Article by David S. Reiter and Brian Chung, Lexology
Lessons Learned From a Prosecution Under the CCA
With the legalization of recreational cannabis, there has been a flurry of activity relating to the enforcement of non-licensed or illegal cannabis storefronts or “dispensaries.” The enforcement is being effected under the authority of the Cannabis Control Act, 2017, S.O. 2017, c. 26, Sched. 1 (CCA), with municipalities as the enforcer(s) using delegated authority from the province of Ontario.
This article discusses the CCA and the broad enforcement powers it contains. It also discusses a range of other potential impacts that commercial landlords can face under the new regime, and it offers insight into some steps that landlords can take to protect themselves.
It is illegal to sell cannabis in Ontario without a licence. The CCA has equipped authorities with enforcement tools to address that illegality. These tools include the ability to charge not only those who sell cannabis without a licence, but also those that own and or operate properties whose tenants are selling cannabis without a licence. In addition, where charges have been laid, authorities can also shut down the property, and prohibit access to it, until there has been a final disposition of any charges. It goes without saying that the impact of such an order can be devastating to the owner or operator of a property.
Our firm recently succeeded in representing a property owner whose dispensary tenant and its employees had been charged with selling cannabis without a licence. The landlord was also charged with permitting the premises to be used for that activity, and closure orders were issued to shutter the property. To our knowledge, this is the first case that has proceeded through the courts to completion with respect to a charge against a landlord under the CCA.
Ultimately, we were successful in getting the charges withdrawn against the landlord. However, there were a number of complicating factors that presented significant challenges, and a lot was learned along the way. We have written this article to alert readers to some of those challenges, and to provide insight into how landlords might begin to address them, and even avoid them.
CHARGES & PENALTIES UNDER THE CCA
As we indicated above, the CCA equips authorities to lay charges against those who sell cannabis without a licence. Charges can also be laid against corporations and individuals that own and or operate properties whose tenants are selling cannabis without a licence. With respect to those charges, the actual offence serves to prohibit landlords from knowingly allowing premises to be used in relation to the sale of cannabis.
The consequences of violating either of these prohibitions are significant.
First, individuals, including directors or officers of a corporation, face fines of up to $250,000 on a first conviction, and/or to imprisonment for a term of not more than two years. Subsequent convictions expose individuals to fines of up to $100,000 for each day on which the offence occurs or continues, and/or imprisonment for a term of not more than two years.
Corporations face different penalties. On a first conviction, a corporation will face a minimum fine of $25,000, but not more than $1,000,000. On subsequent convictions, corporations face fines of at least $10,000, but not more than $500,000 for each day or part of a day on which the offence occurs or continues. There is no maximum cumulative fine.
All fines will be automatically subject to an additional 25% Victim Fine Surcharge. On a $25,000 minimum fine, the surcharge takes the actual fine amount that has to be paid to $31,250.
Finally, where a conviction is issued, the court can also order that the subject premises be closed to any use for a period not exceeding two years.