Marijuana other odors and HOAs - What can and should HOAs do?

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1 Marijuana other odors and HOAs - What can and should HOAs do? October 4, 2013 Orten Cavanagh & Holmes, LLC Community Association Attorneys Denver Phone Fax Toll Free Colorado Springs Phone Fax Toll Free info@ochhoalaw.com Web:

2 Personal use of marijuana is allowed under the Colorado Constitution - Amendment 64 55% - yes votes 44% - no Passed by voters in November of 2012 Effective January 1, 2014 See the full text of Amendment 63, attached Regulation of marijuana is also allowed under the Colorado Constitution Amendment 64 Authority of HOAs to regulate marijuana Authority comes from Amendment 64 Authority comes from Amendment 20 also attached Authority may come from the governing documents of a Common Interest Community check your documents Authority comes from case law o Committee for a Better Twin Rivers, et al. v. Twin Rivers Homeowners Association. Decided July 26, The New Jersey Supreme Court case denied owners claims that an association s actions violated rights protected by the New Jersey State Constitution. The Court determined the association s private property interests outweighed the owners rights to express themselves. The New Jersey Constitution applies to public property, not private property in a homeowners association. The two rights under the New Jersey Constitution that owners claim were violated were: the right to freedom of speech (signs were desired to be placed on common element property and articles of these owners were not published in the association s newsletter) the right to meet (assemble) Key to these allegations were the owners claim that the association was the equivalent of the state and that its actions should be measured against the much higher standard imposed on the state, as opposed to the lower standards imposed on private persons. Twin Rivers has 2,700 homes, with about 10,000 residents. The community includes single family housing and apartments. Common elements are governed by the Twin Rivers Homeowner Association. The Community allowed residents to post one or two signs (one in a window) and another in the garden area. The Community also allowed owners to use a clubhouse/meeting room provided that the owner paid a 1

3 $ fee and a deposit, as well as provide the Board with an insurance certificate. The Board reserved the right to deny a rental for any reason. Finally, the Community published a newsletter, titled Twin Rivers Today, in which the President s articles were more prominently placed than letters from owners (located on the tenth page of the newsletter, if published). History of the Alleged Violated Constitutional Rights in the Twin Rivers Community. Past New Jersey court rulings allowed freedom of speech and the freedom to meet (or assemble) on public property, not private property. Before this case, Courts had not extended these rights to private property, unless the public was invited. In the Twin Rivers case, the New Jersey Appellate Court took the approach that common elements are similar to public property (town squares, plazas, etc.). The New Jersey Appellate Court allowed the rights sought on common elements to owners and the public. Holding of the case. The Supreme Court reversed and noted that the owners were protected by other state statutes, including the business judgment rule and the state s common interest act. The Court also listed several alternative actions the owners could take, including going door-todoor to solicit owner support, creating an alternative community newsletter, rallying owners to amend the governing documents, or running for the Association s Board of Directors. The test used by the NJ Supreme Court. Utilizing a three-pronged test to balance individuals expressional rights versus private property interests, the Court determined the Community s private property interests outweighed the owners individual rights of expression, and therefore did not violate the owners State Constitutional rights. The test includes the following three prongs : The nature, purposes, and primary use of such private property - its "normal" use. o The Court found that the primary purpose of common elements was private use. Unlike state actors, the association was not responsible for any of the following: governing the community (in a local governmental sense vs. a private governmental context) running the local court system or provide schools, police, first-aid, or fire services. The extent and nature of the public's invitation to use that property. o The Court also noted that the public had not been invited to use common elements. Although roads were open to the public, they were intended for the owners and their guests. The purpose of the expressional activity undertaken upon such property in relation to both the private and public use of the property. 2

4 o The Court found that the owners activities and rights of expression were not unreasonably restricted. Owners were permitted some expressional rights, but the reciprocal/contractual nature of the Community was essential to the fundamental nature of living in the Community. The NJ ruling was not based on the U.S. Constitution. The ruling in the Twin Rivers case is based solely on New Jersey s constitution. What would happen before the US Supreme Court of the Colorado Supreme Court? While the ruling was not based on the U.S. Constitution or the Colorado Constitution, the clauses are similar. The U.S. Constitution provides as follows: o Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or the press, or the right of the people to assemble peacefully, and to petition the government for a redress of grievances. The Colorado Constitution provides as follows: o Freedom of speech and the press. No law shall be passed impairing the freedom of speech; every person shall be free to speak, write or publish whatever he will on any subject, being responsible for all abuse of that liberty; and in all suits and prosecutions for libel, the truth thereof may be given in evidence, and the jury, under the direction of the court, shall determine the law and the fact. What is the effect on Colorado owner associations? Because the ruling was based on New Jersey law, there is no direct correlation to Colorado. The decision is not binding on Colorado courts but may have some persuasive authority in Colorado. What are the rights of owners and residents in Colorado? Rights of owners and residents in Colorado common interest communities are addressed in Colorado State Statutes and in the governing documents for a community. The primary statute addressing owner rights is the Colorado Common Interest Ownership Act, including amendments made to that Act. Some owner rights and responsibilities are addressed in the Colorado Revised Nonprofit Corporation Act. In Colorado, it is anticipated that the same ruling would be made as in the New Jersey Twin Rivers case. It is anticipated that the State Supreme Court would rule that: 3

