Applying for or Buying an OLCC Recreational Marijuana License when Licensing is in Flux

If you have been following Oregon Liquor and Cannabis Commission (OLCC) recreational marijuana licensing, you know that licensing is in flux right now. Transactions involving the sale and purchase of businesses have been largely unaffected by the turmoil in licensing. While some purchase prices have been reduced, most transactions have moved forward without issue. License transactions, on the other hand, have become much less stable as buyers weigh whether to apply for a new license and risk having their applications inactivated, or enter into a purchase agreement to buy a license and risk paying a high price for something they could have gotten for just a license fee.

When important business decisions depend on unknowns and uncertainties, a wait-and-see approach is typically wise. It is also often impractical. If you need to get licensed soon, perhaps because you are planning to grow an outdoor crop this year, because you are paying rent on the perfect retail location, or simply because your business ambitions cannot wait, the wait-and-see approach might be letting the tail wag the dog. So, if you need to start the process of obtaining an (OLCC) recreational marijuana license now, how should you do it?

Right now, with licensing open on all license types, we are advising clients who want or need a license in the near future to submit a new application and simultaneously seek a license to purchase. On the licensing side, this dual approach is fairly painless; clients can simply duplicate their new application for the license purchase and the only additional cost is the $250 application fee for the second application.

On the transaction side, it is a bit more complicated, but still manageable. For clients who are using license purchases as backups, we are negotiating manageable nonrefundable deposits so that, if the client’s new application is processed, they can terminate the license purchase agreement, sacrificing their deposit but not paying the entire purchase price. Careful drafting minimizes legal fees and protects the client in the event they terminate the transaction. However, even with the best drafting possible, this strategy is still far from ideal as the client incurs legal fees, sacrifices a deposit, and invests time and energy into the transaction. Also, while some sellers are happy with a termination that allows them to keep a deposit and sell their license to a new buyer, in most cases this tactic is hard on the seller, who is expecting a timely closing and payment of the full purchase price.

Competent counsel experienced in this industry is crucial when navigating business and license transactions, especially amidst uncertainty. Poorly crafted deals can cost parties unnecessarily and can open them up to disputes and possible litigation.