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Complying with Licensing Regulations

Legalization may be here, but would-be retailers have found that they have to tiptoe across a minefield of regulations in order to achieve their desired outcome of being granted a licence to sell recreational cannabis.

Dennis P. Coates, Q.C., Senior Associate with MJB Lawyers, provides answers to some of the big questions that retailers in BC and Alberta pose:

Q: What are the key issues to apply for a licence in BC?

The fee to apply is $7,500.00 and non-refundable. A common question relates to the size and configuration of a retail location. The range in size seems to be 500 sq. ft. to 3,000 sq. ft. The first announced government store in Kamloops, BC will be 3,000 sq. ft.

The legal requirement with respect to minors is to not allow them in the store. The store will need to be designed so there is a checkpoint near the entry, perhaps close to the till or exit. Contrary to liquor store operations, there is no self-serve, no visibility allowed of product or the interior from outside the store, mandatory security and camera surveillance. and locked display and storage areas.

Q: How long will the BC application portal be open?

Although this is subject to change in the future, at this point, the Liquor and Cannabis Regulation Branch intends to keep the portal to accept applications for cannabis retail store licences open indefinitely.

Q: Who can you hire and what training is required?

Employees will need to be registered, which will involve security screening including an RCMP Criminal Record Check. In Alberta, all employees must complete the “Sell Safe” course. Training for sales personnel will evolve and many companies are offering budtender training. Currently retailers have great difficulty retaining competent staff and managers. The task with a cannabis store will be far more difficult.

Third party use agreements will not be allowed.

Q: What does “fit and proper” mean?

The fit and proper process will be more thorough than used in the liquor licensing processes. In BC, there will be an appointed Security Manager within the LCRB, who aside from the usual criminal record search, will be investigating associates of the applicant as well as anybody with connections to the applicant. This process will examine financial affairs and financing arrangements to ensure the source of monies is acceptable. This includes the following:

* Business accounts;
* Financial institutions;
* Accountant information;
* Taxes;
* Funding sources and debt; and
* Business loans, liens, securities and conditional guarantees.

In Alberta, the AGLC will carry out thorough personal and financial background checks on all applicants, including their associates and key staff who have some control in the decision-making processes and daily operations, including those who have the authority to hire or terminate the employment of workers.

Q: What is the process of transferring licences in BC?

It is similar to the liquor industry, except that the transfer must be approved ahead of time and the potential owner must go through the same rigorous fit and proper examination. This includes not being a significant shareholder in more than eight cannabis licenses. Local government may have input into the transfer of licence process through their business licence bylaw.

Q: What is the role of local government?

Other than the fit and proper process, local government is actually the decision maker in terms of who gets a licence and where. Without local government endorsement, no licence will be issued. They are required to gather residents’ views, which could include any of the following: a public hearing, a referendum, posting of a notice, and a review of written comments, or any method they choose.

Many municipalities have designated certain zones where a licence may be considered and have set out in the zoning bylaw a mandatory separation from other licensed cannabis outlets and from parks and schools.

Some have decided to not allow any outlets. If they choose to recommend a licence, their approval must state their views of the impact on the community. Some cities, such as Kamloops, have proposed a large business licence fee of $5,000 per year. Municipalities can also dictate conditions such as hours of operations.

One of the difficult issues for local government will be deciding which applicant to recommend if there is more than one in a specific area. Methods will include first in, a lottery, or a proper staff analysis of the competing applications. One of the factors that may surface is the treatment of existing illegal cannabis outlets. Some local governments may reject these applications.

The timing of any approval will depend completely on the number of applications and complexity of the fit and proper investigation, but will be a minimum of 30 days. The additional time to secure local government approval depends on the process they select. This could be anywhere from 30 to 90 days. Proposed government stores are not required to go through the LCRB process and only require a municipal approval in order to trigger the issuance of a cannabis licence.

Q: How is the Alberta process different?

There are some notable differences, which include:

* The hours of operation are 10:00 AM to 2:00 AM;
* The age limit for both staff and customers is 18;
* All cannabis retail stores are privately owned, with no government stores;
* The Alberta government will operate all online sales; and
* The required distance from other cannabis stores, schools and provincial health care facilities is 100 meters.

As a retailer, you are only allowed to purchase product from the AGLC, which will ensure that the relationships between licensees, suppliers, and cannabis representatives is competitive. Your business must only operate as a retail cannabis store, and therefore must be separate from any other business. It must also be incorporated in Alberta, or extra-provincially registered there, and have a signed lease or certificate of title.

Dennis P. Coates received his Bachelor of Commerce and Law degrees from UBC. He became a partner in MJB’s predecessor in 1982 and was appointed Queen’s Counsel in 1987. In 2014, he became a senior associate with MJB Lawyers. He is a leading professional in the multitude of issues facing the hospitality industry in the province of BC, including liquor licensing.