5 o owners claims that an association s actions violated rights protected by the New Jersey State Constitution would be denied the right to freedom of speech does not allow owners to put signs on common elements or publish articles in the Association s newsletter the right of assembly in a common element clubhouse can be subject to a reasonable fee ($165.00) a deposit and requested reservation could be denied State law requires some indoor areas to be smoke-free Colorado s Clean Indoor Air Act - House Bill o Effective March 27, 2006 o Relevant to HOAs, this act applies to: Common elements of condominiums and other multiple-unit residential buildings like attached townhomes or patio homes. This includes common restrooms, lobbies, hallways, clubhouses, mailrooms, pool locker rooms or other enclosed, shared areas, like entryways ( outside of the front or main doorway leading into the restroom, lobby, hallway and so on. Entryways include a specified radius outside the doorway. The specified radius is determined by the local authority (such as city governments, but most likely not an HOA board of directors). If the local authority has declined to specify a radius, the Act provides a specified radius of 15 feet. o Also applies to: public places and buildings, elevators, restrooms, theaters, museums, libraries, schools, educational institutions, retirement facilities and nursing homes, lobbies, reception areas, hallways, and any other common-use areas, places of employment, restaurants, bars, limited gaming facilities, billiard or pool halls, bowling alleys, grocery stores, any food service establishment, indoor sports arenas, gymnasiums, auditoriums, health care facilities, hospitals, health care clinics, doctor s offices, and child day-care facilities, certain hotel/motel rooms, jury waiting and deliberation rooms, courtrooms, and public meeting rooms, government-owned mass transportation. o Exemptions: Private homes, residences, and automobiles unless being used for child care or day care, limousines under private hire, certain hotel or motel rooms, retail tobacco businesses, an establishment that met the definition of a cigartobacco bar, as of December 31, 2005, the outdoor area of any business, excluding entryways as described above, the retail floor plan of casinos, fully enclosed and independently ventilated airport smoking concessions at Denver International Airport, employers with three or fewer employees who do not allow access to the public, a private, non-residential building on a farm or ranch that has an annual gross income of less than $500,000 4

6 Enforcement o Penalties: A violation of this law is a Class 2 Petty Offense. It is unlawful for a person who own, manages, operates, or otherwise controls the use of a premises subject to this law to violate any provisions of this law. It is unlawful for a person to smoke in an area where smoking is prohibited by this law. 1st violation within a calendar year - $200 fine 2nd violation within a calendar year - $300 fine 3rd violation within a calendar year - $500 fine Each day of a continuing violation shall be deemed a separate violation. Amendment 64 and the legislation passed under it allow the state and local governments to enforce the state constitution and the legislation passed under it. Sample covenants for proposed amendment of an Existing Declaration For a Community limited to residential uses, with secondary home office or business uses permitted: Covenant and Restriction on Marijuana Distribution and Growing. No Owner or occupant of a Property in the Community may utilize their Property for the purpose of growing or distributing marijuana, including medical marijuana. This covenant and restriction may further be clarified by the Board of Directors through Rules and Regulations. Owners will be responsible for any additional costs or damage resulting from a violation of this covenant and restriction, including but not limited to increased water and utility charges. For a mixed use Community, that allows both commercial and residential uses: Medical Marijuana or Similar Use Covenants and Restrictions. Medical Marijuana Uses Defined and Covenants Restricting those Uses. Use of a Unit within the Community for any medical marijuana service, facility or business of any kind or to any extent, including marijuana grow operations, dispensary or clinic to provide or providing or facilitating the provision of medical marijuana (collectively, the above are referred and defined as a Medical Marijuana Use ") is prohibited. No Unit within in the Community may be used for a Medical Marijuana Use. Supplemental Rule Making Authority of the Association. The Association may further broaden the above definition of "Medical Marijuana Use" by resolution adopted by the Board of Directors. 5

