Cannabis Leases in NYC: 6 Risks Landlords Can’t Afford to Overlook

By R&E's Adam J. Lindenbaum

New York’s legal cannabis market is booming—but for landlords, it’s not all green. Leasing to cannabis dispensaries can be highly lucrative, yet it opens the door to legal liabilities, financing issues, and enforcement risks if not handled correctly. Whether you're eyeing a new revenue stream or already in talks with a cannabis tenant, here’s what every NYC landlord needs to know before signing the lease.

High Growth, Higher Risk: 

In 2021, New York legalized recreational cannabis under the Marijuana Regulation and Taxation Act (MRTA). Since then, demand for dispensary space has skyrocketed. However, many operators remain unlicensed, and landlords who lease to them are being caught in the legal crossfire.

This article breaks down:

• Key compliance steps landlords must take.
• The federal vs. state law clash affecting financing.
• Critical lease provisions to reduce liability.
• The enforcement crackdown that could cost landlords $10,000+ per offense.

What We’re Serving Up: 6 Legal & Financial Risks Landlords Must Manage

Here’s what NYC landlords need to know before getting into cannabis leases:

1. License or Liability: Verifying your tenant’s OCM license is step one—or face hefty penalties.
2. Federal Law Still Applies: Cannabis is legal in NY, but still illegal federally—creating issues with banks, insurers, and lenders.
3. Lease Language Matters: Without strong compliance and indemnification clauses, landlords shoulder major legal risks.
4. New Enforcement Laws: RPAPL 715-a, Cannabis Law 16-a, and Local Law 107 are targeting landlords, not just tenants.
5. Active Monitoring Required: Ignorance won’t protect you—landlords must take proactive steps if violations occur.
6. Fines, Title Issues & Eviction Proceedings: Illegal sales can result in property title issues, fines, and loss of tenants.

1. License or Liability: Verify Before You Lease

Before signing any deal, landlords must ensure their prospective cannabis tenant holds a valid license from the Office of Cannabis Management (OCM).

Why It Matters: Leasing to an unlicensed dispensary can expose landlords to fines, eviction proceedings, and even title encumbrances.

Action Steps:

• Request and verify the OCM license via the official OCM website.
• Check for any past legal violations tied to the operator.
• Include a licensing verification clause in the lease.

2. Federal Law Still Applies: The Banking Problem

Even though New York legalized cannabis, it remains a Schedule I substance federally. That means:

• National banks may refuse to finance or refinance buildings with cannabis tenants.
• Insurance premiums may spike or coverage may be denied.
• Federal scrutiny can delay or derail property transactions.

Why It Matters: Many landlords face financing disruptions or insurance gaps due to federal law non-compliance.

3. Lease Language Matters: Protect Yourself

To limit liability, landlords must draft airtight leases tailored to cannabis use.

Key Clauses to Include:

• Compliance Clause: Tenant must maintain valid licensing and follow all laws.
• Use Clause: Clearly define use for legal cannabis only.
• Indemnification Clause: Tenant covers any landlord liability from illegal activity.
• Early Termination Clause: Landlord can terminate if license is revoked or laws are broken.

Why It Matters: Without these clauses, landlords may bear full legal and financial responsibility.

4. New Enforcement Laws: Landlords in the Crosshairs

In 2023, NYC ramped up enforcement with landlord-focused laws:

• RPAPL 715-a: Landlords leasing to unlicensed cannabis sellers face eviction proceedings initiated by the state.
• Cannabis Law 16-a: Allows state enforcement actions that may cloud property title.
• Local Law 107: Imposes fines up to $10,000 for the first offense for renting to illegal dispensaries.

Why It Matters: Even unknowingly leasing to an unlicensed business can trigger legal action and financial penalties.

5. Active Monitoring Required: Ignorance Isn’t a Defense

Even with the right lease language, landlords must actively monitor tenant activity.

Best Practices:

• Conduct regular inspections.
• Investigate neighbor complaints.
• Issue violation notices or commence eviction if illegal activity is found.

Why It Matters: Landlords who fail to act risk fines, lawsuits from residential tenants, and city action.

6. Fines, Title Issues & Eviction Proceedings

If a tenant begins selling cannabis illegally:

• Landlords may face legal action, fines, and title issues.
• Notices of pendency can block sales or refinancing.
• Complaints from residential tenants may lead to lease disputes.
• City agencies can pursue joint eviction of both landlord and tenant.

Market Impact: Opportunity vs. Liability

The legal cannabis market represents a high-demand tenant base, but also a high-risk legal environment.

Opportunities:

• Access to premium lease rates from cannabis operators.
• Potential for increased property value in key retail corridors.

Challenges:

• Legal compliance burdens on landlords.
• Financing and insurance roadblocks.
• Need for ongoing tenant oversight.

By the Numbers

• $10,000 fines: Local Law 107 penalties for landlords leasing to unlicensed dispensaries.
• RPAPL 715-a: State can evict landlords leasing to illegal cannabis businesses.
• 1,500+ illegal dispensaries: Estimated number operating in NYC (Source: NYPD, 2024).
• 80+ licenses issued: As of early 2025, the OCM has approved just over 80 retail dispensary licenses (Source: OCM).

The Bottom Line for NYC Landlords

The cannabis leasing market is lucrative but fraught with risk. Landlords must take a proactive, informed approach—from tenant vetting to lease drafting to property monitoring—to avoid fines, lawsuits, and lost revenue.

Need help navigating cannabis leases? Contact Rosenberg & Estis today to ensure your lease aligns with the latest laws—and keeps you protected.

Founded in 1975, Rosenberg & Estis, P.C. is widely recognized as one of New York City’s pre-eminent real estate law firms. R&E provides full-service representation and advice in every aspect of real estate, from performing due diligence and evaluating financing, to handling joint ventures, acquisitions and leasing, construction and design team agreements, property tax exemptions and abatements, land use and zoning matters, Real Property Income & Expense (RPIE) filings, real estate tax certiorari, co-op and condo offering plan filings and board representation, distressed situations workouts, foreclosures and bankruptcies, trust and estate planning, as well as the litigations and negotiations which sometimes ensue when deal-making. R&E’s wealth of experience in New York real estate makes it the ideal thought partner for owners, developers, not-for-profit corporations, educational institutions, sponsors, equity investors and lenders in both real estate transactions and in all court venues.