Landlords In Grey Zone Over Bank Mortgages Vs. Legal Dispensaries

This story was republished with permission from Crain’s New York and written by C.J. Hughes.

Because marijuana is still illegal at the federal level, landlords who have mortgages with federally chartered banks would seem potentially at risk by having pot stores as tenants, as doing business with a drug dealer, essentially, runs afoul of the law.

But even though federal officials haven’t said outright that they won’t enforce the law, some landlords seem unfazed, as in Greenwich Village, where the city’s second legal dispensary opened on Jan. 24.

“My only concern is: Is marijuana legal? And is the state of New York behind it? And the answer to both of those questions is yes,” said Herman Gans, an owner of 144 Bleecker St., which is home to the new cannabis shop, Smacked Village.

In 2011 Gans and his co-investors borrowed $6.8 million against the 4-story mixed-use building, which cost $4.2 million in 2001, records show. The lender was New York Community Bank, which is based on Long Island and holds $66 billion in loans for properties across the country.

A message left with the bank asking for an explanation of its position on working with landlords with cannabis-selling tenants was not returned by press time.

Cooper Katz, a broker with ABS Partners Real Estate who handled the Smacked Village deal, said it’s his understanding some financial institutions are advising landlords to tread carefully.

“Some of the banks are saying, ‘We’re OK with it,’ and others are not,” said Katz, who was the fifth agent to market 144 Bleecker, a 5,600-square-foot two-level space that had been empty since a Duane Reade closed in 2019. “But it’s definitely a conversation we’re having.”

If some federal lawmakers have their way, those conversations won’t be necessary for much longer. In 2020 the House of Representatives approved the More Act, which would decriminalize cannabis on a national level. And Senate Majority Leader Chuck Schumer of New York has said he expects his chamber to take up the bill soon.

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