Police Line.jpgIn October of 2009, the United States Department of Justice issued a memorandum (the “Ogden Memo”) stating that scarce federal resources should not be focused “on individuals whose actions are in clear and unambiguous compliance with existing state laws providing for the medical use of marijuana.” The Ogden Memo also emphasized the federal commitment to enforcing federal drug laws and that marijuana remained illegal, but it was widely perceived as marking a significant decrease in the risk of federal criminal prosecution of state-sanctioned medical marijuana activities. This perception was arguably the catalyst that sparked the rapid development of Colorado’s commercial medical marijuana industry, which started toward the end of 2009.

In reaction to the development of the industry, the State of Colorado has spent the last eighteen months developing and implementing the most comprehensive medical marijuana regulatory system in the country. Operating under this regime is quite onerous for the regulated businesses, but the extensive amount of oversight involved, as well as the resulting elimination of more “amateur” businesses, has also tended to increase the perceived legitimacy of the industry. In turn, the development and institutionalization of medical marijuana as a legitimate, regulated industry has had a significant impact on real estate in Colorado, perhaps most notably by creating new demand for warehouse and retail space.

However, largely in reaction to the increase in the scope of the commercial cultivation, sale and distribution of medical marijuana, the DOJ issued a new memorandum in June of this year. It stated that the Ogden Memo was intended to refer to sick individuals and the individuals who care for them, and not to commercial medical marijuana operations. As such, the new memorandum stated that persons “in the business of cultivating, selling or distributing marijuana, and those who knowingly facilitate such activities,” are in violation of federal criminal drug laws. Those who “knowingly facilitate such activities” could include, for example, landlords that lease property to persons engaged in these illegal activities. The new memorandum also made clear that these activities should not be considered “shielded” by the Ogden Memo, and are properly the subject of federal prosecution.

Thus far, the federal government’s hands-off approach in Colorado has not changed. However, the new policy makes explicit that the participants in Colorado’s medical marijuana industry face a very real risk of federal criminal prosecution. This includes those who “knowingly facilitate” the business of cultivating, selling or distributing marijuana. Especially given the recent federal pronouncement, it is important for property owners to understand and recognize the risks associated with their participation in the medical marijuana industry. Though federal authorities have not clamped down on Colorado’s medical marijuana industry to date, landlords of medical marijuana businesses could face federal criminal liability (for example, through “aiding and abetting” federal criminal statutes), and their properties could be subject to forfeiture.

Photo by Tony Webster (flickr)

Denver, and specifically The Spire, made the New York Times.  The article discusses parking requirements and the impact of parking requirements on development. As Denver’s light rail expansion and associated transit oriented developments continue, RTD, local governments and developers will no doubt continue to grapple with how best to address parking. Too little parking at a development, when other areas have plenty, can be a real deterrent for businesses to locate there because customers won’t want to deal with the hassle of finding a parking space.  Too much parking can be a financial drain on a project, both at the time of initial development in terms of development costs, and after completion in terms of operational costs.  In a city that has historically been car-dependent, trying to figure out the right parking equation for TODs may ultimately be a case of trial and error. As earlier reported, RTD has adopted a flexible policy with respect to parking at TODs.  We look forward to seeing this flexible policy put into practice.

By: James T. Johnson and Kimberly A. Martin

In May of this year, Governor Hickenlooper signed into law House Bill 11-1146, which amends the statutory definition of “agricultural land” for property tax purposes.  Historically, land underlying a residence located on a parcel of property that otherwise was classified as “agricultural land” was also classified as agricultural land for property tax purposes.  This classification resulted in the residence being qualified for more favorable “agricultural” property tax treatment as compared to the residential classification.  

Under House Bill 11-1146, now excluded from the classification of “agricultural land” is up to two acres of land upon which a “residential improvement” is located if the residential improvement is not “integral to an agricultural operation” conducted on the land.  Any such excluded land will be classified as “residential land” for property tax purposes, but the remainder of the property would retain its agricultural classification.  If the residence is integral to the operation of a farm or ranch, the classification does not change.  Further, vacant land or any other land upon which a residence is not located, whether or not subdivided, is not affected by this legislation. 

House Bill 11-1146 will apply to the 2012 property tax year and all subsequent tax years.  For a more complete discussion of this new law, see our Client Alert on the topic.

In May, Governor Hickenlooper signed into law Senate Bill 11-234 – Concerning Residential Real Property Transfer Fee Covenants.  The bill is targeted at prohibiting fees payable upon the transfer of residential real property to individuals and entities where such fees do not touch and concern the real property.  The common law likely already prohibited such fees.  Nevertheless, the bill became effective immediately, the General Assembly having determined that such was necessary “for the immediate preservation of the public peace, health and safety.”  Apparently, the General Assembly identified a rising popularity trend for such fees, and it wanted to thwart their growth in Colorado.

The bill does essentially four things.  First, it prospectively prohibits fees payable upon the conveyance of residential real property, except for transfer fees that touch and concern residential real property, including payments to lenders, brokers, lessors, governmental and quasi-governmental entities, homeowner’s associations, and certain non-profit entities.  Second, it narrows the circumstances under which prohibited fees established prior to the effective date of the bill are payable.  Third, it provides penalties for recording documents requiring the payment of such fees.  And fourth, under certain circumstances, it provides a quick mechanism for removing covenants requiring the payment of such fees. 

For a more complete discussion about the bill, please see my Client Alert on the topic.  Any individuals or entities that have either considered or implemented a transfer fee should be aware of the enforceability issues raised by this bill. 

Light Rail with DevelopmentRecent stories in the business section of the Denver Post have featured real estate development around light rail stations.  First, there was the story of the Denver Federal Center, and a few days later an article on the Denver Design District.  This appears to be a continuation of the theme that transportation will drive future development in Denver.  As reported in an earlier post, Regional Transportation District is taking a more flexible approach with transit oriented developments.  All of this seems like great news.  However, as reported in today’s Denver Post, FasTracks is at least $2 billion short in funding, and RTD’s board voted 13-1 against placing a sales tax increase on the November ballot.  It is not surprising that a sales tax increase in this climate is not feasible politically.   Given that many of the newly planned developments in the Denver area seem to be linked to transit, this shortfall in FasTracks funding may slow down some of it.    However, given the general state of the economy, not all of it may come to fruition that quickly anyway.

Photo by vxla (Flicker)