Real Estate Law Blog

In December 2017, Royal Assent was given to Bill 26: An Act to Control and Regulate Cannabis (“Bill 26”).  Bill 26 amends the Gaming and Liquor Act (Alberta) and regulates both the retail sale and commercial distribution of cannabis in Alberta. We are aware that there is a great deal of excitement in this area, with many rushing to be well positioned when legalization presumably occurs as of October 17, 2018; however, there are some key licensing issues that owners and operators of retail cannabis stores and commercial suppliers should be aware of in order to avoid any related issues in the operation of their businesses.

1. Cannabis Licenses: A cannabis license issued by the Alberta Gaming and Liquor Commission (“AGLC”) authorizes the purchase, sale, transport, possession or use of cannabis.  Each such license is to be issued for a term of one or two years, and most importantly, cannot be sold or transferred.  The restriction on the transfer of licenses also applies to a change of control of a licensee, including the sale of a business.  If a licensee business is sold, or a license is in some other way transferred, the license is automatically cancelled.
2. Development Permits: In order for the AGLC to grant a license, the applicant must first have a development permit for their proposed cannabis retail location.  The issuance of a development permit indicates to the AGLC that all buffer zone requirements contained in Bill 26 are met, along with any municipal zoning requirements.
3. Supplier-Retailer Relationship: You may have seen a number of exclusive arrangements announced in the last months for the supply of cannabis from a supplier to a particular potential licensee. Bill 26 provides that all contractual agreements for the supply of cannabis between suppliers and a licensee retailer are void.  Bill 26 further requires that all suppliers must sell their cannabis to the AGLC, and from there, the AGLC will sell directly to retailers.  Similarly, all payments from retailers must be made to the AGLC, who then forwards payment to the applicable supplier.
4. Separate Business Rule: Bill 26 requires that a licensee’s sole business be limited to the sale of cannabis.  No licensee is permitted to be engaged in any other type of business, and in particular, no cannabis is to be sold at a location where any alcohol, tobacco, or pharmaceuticals are sold. Bill 26 sets out a number of factors to be taken into account in determining what amounts to a separate business, which include, among other things: (i) whether the licensee’s activities are carried out by a separate corporation; (ii) whether the employees of the licensee are employed at another business operated by the operator of the licensee; and (iii) whether the licensee contains separate financial records. Despite the factors laid out in Bill 26, we anticipate that there will be some degree of uncertainty around the separate business rule for the near future.

The licensing issues summarized above are but a few of the many that will be faced by both suppliers and retailers of cannabis as legalization moves forward.  All cannabis related businesses should work carefully to apprise themselves of all of the legal related issues surrounding cannabis and to implement strategic solutions so as to avoid otherwise unforeseen issues that could prevent operation.  Lawson Lundell is actively assisting a number of clients in managing the complexities involved in the retail sale of cannabis in Alberta, and are well equipped to assist clients in navigating this potentially profitable, but still emerging area.

With thanks to articling student Carson Falk for his assistance drafting this post.