Legalized Recreational Use of Marijuana May Soon Become a Reality for New York State – But Not Its Title Underwriters

I’ll admit it – I may be among New York State’s nerdiest lawyers. You see, despite my advanced age, I’ve never used marijuana! Hey, it’s illegal, right? And, if Gov. Cuomo is correct, it’s a gateway drug, too, and I sure don’t want to become a drug addict!

Actually though, now, the Governor may be reversing course a little, and it seems New York State may, sometime during this legislative session, legalize recreational marijuana use. Just Google “NY Marijuana” and you’ll have access to a plethora of information, explaining the political pressures and rational arguments behind the shift.

Personally, I can’t wait! I’m not an advocate one way or the other; I just want to know what all the buzz is about! OK, to be completely honest, I guess I’m uncertain about whether, if NYS legalizes it, I will try it. You see, according to the title underwriters we work with here at Vanguard, we have to pay attention, not just to New York law, but Federal law, too. No surprise there, if truth be known. On the other hand, if a tree falls . . . .

I had occasion recently to underwrite a multi-million-dollar title in central New York, but a major tenant in the property was a proposed Cannabis-related enterprise. I thought: “OK, the lease says all New York and federal laws, rules, and regulations will be complied with,” so what’s the harm? After learning that a sister company of one of our Underwriters declined to insure, I decided to check with our Underwriters. Wow, was I wrong!

Without going into too much detail, it turns out that senior underwriting counsel for our underwriters are very concerned – not so much about the potential direct violation of Federal law – but about “aiding and abetting” a federal criminal activity, by assisting a Lender who loans money to the landlord who supports engagement in a federal criminal activity. So, they all said NO! [emphasis NOT added]. I joked with the client that “Maybe, Magic Dragon National Title Insurance Company would insure”. (The client didn’t laugh, either).

The take-away, for now, is that even if and when New York State legalizes recreational marijuana use, title companies likely will not insure real property associated with promoting or facilitating such use, at least unless and until the federal government’s position changes, or until we have legal precedent fully supporting the change.

The other take-away is, even old dogs can learn!

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