosenberg & Estis, P.C. earlier this week, the 2025 Budget Legislation signed into law by Governor Hochul on April 20, 2024 included major new and amended housing laws to reshape residential development and ownership in New York City and New York State. The same Budget Legislation also includes amendments to the New York Cannabis Law and Real Property Actions and Proceedings Law to address the ongoing statewide problems caused by unlicensed cannabis shops that is most prevalent in New York City. By way of background, R&E previously reported in August 2023 on New York City Local Law 107 which imposes financial penalties upon commercial landlords who knowingly permit unlicensed cannabis sales at their properties. The newly enacted Budget Legislation broadens available enforcement mechanisms and increases penalties, signaling that New York State is serious about curbing widespread unlicensed cannabis sales and improving upon its initial rollout of cannabis legalization in March 2021.
The Budget Legislation amends Cannabis Law § 16-a by eliminating the need for prior service of a notice of violation before the Office of Cannabis Management (OCM), the Attorney General (AG) or any authorized local corporation counsel or government can seek a court order requiring the immediate cessation of unlicensed cannabis sales. An authorized enforcement agency can seek to permanently enjoin both landlords and commercial tenants from unlicensed cannabis activity where the public health, safety and/or welfare is in danger. Underpinning these expanded powers are the amendments to Cannabis Law § 125, which now provides that any unlicensed, unregistered or unpermitted cultivation, processing, distribution or sale of any cannabis or hemp product, or any product marketed or labeled as such, may be deemed to constitute a “significant risk of imminent physical harm…presents a danger to public health, safety, or welfare and constitutes a public nuisance.” The enforcement agency may allege public danger based upon sales to minors, unlicensed processing of cannabis, violent conduct, presence of unlawful firearms, proximity to schools/houses of worship/youth facilities, sale of products leading to illness or hospitalization, and/or sale of products not tested or labeled according to state law. Cannabis Law § 17 was similarly amended to provide OCM and the Cannabis Control Board (CCB) expanded powers in connection with administrative enforcement proceedings to prosecute unlicensed cannabis sales. The Legislation authorizes the enforcement agencies broad discovery powers and provides for temporary closure orders by padlocking and/or temporary restraining orders, and contemplates expedited timelines for both the scheduling of hearings and the issuance of decisions thereon.
The Budget Legislation also increases fines and penalties for unlicensed cannabis sales on more than a de minimis basis. Amended Cannabis Law § 132 provides for: (i) a civil penalty of not more than $10,000 per day during which a violation continues; plus (ii) up to five times the revenue from prohibited sales or up to three times the projected revenue for unsold products. If unlicensed sales continue after an order to cease conduct has issued, penalties further increase to: (i) a civil penalty of not more than $20,000 per day during which a violation continues; plus (ii) up to five times the revenue from prohibited sales or up to three times the projected revenue for unsold products. Furthermore, refusals to permit OCM or the CCB from performing regulatory inspections may include civil penalties of up to $20,000 for the first refusal and $40,000 for subsequent refusals within three years. The Legislation also amends Real Properties Actions and Proceedings Law § 715-a, concerning grounds and procedures for the removal of commercial tenants for unlicensed cannabis sales. Landlords in the City of New York will now face an increased penalty of $50,000 for knowingly renting to unlicensed cannabis shops, while landlords outside the five boroughs can face penalties of up to five times the monthly rent in effect after receipt of notice of the unlicensed activity. Furthermore, RPAPL § 715-a was amended to lessen the burden on landlords seeking to evict, who will now only need to prove the tenant was “customarily or habitually” engaged in the business of selling cannabis without a license, as opposed to the prior standard of “solely or primarily” engaging in such unlicensed sales.
The provisions of Article VII, Part G of the Budget Amendments take effect immediately. Rosenberg & Estis will provide updates as the implementation of the new legislation continues to develop and as we gain greater clarity regarding how the enforcement of the new laws plays out in the Courts. If you have any questions, please feel free to contact your trusted R&E attorney or Adam Lindenbaum, Member of the firm’s Litigation Department, who authored the above industry update.