Title Tip: Weed Insure it if We Could

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Today’s Title Tip is a weedy issue if you’re considering a different kind of ‘joint’ ownership. It involves getting title insurance for a property being acquired to use for marijuana-related business enterprises.

While medical or recreational use of marijuana is not legal in Texas, there are plenty of folks who think it could be some day. Lots of forward-thinking investors might look at real estate for growing, processing, or selling marijuana if it becomes legal here. Or they could be looking to buy similar property in a state where it is legal.

There are 22 states that allow legalized medical use and nine more than allow both recreational and medical use. This growing industry is attracting real estate-minded buyers. But your plans could quickly go up in smoke.

Title insurance agencies and underwriters are turning away from the idea of issuing title insurance or closing these properties. And without title insurance, lenders are disinclined to finance and investors are hesitant to put money in a pot farm or cannabis dispensary. This restriction comprises all properties “including but not limited to the cultivation, storage, distribution, transport, manufacture, or sale of marijuana and/or products containing marijuana.”

Why be such a drag on the wacky tobacky business? Blame the Feds. Although some states allow it, marijuana remains illegal under the Federal Controlled Substances Act. And the federal government can seize property related to federally illegal enterprises.

Additionally, the Feds can seize money involved in illegal activity transactions. The current conflicts between state and federal law regarding marijuana make insuring property transactions related to this business precarious. I don’t know of a title company that wants to insure such an investment or risk having their escrow accounts seized.

And since we don’t like to leave any stone unturned when it comes to title work, this issue pertains to both past and future use. Not only will title agencies not insure a property to purchase as a marijuana -elated business, but they don’t want to insure the purchase of property has been used in the past in connection with the marijuana business, even if you don’t intend to continue using it for that purpose. The long arm of the law can go back too far for comfort.

The latest title insurance bulletin I’ve seen – marked confidential – does not demand that title agents become pot detectives. But we are to be alert to transactions with companies that bear marijuana-related names or for people and entities known for their marijuana or cannabis businesses. We have ways of sniffing those out. 

Marijuana laws are still changing in our country and the title insurance restrictions will change with them. Until then, take this ounce of advice before putting your cash in the grass business. It could end up a bust.

The opinions expressed are of the individual author for informational purposes only and not for the purpose of providing legal advice. Contact an attorney to obtain advice for any particular issue or problem.

Lydia Blair (formerly Lydia Player) was a successful Realtor for 10 years before jumping to the title side of the business in 2015. Prior to selling real estate, she bought, remodeled and sold homes (before house flipping was an expression). She’s been through the real estate closing process countless times as either a buyer, a seller, a Realtor, and an Escrow Officer. As an Escrow Officer for Carlisle Title, she likes solving problems and cutting through red tape. The most fun part of her job is handing people keys or a check.

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