A growing concern: LA’s illegal pot shops outnumber those with city licenses

Officials are struggling to regulate illegal shops and the landlords who rent to them
May 29, 2019 01:00PM

Cat Packer and a medical dispensary in Venice Beach

Cat Packer and a medical dispensary

Los Angeles law enforcement officials are cracking down on unlicensed pot shops, but it’s an uphill battle.

There are at least 220 illegal retail dispensaries operating within city limits, mostly around Downtown L.A. and South L.A., according to an L.A. Times report. That’s more than the 182 pot shops that hold licenses.

Legal operators say they struggle to compete with illegal operators, who don’t pay taxes and avoid the costs of following city regulations. The high costs of operating a legal cannabis business has created abundant opportunities for real estate debt and equity players in the space.

Cat Packer, the executive director of the L.A. Department of Cannabis Regulation said in January that the city should punish landlords as harshly as operators for renting to them.

Since 2017, the city has been allowed to fine landlords up to $20,000 per day for letting illegal businesses operate at their properties, but has rarely issued those fines. Industry advocates say the abundance of unlicensed shops is a phenomenon unique to L.A. because the city historically hasn’t prosecuted most illegal operations.

In April, the city’s attorney’s office highlighted its decision to charge a South L.A. landlord who rented to an illegal operator, as well as the brokers who set up the lease for the space.

L.A. is one of the 360 or so municipalities that has legalized cannabis sales in California. Some state lawmakers want to force cities that have banned sales into allowing dispensaries. [LAT]Dennis Lynch