7 Medical Marijuana Uses are a Violation of the Covenants and Restrictions of this Declaration. Any Medical Marijuana Use is a violation of the covenants and restrictions included in this section of the Declaration. What about a covenant restricting use of marijuana? Case law in Colorado upholding smoking ban under nuisance theory Christensen v. Heritage Hills I Condominium Owners Association, 2006CV1256 (Jefferson County District Court), decided November 7, 2006: Court evaluated an association s restriction covenant banning smoking within the boundaries of the condominium. Court determined smoking to be a nuisance due to smoke seepage and impact on owners and tenants. Court determined ban to be reasonable and not arbitrary or capricious. Extensive efforts to ameliorate the impact of the smoke were undertaken, to no avail, prior to passage of the restrictive covenant. Ban did not violate public policy or any fundamental right of the owners. Case law addressing association enforcement of a smoking ban America v. Sunspray Condominium Association, et al., 2013ME19 (Maine Supreme Judicial Court), decided February 12, 2013: Owner sued his association and members of the Board of Directors claiming they had failed to effectively enforce the association s smoking ban. Owner also claimed the Board failed to investigate or take action in response to violations, or when they did, did so ineffectively. Court disagreed and applied the business judgment rule in finding that the Board did not refuse to enforce the ban, but rather enforced in a manner that the owner found insufficient. This was not enough to prove bad faith or establish liability ( Disagreement is not bad faith. ). Court also found that mere exposure to secondhand smoke outside of the owner s unit was not a legally cognizable injury; a more particularized injury would need to be asserted in the pleadings and proven at trial. Survey From Class Presented at the RMC-CAI Spring Showcase April 4, 2013 At a panel discussion held at CAI s Spring Showcase, presented by the Rocky Mountain Chapter, those in attendance were surveyed. The results of that survey follow: Survey Results Most HOAs with attached walls are interested in regulating marijuana cultivation and second 6

8 hand smoke. From the survey responses turned in after the panel discussion, 927 HOAs responded. From those 50% (465) are interested in regulating growth and second hand smoke. Figure 1: HOAs interested in Regulating Marijuana Cultivation and Second Hand Smoke On the question of growing cannabis and second-hand smoke in communities with attached walls, the survey asked respondents about the HOAs they worked with and how many were interested in considering or adopting new covenants or rules. Of the 927 HOAs with representatives who responded, many of those may be planned communities without attached walls. Responses to the survey were primarily provided by HOA managers. See more on demographics of respondents below. Not many comments were offered on this survey question, as most HOAs were clear, that if they have homes with attached walls, regulating marijuana growing operations (and related 24-7 odors) as well as second hand smoke is desired. FAQ s on Marijuana and HOAs Were Presented. FAQ s on HOAs and marijuana were provided by Orten Cavanagh & Holmes, attorneys for HOAs. Those FAQ s are re-published here. 7

9 Can HOAs ban smoking of marijuana and other uses of marijuana in the privacy of a home in an HOA? Can odors from growing marijuana plants be restricted by HOAs? Can HOAs restrict growing operations as a secondary home business? If personal use growth is allowed, should it be regulated? Can an adult smoke pot in the condo building, HOA lobby, at the HOA pool or clubhouse? Should HOAs seek to add specific covenants banning use of marijuana? Yes on smoking bans. This is most relevant for attached homes, where smoke may enter other homes. HOAs should proceed to balance interests and preserve value. Prohibitions on smoking of marijuana, or other products, by a new restrictive covenant will be best vs. a ban by rule. A rule on what happens inside a home will be more difficult to enforce. Rules restricting odors from a home will be easier to enforce, and are recommended for HOAs with attached homes. Yes. This is relevant for attached homes and is also recommended, with adequate venting and appropriate electrical use required. Odor from growing plants can be offensive and will transmit through walls. Yes. Residents (relevant to attached homes) can and should be restricted from commercial growing operations or growing operations for others, with only personal use growth allowed, if adequate ventilation and appropriate electrical use are addressed. Yes. Odor elimination devices should be required. Electrical use will be expensive. If common, that expense should be addressed. Compliance with state and local law should be required. No. Amendment 64, itself, restricts consumption that is conducted openly and publicly or in a manner that endangers others. Colorado s Indoor Clean Air Act also applies and restricts smoking in indoor lobbies, pools, clubhouses, etc. of HOAs. HOAs can restrict smoking of marijuana, as well as other smoking, in the indoor lobby, pool and clubhouse. This is a decision to be made by the Community (presumably a Community with attached homes). For example, consider whether banning personal consumption of fermented beverages (alcohol) would be appropriate in your Community. 8

10 Can residential HOAs and those that allow for mixed uses (commercial, retail and residential) ban marijuana shops and commercial cultivation? When will recreational marijuana be available at shops in Colorado? How much pot or plants can an adult possess in Colorado? What is the accepted level of THC in a blood stream that would label an adult to be impaired? Yes. These restrictions are expressly allowed under Amendment 64. January 1, Adults age 21 and older can possess up to an ounce of marijuana and grow up to 6 plants privately, 12 if they are registered as a medical marijuana user. That is difficult to say and has not yet been established. Marijuana metabolizes at different rates. Planned Communities and Odor from Growing Marijuana Surprisingly, odor from growing marijuana is an issue for most planned communities (based on survey responses). 163 responses were received, with 73% (119) indicating that their planned communities are interested in regulating marijuana cultivation. 20% (33 out of 163) indicated no interest. 7% were unsure or answered with NA (12 out of 163). 9

