The Los Angeles Department of Cannabis Regulation (“DCR”) is set to begin accepting applications for new cannabis businesses for the first time since the city’s initial registration in 2007. Phase 2 of commercial cannabis licensing is set to begin on August 1, 2018 and continue through August 30, 2018. Just as we did with audits from the BCC, we wanted to take some time to explore a few common questions that we’ve been getting regarding Phase 2. *Note: We will of course be updating this as more information becomes available from DCR.

What is Phase 2?

Commercial cannabis licensing in Los Angeles has three phases. Phase 1, which is now closed, was for the existing Proposition D-compliant retailers. Phase 2, which opens on August 1, is for non-retailers who were in operation prior to January 1, 2016 and qualify under the Social Equity Program. Phase 3 is for applicants who qualify under the Social Equity Program and for all general applicants for all license types.

What are the qualifications for applicants under Phase 2?

The main criteria set forth in Los Angeles Municipal Code (“LAMC”) Section 104.08 are as follows:

1. The applicant is non-retail business (cultivator, manufacturer ,or distributor);
2. The applicant was engaged in the non-retail activity before January 1, 2016;
3. The applicant was a supplier for a Proposition D compliant retailer;
4. The applicant qualifies under the Social Equity Program;
5. The proposed location complies with zoning standards for commercial cannabis activity,
   including the location be outside a 600-foot radius of a school;
6. All municipal taxes are paid and up to date; and
7. The applicant has contracted with a testing laboratory to test all and cannabis goods produced
   at the location.

There are additional minor criteria, including that there are no fire and life safety violations on the property and the applicant attests it will comply with all DCR regulations. Applicants should review LAMC Section 104.08 to ensure they meet the requirements for Phase 2.¹

What will the Phase 2 application process look like?

Until the Phase 2 application is released, many of the details will remain up in the air and we can only turn to the ordinance for guidance. It does seem like the DCR will release an online application to determine an applicant’s qualification for Phase 2 and Social Equity Program. If an applicant qualifies, the DCR will issue a temporary approval, followed by an application for an annual license sometime in the future. However, like all things cannabis, the situation is fluid and subject to change.

How long will Phase 2 be open?

The initial application period for Phase 2 will be open for 30 days according to the ordinance and the Los Angeles Department of Cannabis Regulation website. Applications are submitted online from August 1, 2018 through August 30, 2018. If Phase 2 is anything like Phase 1, the website may crash and go down unexpectedly. That application will likely require filling out mostly administrative information and submitting evidence via PDF files that the applicant meets the qualifications for Phase 2.

Who qualifies under the Social Equity Program?

The Social Equity Program has 3 tiers that are listed below:

• Tier 1 – 51% equity and either i) marijuana conviction and low income, or ii) low income and 5
  years residency in an impacted neighborhood;
• Tier 2 – 33% equity and either i) low income and 5 years residency in an impacted neighborhood;
  or ii) 10 years in an impacted neighborhood; and
• Tier 3 – Social Equity Agreement with the City to provide capital, leased space, business,
  licensing, and compliance assistance to persons who meet the criteria to be a Tier 1 or a Tier 2
  Social Equity applicant.

A Phase 2 applicant must qualify under one of the tiers listed above.

When will the annual Los Angeles Cannabis Application associated with Phase 2 be released?

If Phase 1 is any indication for timing on Phase 2 we might have to wait a little bit. The initial application for Phase 1 was released on January 1 and the second portion has still not been released or given a release date. We will have to stay tuned to the information coming out of the DCR.

Is the City offering any workshops?

On Tuesday, July 24, 2018, the DCR will present a general overview of the City’s Social Equity Program, describe the applicant eligibility requirements for Phase 2, and provide a preview of the Phase 2 application process. A 30-minute question and answer session will immediately follow the formal presentation. This workshop will be held at Los Angeles Mission College located at 13356 Eldridge Ave, Sylmar, CA 91342 between 6 P.M. and 8 P.M. on Tuesday, July 24, 2018.

Is MMLG offering any workshops on Phase 2’s Los Angeles Cannabis Applications?

Yes. Stay tuned. Have questions or issues you want addressed? Let us know: Facebook, Instagram, Email, Phone: 310.449.4528

¹ An Applicant who applies for a License for Non-Retailer Commercial Cannabis Activity and who meets the below criteria as determined by DCR shall receive a Temporary Approval, which shall provide the Applicant with limited immunity, as described in Subsection (c), to operate pending the review of its License application: 1) the Applicant was engaged prior to January 1, 2016, in the same Non-Retailer Commercial Cannabis Activity that it now seeks a License for; 2) the Applicant provides evidence and attests under penalty of perjury that it was a supplier to an EMMD prior to January 1, 2017; 3) the Business Premises meets all of the land use and sensitive use requirements of Article 5 of Chapter X of this Code; 4) the Applicant passes a pre-license inspection; 5) there are no fire or life safety violations on the Business Premises; 6) the Applicant paid all outstanding City business tax obligations; 7) the Applicant indemnifies the City from any potential liability on a form approved by DCR; 8) the Applicant provides a written attestation that it will enter into an agreement with a testing laboratory for testing of all Cannabis and Cannabis products and attests to testing all of its Cannabis and Cannabis products in accordance with state standards; 9) the Applicant is not engaged in Retailer Commercial Cannabis Activity at the Business Premises; 10) the Applicant attests that it will cease all operations if denied a State license or City License; 11) the Applicant qualifies under the Social Equity Program; and 12) the Applicant attests that it will comply with all operating requirements imposed by DCR and that DCR may immediately suspend or revoke the Temporary Approval if the Applicant fails to abide by any City operating requirement. For purposes of this subsection only, an Applicant who has entered into a payment plan with the City's Office of Finance pursuant to LAMC Section 21.18 to pay all outstanding City-owed business taxes is deemed current on all City-owed business taxes and is deemed to have submitted payment for all City-owed business taxes.