Is the Massachusetts Cannabis Control Commission Going to Enforce the Cap on Host Community Agreements?

The Massachusetts Cannabis Control Commission is finally putting some teeth into enforcement of the practice of cities and towns trying to extract additional fees from recreational marijuana businesses. At present, the law requires that recreational marijuana businesses obtain a “Host Community Agreement.” In other words, the marijuana operators must negotiate with the municipality to get their approval before they can locate their business within the community. This has opened up a point of leverage for the cities and towns to exploit their power.

The Host Community Agreement allows the municipality to get a fee of up to 3 percent of their gross sales from the marijuana operators. Since the businesses must get the consent of the municipality when it applies for a license, the municipalities have used this opportunity to demand “voluntary” fees in excess of the 3 percent cap. As the Boston Globe reported recently, the municipalities are probably breaking the law.

The Globe reported that Fall River, for instance, is seeking 4 percent of annual sales. Other cities and towns are seeking “voluntary” payments to charities handpicked by local officials. These fees exceed the 3 percent cap.

The Cannabis Control Commission plans to reconsider a decision not to review the Host Community Agreements. The actions by the municipalities not only flout the letter and spirit of the law but also raise constitutional questions of due process and equal protection in two respects.

First, the citizens of Massachusetts voted on November 8, 2016 to affirm Proposition 4 to legalize recreational marijuana. Many municipalities, however, have created procedural and financial barriers as a condition to obtaining licenses by leveraging the Host Community Agreement. The creation of these procedural barriers permits them to extract concessions from cannabis operators they could not get substantively. Second, this has created an unfair financial burden on minority owned businesses that cannot pay the extravagant demands of the municipalities. This is a deprivation of a property right that violates the United States and Massachusetts Constitution Due Process and Equal Protection Clauses.

Hopefully, the Cannabis Control Commission will strictly enforce the 3 percent cap on sales, allowing all marijuana businesses and Massachusetts citizens to enjoy the fruits of the law that they voted for in 2016.

If you are seeking legal representation to start a cannabis business in Massachusetts, please call our law office to speak with Attorney David Rubin.