11 Figure 2: Interest in Regulating Cultivation The comments on this survey question indicate that regulation of marijuana cultivation in planned communities has not been discussed in many (most?) planned communities. Perhaps this issue will now be discussed in planned communities. The comments on this survey question follow: This has not been discussed Boards are not ready to address Nine of my communities have not thought of this Concerns about grow activity attracting other bad behaviors My HOAs are considering regulating marijuana due to open windows and the smell gets out No comments yet from my HOAs No issues right now Has not been addressed I believe shared wall communities will be an issue Complete Bans on Marijuana HOAs can ban marijuana use (similar to the way alcohol use and sales was restricted by covenants in the early 1900 s. Yet, is that practical or desirable? Our law firm recommends that covenants or rules banning or prohibiting an activity inside a home should not be pursued, unless the external affects of what happens inside a home is impacting other residents, in a material way. 10

12 Other recommendations on new covenants or rules are as follows: Reasonableness Requirement. The new covenant or rule must be reasonable Consistent with Other Laws. The new covenant or rule must be consistent with applicable federal, state and local statutes Consistent with the Governing Documents. The new covenant or rule must be consistent with the association's governing documents (i.e., cannot prohibit what the declaration or covenants permit and vice versa) Related to Purpose of the Association. The new covenant or rule must reasonably relate to the operation and purpose of the association Fair. The new covenant or rule must be fair. It should not create a separate class or group of owners, residents or occupants Clarity. The new covenant or rule should be clear and unambiguous. Uniformly Enforced. The new covenant or rule must be uniformly enforced this means there must be no selective enforcement or exceptions (i.e., a new covenant or rule must be enforced against all owners, not just owners who are delinquent in payment of assessments) From the 927 HOAs represented in the surveys, only 9% (100) responded to this question of an absolute prohibition. Figure 3: Responses on Absolute Prohibition From those responses 50% were in favor of a complete ban and 50% were against it or unsure. 11

13 The comments to this survey question also indicate this question has not been discussed. The comments were as follows: This has not been discussed No, due to medical use of marijuana None have done anything about this yet This may change, as laws and rules get defined Violation is being considered No one has asked for this yet but a few want no smoking At this time, none, but potential interest as more residents grow A complete ban may be considered in our community Ban is being considered on cultivation in 2 communities Need to discuss with boards What about positive tests of employees from second hand smoke or marijuana smoke? None of our 12 HOAs have expressed this concern yet Not known as of now This was informative for potential growers Have not discussed this much Don t know yet Unsure Not yet new issue it is too new discuss Not sure Not sure. Has not come up Residents have allegories and/or are elderly in our retirement community HOAs are looking for their options General Comments of HOAs on Regulating Odors, Amendment 64 and More Many survey respondents included general comments. These general comments provided are as follows: Can HOA charge for grow light electricity use (if not separately metered)? Hopefully the nuisance restriction addresses the issue, if not rules should be adopted Very good presentation Very helpful, a hot topic at recent board meetings This was a very helpful and informative class. Thank you! Smoke does not seem to cause enough odor to be an issue but cultivation does Boards seem to consider cultivation against the law and expect the HOA management to make it go away Great info! Thank you! This class was very informative and useful 12

14 I have a single family community that has already changed their facility rules to prohibit smoking specifically due to amendments 64 and 20 Need more info What about water and grow operations? Condos/Townhomes are saying for watering the plants increases or can increase indoor use. How can an HOA confirm water use issue to growing vs. plumbing leaks? What can an HOA do to suggest to property owners of single family homes to not smoke on patios Good luck with this one! We are not 100% sure of the impact of these new marijuana rights to use. A majority of our communities have not discussed this yet. I am interested in banning smoking of any kind in common and limited common areas Any change can be a precursor to conflict. I see this as one that will probably have cultural and generational aspects. Most Offensive Odors At the top of the list is smoke, from cigarettes, marijuana, cigars and pipes. Next most offensive odors are from food preparation/cooking. The list of offensive odors and their ranking is as follows: 1. Smoke from cigarettes, marijuana, cigars and pipes (71 responses) 2. Cooking odors (27 responses) 3. Dog feces (6 responses) 4. Tie: trash (4 responses) mold (4 responses) pets (4 responses) 5. Tie: BBQ smoke (2 responses) marijuana growing operations (2 responses) 6. Tie: dirty housekeeping (1 response) trash chutes (1 response) essential oils used by an in-house therapy business (1 response) body odors/excretions (1 response) Other Odors in HOAs With Attached Walls Of the HOA representatives responding to this question on other odors, 93% (332 out of 356) are considering regulating other odors. 6% (20 out of 332) are not interested in this, and less than 1% are unsure (3 out of 332). 13

