Cannabis Real Estate Deals - Marijuana and Title Insurance

December 15, 2021

It has been a major challenge over the last several years to find a title company that will issue a marijuana property title insurance policy, close the transaction, and handle funds for cannabis business related sale. That problem is finally well on it's way being solved.

Why Does The Title Company Need To Know It Is A Cannabis Related Real Estate Closing?

Due to constantly changing and often conflicting laws around marijuana, there are many hurdles and very limited financial services available for cannabis related businesses. Real estate title insurance companies have frequently declined to provide title reports when they hear there is marijuana involved. They won't hold escrow for cannabis-related transactions, or issue title insurance policies for any real estate transaction involving cannabis related companies or properties.

Buyers have frequently tried to “hide” the fact that the sale or property is a cannabis related title transaction. There are a few issues with this.

For one, many title companies have included clauses in their policies to protect themselves. The language is something along the lines of “Due to conflict between state and federal laws, the Company is unable to close or insure any transaction involving Land that is associated with the cultivation, distribution, manufacture or sale of marijuana.” You do not want to be in a situation where you have an issue and try to make a claim, and then find out that the validity of your policy is in question.

Second, you do not want to get ready to schedule your closing, and then have the title company cancel the transaction on you because they found out the closing was related to a marijuana property. We receive frantic calls from customers in this situation a LOT. Most times, they have a closing deadline that they are required to meet (often a day or two away from when they call us), and now they are starting at square one with their title search, commitment, and closing. While this may not be the end of the world with a standard real estate transaction, cannabis related real estate deals are often very competitive, with many back-up offers in line behind the current buyer, and missing the closing deadline can be a very big deal.

DON'T RISK IT. Whether you are the buyer or the seller in a marijuana property related closing, make sure that you are using a title insurance company that is willing to write marijuana title insurance, and understands how to handle cannabis related closings.

Third Party Escrow Services For Marijuana Facility Closings

As more and more states are legalizing marijuana, some title companies have started to become more involved in cannabis-related real estate transactions. They will issue marijuana title insurance policies. However, the majority of title companies that are willing to issue cannabis title policies are still unable or unwilling to hold any escrow funds.

Token Title has created a service specifically for this situation. We work with many other title companies to escrow the closing funds while they issue the title policies and handle the actual closing. There are just a few extra documents to sign, and the process is almost identical to what you would experience working with only the title company.

Cannabis Related Title Insurance Exceptions

Underwriter’s who have agreed to insure cannabis real estate transactions will have exceptions on their title commitments for cannabis related title policies similar to the following:

Without limiting, modifying, abridging or negating any provision of the Exclusions From Coverage stated in this Policy or any other exception included in this Schedule B, and as a supplement and addition thereto, this Policy does not insure or provide title insurance coverage directly or indirectly for or against any and all consequences and effects, legal, equitable, practical or otherwise, civil or criminal, of any violation or alleged violation of any United States federal, state, county, municipal or local laws, statutes, ordinances or regulations or any actual or threatened action, court order or mandate for the enforcement thereof, relating to or governing the use, processing, manufacture, growth, possession, distribution, sale or any other activity on, about, or relating to or concerning the land, title thereto or any interest therein, of any Schedule I drug as defined by the United States Controlled Substances Act, including, without limitation, marijuana and/or cannabis, and any component, derivative or product thereof. This Policy insures title only; nothing contained in this Policy shall be construed to insure the subject premises for any particular use.

Additional Requirements For Marijuana Property Title Insurance

If the property involved in the transaction is going to be used as a marijuana facility, or is already being used as a marijuana facility, the insurance company is likely going to have additional requirements that will need to be met before they will issue a title insurance policy. Our cannabis title insurance team has streamlined this process as much as possible, and require answers to only a few additional questions, such as -

There are also more stringent regulations from the insurance underwriters to approve the issuance of said policies. Title insurance underwriters still want to protect themselves and will require sufficient evidence all state licensing laws are being followed prior to the title policy being issued.

Although there may be more requirements to obtain title insurance for cannabis related real estate transaction, it is still highly recommended that title policies be obtained to protect from title related claims.

Why Should I Use Token Title For My Marijuana Property Sale?

The executive team at Token Title has been involved in operating several ancillary cannabis businesses in the past ten years, and has witnessed first hand what a struggle it can be to find a title company willing to be involved in a marijuana related transaction. After fighting the challenges relating to obtaining cannabis title insurance policies, and finding a title companies willing to hold cannabis transaction escrow, we decided to open Token Title.

As Michigan’s first title insurance company to specialize in cannabis title insurance, we understand the complications that can be involved in marijuana property closings. Many transactions involve closing in escrow until permits and licenses are transferred, constantly changing deadlines and closing dates, multiple partners, and more.  We can hold marijuana transaction escrow funds, perform title searches for cannabis related property, and handle closings for any cannabis related sale. If you need only escrow for a cannabis related business asset or permit sale, we can do that as well.

The cannabis team at Token Title has been involved in many cannabis related transaction types including business, entity, and permit sales, partial ownership interest transfers, and more.

Which States Does Token Title Service?

Token Token works across the United States, both directly and through cannabis title insurance partners. If you have a marijuana related transaction that you would like us to help you with, send us an inquiry and we will get back to you right away.

Cannabis Real Estate Deals - Marijuana and Title Insurance