Cannabis Property Owners/Landlords

Emergency generators, tenant vehicles, and powered equipment, such as forklifts, may be used at a facility. This activity can involve the storage of fuels, oils, hydraulic fluids, and other automotive fluids in containers or tanks. Leaks or spills of these chemicals from vehicles, equipment, containers, or tanks can contaminate soils and groundwater or collect in stormwater run-off, which could result in liability for the property owner.

Indoor cannabis cultivation requires elevated humidity and warm temperatures. In efforts to prevent odors from impacting adjacent properties, some facilities may also inhibit ventilation. These conditions can lead to mold growth within the building. Moisture intrusion can also occur due to storms, flooding, leaking water pipes, spillage of irrigation water, sprinklers, and HVAC systems, and lead to mold growth in buildings. Building mold growth can require cleanup or result in third-party bodily injury or property damage claims for the cannabis operation and the property owner.

Legionella is a bacterium that causes a form of potentially fatal pneumonia. Legionella can thrive in water-containing systems like misters, air conditioning, heating and cooling, plumbing, and water features. Poorly maintained systems and inadequate corrosion control or sanitation can result in Legionella growth and dispersal through mist and airborne droplets. Exposure can lead to illness and result in bodily injury claims. If a property owner is responsible for maintaining water-containing systems, they could be liable for claims related to legionella.

Illicit abandonment is the illegal dumping of pollutants on a property. It can become the property owner’s burden for cleanup and third-party bodily injury or property damage if law enforcement cannot locate the originator of the waste.

Wastewater from cannabis operations can carry pesticides, herbicides, fertilizers, and other pollutants to storm drains, drywells, or surface waters, potentially impacting drinking water supplies and surface water bodies. The property owner could be liable for environmental damage caused by its tenant.

Areas of a property may be exposed to weather elements. Stormwater may come in contact with a cannabis tenant’s fueling areas, storage tanks, cleaning chemicals, chemical containers, bulk product storage areas, or wastes and become impacted by petroleum hydrocarbons, particulates, or pollutants. If stormwater is not properly controlled, contained, or pre-treated before discharge into sanitary or storm drainage systems, it can pollute soil and groundwater or discharge pollutants directly into surface waters, impacting human health and aquatic systems. The property owner could be liable for environmental damage caused by its tenant.

Toxic or hazardous air emissions can be generated from cannabis processing or product manufacturing facilities. Sources of air emissions include solvent use, boilers, vehicles, and power equipment. Lack of controls or permit exceedances can result in third-party injury claims, to which a property owner may have to defend themselves.

Flowering cannabis plants have a pungent odor. If odors are not controlled, neighbors may complain or file third-party suits. Courts have affirmed that claims based on odors emanating from a facility meet the pollution exclusion in the commercial general liability policy. A substance need not be toxic or harmful to be considered a “pollutant.” A property owner could be drawn into a lawsuit by a third party and have to defend themselves.

Some products used by cannabis tenants may be flammable and result in a fire that spreads and releases other contained materials. A hostile fire at a facility could emit toxic fumes and smoke from stored materials. Firefighting solutions such as water or foam could create contaminated run-off that spreads to nearby storm drains or properties, resulting in environmental cleanup and tort liability for a property owner.

If a tenant's cannabis operation goes out of business or abandons chemicals or wastes at a property, the property owner could become responsible for the disposal of the chemicals and wastes. Improper waste handling or disposal could lead to environmental liability or legal consequences for violating regulatory requirements. Waste generators can become Potentially Responsible Parties for cleanups at non-owned disposal sites (NODs).

Properties housing indoor cannabis cultivation or other cannabis operations will likely be in commercial and industrial complexes. Contaminants from neighboring facilities could migrate to the property. If the neighboring facility is not properly insured or goes bankrupt, the cleanup cost for the contamination could fall on the subject property owner.