15 Figure 4: Other Odor Regulation Of the HOAs that responded to the question on regulating marijuana, cultivation odors and second hand smoke, about 25% did not respond (121 out of 477), presumably because those HOAs already have covenants and/or rules in place that regulate other odors. There were many comments on this survey question, including the following: My HOAs have covenants and restrictions on odors but would do something new for marijuana If marijuana rules were adopted, it would likely include cigarettes also My HOAs are only interested in marijuana odors No issues with this right now All 4 of my attached wall HOAs have issues with odors coming from next door or hallways Already dealt with One HOA enacted ban on smoking in limited common areas/balconies and patios High rise already gets lots of odor complaints Survey Demographics 88 HOA representatives completed surveys on behalf of 927 HOAs. 52 of those responders were community managers, 15 professionals at management companies, 9 HOA board members or community volunteers, and 6 business partners. See the chart below: 14

16 Figure 5: HOA Representative Responder Demographics Do you have more questions on regulating odors including marijuana? If you do, we have answers, or can get them for you and your HOA. Contact Orten Cavanagh & Holmes today. Disclaimer This article has been prepared by the HOA law firm of Orten Cavanagh & Holmes LLC (the Firm ) for general informational and educational purposes only. This article does not and is not intended to, constitute legal advice for any specific matter. The information in this article is not privileged and does not create an attorney-client relationship with the Firm or any of the Firm's attorneys. This article is not an offer to represent any HOA or any other person. You should not act, or refrain from acting, based upon any information in this article. The hiring of an attorney is an important decision that should not be based solely on written information about qualifications or experiences. Anyone considering hiring an attorney should independently investigate the attorney s credentials and ability and not rely upon advertisements or selfproclaimed expertise. To contact an attorney at the HOA law firm of Orten Cavanagh & Holmes LLC visit us at our website and call or one of our attorneys, contact us at info@ochhoalaw.com or call us at (720) or (719) or (888)

17 Full Text of Amendment 64 Amending Article 18 of the Colorado Constitution Section 16. Personal use and regulation of marijuana (1) Purpose and findings. (a) In the interest of the efficient use of law enforcement resources, enhancing revenue for public purposes, and individual freedom, the people of the state of Colorado find and declare that the use of marijuana should be legal for persons twenty-one years of age or older and taxed in a manner similar to alcohol. (b) in the interest of the health and public safety of our citizenry, the people of the state of Colorado further find and declare that marijuana should be regulated in a manner similar to alcohol so that: (i) individuals will have to show proof of age before purchasing marijuana; (ii) selling, distributing, or transferring marijuana to minors and other individuals under the age of twenty-one shall remain illegal; (iii) driving under the influence of marijuana shall remain illegal; (iv) legitimate, taxpaying business people, and not criminal actors, will conduct sales of marijuana; and (v) marijuana sold in this state will be labeled and subject to additional regulations to ensure that consumers are informed and protected. (c) in the interest of enacting rational policies for the treatment of all variations of the cannabis plant, the people of Colorado further find and declare that industrial hemp should be regulated separately from strains of cannabis with higher delta-9 tetrahydrocannabinol (thc) concentrations. (d) the people of the state of Colorado further find and declare that it is necessary to ensure consistency and fairness in the application of this section throughout the state and that, therefore, the matters addressed by this section are, except as specified herein, matters of statewide concern. (2) definitions. As used in this section, unless the context otherwise requires, (a) Colorado medical marijuana code means article 43.3 of title 12, Colorado revised statutes. (b) consumer means a person twenty-one years of age or older who purchases marijuana or marijuana products for personal use by persons twenty-one years of age or older, but not for resale to others. (c) department means the department of revenue or its successor agency. (d) industrial hemp means the plant of the genus cannabis and any part of such plant, whether growing or not, with a delta-9 tetrahydrocannabinol concentration that does not exceed three-tenths percent on a dry weight basis. 16

18 (e) locality means a county, municipality, or city and county. (f) marijuana or marihuana means all parts of the plant of the genus cannabis whether growing or not, the seeds thereof, the resin extracted from any part of the plant, and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds, or its resin, including marihuana concentrate. marijuana or marihuana does not include industrial hemp, nor does it include fiber produced from the stalks, oil, or cake made from the seeds of the plant, sterilized seed of the plant which is incapable of germination, or the weight of any other ingredient combined with marijuana to prepare topical or oral administrations, food, drink, or other product. (g) marijuana accessories means any equipment, products, or materials of any kind which are used, intended for use, or designed for use in planting, propagating, cultivating, growing, harvesting, composting, manufacturing, compounding, converting, producing, processing, preparing, testing, analyzing, packaging, repackaging, storing, vaporizing, or containing marijuana, or for ingesting, inhaling, or otherwise introducing marijuana into the human body. (h) marijuana cultivation facility means an entity licensed to cultivate, prepare, and package marijuana and sell marijuana to retail marijuana stores, to marijuana product manufacturing facilities, and to other marijuana cultivation facilities, but not to consumers. (i) marijuana establishment means a marijuana cultivation facility, a marijuana testing facility, a marijuana product manufacturing facility, or a retail marijuana store. (j) marijuana product manufacturing facility means an entity licensed to purchase marijuana; manufacture, prepare, and package marijuana products; and sell marijuana and marijuana products to other marijuana product manufacturing facilities and to retail marijuana stores, but not to consumers. (k) marijuana products means concentrated marijuana products and marijuana products that are comprised of marijuana and other ingredients and are intended for use or consumption, such as, but not limited to, edible products, ointments, and tinctures. (l) marijuana testing facility means an entity licensed to analyze and certify the safety and potency of marijuana. (m) medical marijuana center means an entity licensed by a state agency to sell marijuana and marijuana products pursuant to section 14 of this article and the Colorado medical marijuana code. (n) retail marijuana store means an entity licensed to purchase marijuana from marijuana cultivation facilities and marijuana and marijuana products from marijuana product manufacturing facilities and to sell marijuana and marijuana products to consumers. (o) unreasonably impracticable means that the measures necessary to comply with the regulations require such a high investment of risk, money, time, or any other resource or asset that the operation of a marijuana establishment is not worthy of being carried out in practice by a reasonably prudent businessperson. 17

