Legal Question in Real Estate Law in California

The risk is this - marijuana is still not legal under Federal Law. Federal Law provides that marijuana is a controlled substance, the distribution of which is a crime. Federal Law also has provisions by which even innocent owners of property where drug busts are made can be forced to forfeit their property. In other words, even assuming he is running a legal dispensary under California law (which most are not), the Federal Government could go after him criminally, and you could ultimately lose your building over his activities. I've advised at least five clients in the past six months not to rent to MM Dispensary operators. Is that overly-conservative? Maybe, but the penalty if you are wrong is tremendously severe. Also, review your loan documents with your present lender - I'd be willing to bet it is a condition of default under your loan if you intentionally allow illegal activities on your property. Again, while it may (arguably) be legal at the State level, it is clearly illegal at the Federal level.

One other point. Both the Obama administration, and the State have said they will not tamper with, or raid "legal" MM Dispensaries. The problem is that most of these dispensaries are not operating within the letter of the law - they have to be structured as nonprofits or cooperatives to be legal, and most are "for profit" entities. Again, if they operate outside the MM Dispensary law, then they are violating both State and Federal law, putting you at further risk. If it were my building, I would not rent to them. And, just so you don't think this is an "anti-pot" rant, I'm not decided either way on the issue of medical marijuana.

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Risks? Criminal prosecution and asset forfeiture to the feds for violation of the fed drug laws. That CA 'law' is politically correct nonsense that has no effect on federal prosecution.

You also have to consider the impact on your other tenants, current and future. A high proportion of them may not want to live in the same building. Why create unnecessary impediments to keeping your building fully rented?