August 21, 2023 05:48 AM
By: The Editors, Crain’s New York Business
This editorial appeared recently in Crain’s New York Business.
Illegal smoke shops are out of control in the city. It makes sense to call on landlords to help stymie their proliferation by requiring them to not knowingly lease their storefronts to such vendors.
The illegal market has quickly outpaced the legal market. According to senior reporter Aaron Elstein, there are about 8,000 unlicensed stores citywide, compared to just 21 licensed retail dispensaries across the state. Only five of those are located in the city, according to the state’s Office of Cannabis Management.
It’s understandable how the problem grew so quickly; landlords were eager to lease shuttered storefronts to paying tenants during the pandemic, and there wasn’t exactly a surplus of takers to choose from. Plus, no one anticipated that the rollout of cannabis licenses would be so glacially slow.
Landlords can now be fined up to $10,000 for knowingly renting store space to illegal cannabis sellers under a new law that went into effect Aug. 14. Under the two-strike system, if a raid finds illegal activity, the sheriff’s office will first notify a landlord that they are renting to an illegal business. If the store is found to still be operating in subsequent inspections, the landlord will receive a $5,000 fine. For each subsequent failed inspection, the landlord will get fined an additional $10,000.
This was a wise move by the city, as the problem has reached a point where the private sector must step in to make sure the underground industry does not get even more out of hand. Plus, officials have taken initial steps, like raids to seize the illegal goods themselves, before they decided to involve landlords.
It’s encouraging that the Real Estate Board of New York is also in favor of the legislation, with Steve Soutendijk, co-chair of REBNY’s New York retail committee and commercial broker with Cushman & Wakefield calling it a “commonsense law” which will “keep bad actors out of commercial spaces and help ensure that real estate brokers and property owners are working with properly licensed retail establishments,” at a recent press conference.
Landlords are generally not allowed to lease their spaces to illegal businesses, and smoke shops selling much more than bongs are no exception.
Not only are many smoke shops engaging in illicit activities, they are undercutting the legal cannabis business which was designed to infuse more money into the state’s economy while decriminalizing marijuana and aiding equity goals.
Ideally, the state will become quicker at getting licenses into the hands of cannabis retailers so that they can conduct business legally. Until then, the city must use all tools available to keep the smoke shop issue at bay.