19 (3) personal use of marijuana. Notwithstanding any other provision of law, the following acts are not unlawful and shall not be an offense under Colorado law or the law of any locality within Colorado or be a basis for seizure or forfeiture of assets under Colorado law for persons twentyone years of age or older: (a) possessing, using, displaying, purchasing, or transporting marijuana accessories or one ounce or less of marijuana. (b) possessing, growing, processing, or transporting no more than six marijuana plants, with three or fewer being mature, flowering plants, and possession of the marijuana produced by the plants on the premises where the plants were grown, provided that the growing takes place in an enclosed, locked space, is not conducted openly or publicly, and is not made available for sale. (c) transfer of one ounce or less of marijuana without remuneration to a person who is twenty-one years of age or older. (d) consumption of marijuana, provided that nothing in this section shall permit consumption that is conducted openly and publicly or in a manner that endangers others. (e) assisting another person who is twenty-one years of age or older in any of the acts described in paragraphs (a) through (d) of this subsection. (4) lawful operation of marijuana-related facilities. Notwithstanding any other provision of law, the following acts are not unlawful and shall not be an offense under Colorado law or be a basis for seizure or forfeiture of assets under Colorado law for persons twenty-one years of age or older: (a) manufacture, possession, or purchase of marijuana accessories or the sale of marijuana accessories to a person who is twenty-one years of age or older. (b) possessing, displaying, or transporting marijuana or marijuana products; purchase of marijuana from a marijuana cultivation facility; purchase of marijuana or marijuana products from a marijuana product manufacturing facility; or sale of marijuana or marijuana products to consumers, if the person conducting the activities described in this paragraph has obtained a current, valid license to operate a retail marijuana store or is acting in his or her capacity as an owner, employee or agent of a licensed retail marijuana store. (c) cultivating, harvesting, processing, packaging, transporting, displaying, or possessing marijuana; delivery or transfer of marijuana to a marijuana testing facility; selling marijuana to a marijuana cultivation facility, a marijuana product manufacturing facility, or a retail marijuana store; or the purchase of marijuana from a marijuana cultivation facility, if the person conducting the activities described in this paragraph has obtained a current, valid license to operate a marijuana cultivation facility or is acting in his or her capacity as an owner, employee, or agent of a licensed marijuana cultivation facility. (d) packaging, processing, transporting, manufacturing, displaying, or possessing marijuana or marijuana products; delivery or transfer of marijuana or marijuana products to a 18

20 marijuana testing facility; selling marijuana or marijuana products to a retail marijuana store or a marijuana product manufacturing facility; the purchase of marijuana from a marijuana cultivation facility; or the purchase of marijuana or marijuana products from a marijuana product manufacturing facility, if the person conducting the activities described in this paragraph has obtained a current, valid license to operate a marijuana product manufacturing facility or is acting in his or her capacity as an owner, employee, or agent of a licensed marijuana product manufacturing facility. (e) possessing, cultivating, processing, repackaging, storing, transporting, displaying, transferring or delivering marijuana or marijuana products if the person has obtained a current, valid license to operate a marijuana testing facility or is acting in his or her capacity as an owner, employee, or agent of a licensed marijuana testing facility. (f) leasing or otherwise allowing the use of property owned, occupied or controlled by any person, corporation or other entity for any of the activities conducted lawfully in accordance with paragraphs (a) through (e) of this subsection. (5) regulation of marijuana. (a) not later than July 1, 2013, the department shall adopt regulations necessary for implementation of this section. Such regulations shall not prohibit the operation of marijuana establishments, either expressly or through regulations that make their operation unreasonably impracticable. Such regulations shall include: (i) procedures for the issuance, renewal, suspension, and revocation of a license to operate a marijuana establishment, with such procedures subject to all requirements of article 4 of title 24 of the Colorado administrative procedure act or any successor provision; (ii) a schedule of application, licensing and renewal fees, provided, application fees shall not exceed five thousand dollars, with this upper limit adjusted annually for inflation, unless the department determines a greater fee is necessary to carry out its responsibilities under this section, and provided further, an entity that is licensed under the Colorado medical marijuana code to cultivate or sell marijuana or to manufacture marijuana products at the time this section takes effect and that chooses to apply for a separate marijuana establishment license shall not be required to pay an application fee greater than five hundred dollars to apply for a license to operate a marijuana establishment in accordance with the provisions of this section; (iii) qualifications for licensure that are directly and demonstrably related to the operation of a marijuana establishment; (iv) security requirements for marijuana establishments; (v) requirements to prevent the sale or diversion of marijuana and marijuana products to persons under the age of twenty-one; (vi) labeling requirements for marijuana and marijuana products sold or distributed by a marijuana establishment; (vii) health and safety regulations and standards for the manufacture of marijuana 19

21 products and the cultivation of marijuana; (viii) restrictions on the advertising and display of marijuana and marijuana products; and (ix) civil penalties for the failure to comply with regulations made pursuant to this section. (b) in order to ensure the most secure, reliable, and accountable system for the production and distribution of marijuana and marijuana products in accordance with this subsection, in any competitive application process the department shall have as a primary consideration whether an applicant: (i) has prior experience producing or distributing marijuana or marijuana products pursuant to section 14 of this article and the Colorado medical marijuana code in the locality in which the applicant seeks to operate a marijuana establishment; and (ii) has, during the experience described in subparagraph (i), complied consistently with section 14 of this article, the provisions of the Colorado medical marijuana code and conforming regulations. (c) in order to ensure that individual privacy is protected, notwithstanding paragraph (a), the department shall not require a consumer to provide a retail marijuana store with personal information other than government-issued identification to determine the consumer s age, and a retail marijuana store shall not be required to acquire and record personal information about consumers other than information typically acquired in a financial transaction conducted at a retail liquor store. (d) the general assembly shall enact an excise tax to be levied upon marijuana sold or otherwise transferred by a marijuana cultivation facility to a marijuana product manufacturing facility or to a retail marijuana store at a rate not to exceed fifteen percent prior to January 1, 2017 and at a rate to be determined by the general assembly thereafter, and shall direct the department to establish procedures for the collection of all taxes levied. Provided, the first forty million dollars in revenue raised annually from any such excise tax shall be credited to the public school capital construction assistance fund created by article 43.7 of title 22, c.r.s., or any successor fund dedicated to a similar purpose. Provided further, no such excise tax shall be levied upon marijuana intended for sale at medical marijuana centers pursuant to section 14 of this article and the Colorado medical marijuana code. (e) not later than October 1, 2013, each locality shall enact an ordinance or regulation specifying the entity within the locality that is responsible for processing applications submitted for a license to operate a marijuana establishment within the boundaries of the locality and for the issuance of such licenses should the issuance by the locality become necessary because of a failure by the department to adopt regulations pursuant to paragraph (a) or because of a failure by the department to process and issue licenses as required by paragraph (g). (f) a locality may enact ordinances or regulations, not in conflict with this section or with regulations or legislation enacted pursuant to this section, governing the time, place, manner and 20

22 number of marijuana establishment operations; establishing procedures for the issuance, suspension, and revocation of a license issued by the locality in accordance with paragraph (h) or (i), such procedures to be subject to all requirements of article 4 of title 24 of the Colorado administrative procedure act or any successor provision; establishing a schedule of annual operating, licensing, and application fees for marijuana establishments, provided, the application fee shall only be due if an application is submitted to a locality in accordance with paragraph (i) and a licensing fee shall only be due if a license is issued by a locality in accordance with paragraph (h) or (i); and establishing civil penalties for violation of an ordinance or regulation governing the time, place, and manner of a marijuana establishment that may operate in such locality. A locality may prohibit the operation of marijuana cultivation facilities, marijuana product manufacturing facilities, marijuana testing facilities, or retail marijuana stores through the enactment of an ordinance or through an initiated or referred measure; provided, any initiated or referred measure to prohibit the operation of marijuana cultivation facilities, marijuana product manufacturing facilities, marijuana testing facilities, or retail marijuana stores must appear on a general election ballot during an even numbered year. (g) each application for an annual license to operate a marijuana establishment shall be submitted to the department. The department shall: (i) begin accepting and processing applications on October 1, 2013; (ii) immediately forward a copy of each application and half of the license application fee to the locality in which the applicant desires to operate the marijuana establishment; (iii) issue an annual license to the applicant between forty-five and ninety days after receipt of an application unless the department finds the applicant is not in compliance with regulations enacted pursuant to paragraph (a) or the department is notified by the relevant locality that the applicant is not in compliance with ordinances and regulations made pursuant to paragraph (f) and in effect at the time of application, provided, where a locality has enacted a numerical limit on the number of marijuana establishments and a greater number of applicants seek licenses, the department shall solicit and consider input from the locality as to the locality s preference or preferences for licensure; and (iv) upon denial of an application, notify the applicant in writing of the specific reason for its denial. (h) if the department does not issue a license to an applicant within ninety days of receipt of the application filed in accordance with paragraph (g) and does not notify the applicant of the specific reason for its denial, in writing and within such time period, or if the department has adopted regulations pursuant to paragraph (a) and has accepted applications pursuant to paragraph (g) but has not issued any licenses by January 1, 2014, the applicant may resubmit its application directly to the locality, pursuant to paragraph (e), and the locality may issue an annual license to the applicant. A locality issuing a license to an applicant shall do so within ninety days of receipt of the resubmitted application unless the locality finds and notifies the applicant that the applicant is not in compliance with ordinances and regulations made pursuant 21

23 to paragraph (f) in effect at the time the application is resubmitted and the locality shall notify the department if an annual license has been issued to the applicant. If an application is submitted to a locality under this paragraph, the department shall forward to the locality the application fee paid by the applicant to the department upon request by the locality. A license issued by a locality in accordance with this paragraph shall have the same force and effect as a license issued by the department in accordance with paragraph (g) and the holder of such license shall not be subject to regulation or enforcement by the department during the term of that license. A subsequent or renewed license may be issued under this paragraph on an annual basis only upon resubmission to the locality of a new application submitted to the department pursuant to paragraph (g). Nothing in this paragraph shall limit such relief as may be available to an aggrieved party under section , c.r.s., of the Colorado administrative procedure act or any successor provision. (i) if the department does not adopt regulations required by paragraph (a), an applicant may submit an application directly to a locality after October 1, 2013 and the locality may issue an annual license to the applicant. A locality issuing a license to an applicant shall do so within ninety days of receipt of the application unless it finds and notifies the applicant that the applicant is not in compliance with ordinances and regulations made pursuant to paragraph (f) in effect at the time of application and shall notify the department if an annual license has been issued to the applicant. A license issued by a locality in accordance with this paragraph shall have the same force and effect as a license issued by the department in accordance with paragraph (g) and the holder of such license shall not be subject to regulation or enforcement by the department during the term of that license. A subsequent or renewed license may be issued under this paragraph on an annual basis if the department has not adopted regulations required by paragraph (a) at least ninety days prior to the date upon which such subsequent or renewed license would be effective or if the department has adopted regulations pursuant to paragraph (a) but has not, at least ninety days after the adoption of such regulations, issued licenses pursuant to paragraph (g). (j) not later than July 1, 2014, the general assembly shall enact legislation governing the cultivation, processing and sale of industrial hemp. (6) employers, driving, minors and control of property. (a) nothing in this section is intended to require an employer to permit or accommodate the use, consumption, possession, transfer, display, transportation, sale or growing of marijuana in the workplace or to affect the ability of employers to have policies restricting the use of marijuana by employees. (b) nothing in this section is intended to allow driving under the influence of marijuana or driving while impaired by marijuana or to supersede statutory laws related to driving under the influence of marijuana or driving while impaired by marijuana, nor shall this section prevent the state from enacting and imposing penalties for driving under the influence of or while 22

24 impaired by marijuana. (c) nothing in this section is intended to permit the transfer of marijuana, with or without remuneration, to a person under the age of twenty-one or to allow a person under the age of twenty-one to purchase, possess, use, transport, grow, or consume marijuana. (d) nothing in this section shall prohibit a person, employer, school, hospital, detention facility, corporation or any other entity who occupies, owns or controls a property from prohibiting or otherwise regulating the possession, consumption, use, display, transfer, distribution, sale, transportation, or growing of marijuana on or in that property. (7) medical marijuana provisions unaffected. Nothing in this section shall be construed: (a) to limit any privileges or rights of a medical marijuana patient, primary caregiver, or licensed entity as provided in section 14 of this article and the Colorado medical marijuana code; (b) to permit a medical marijuana center to distribute marijuana to a person who is not a medical marijuana patient; (c) to permit a medical marijuana center to purchase marijuana or marijuana products in a manner or from a source not authorized under the Colorado medical marijuana code; (d) to permit any medical marijuana center licensed pursuant to section 14 of this article and the Colorado medical marijuana code to operate on the same premises as a retail marijuana store.; or (e) to discharge the department, the Colorado board of health, or the Colorado department of public health and environment from their statutory and constitutional duties to regulate medical marijuana pursuant to section 14 of this article and the Colorado medical marijuana code. (8) self-executing, severability, conflicting provisions. All provisions of this section are selfexecuting except as specified herein, are severable, and, except where otherwise indicated in the text, shall supersede conflicting state statutory, local charter, ordinance, or resolution, and other state and local provisions. (9) effective date. Unless otherwise provided by this section, all provisions of this section shall become effective upon official declaration of the vote hereon by proclamation of the governor, pursuant to section 1(4) of article v. 23