Title Insurers Are Not High on Marijuana

Because it protects buyers, sellers and lenders alike, title insurance is an integral part of every real estate transaction. While we at Wright Beamer regularly deal in real estate law and are well-versed in the documentation involved, one title insurance commitment that crossed my desk a few weeks ago contained the following disclaimer that I had not seen before:

Note: Please be aware that due to the conflict between federal and state laws concerning the cultivation, distribution, manufacture or sale of marijuana, the [title] company is not able to close or insure any transaction involving land that is associated with these activities.

Turns out that despite the rise of state and local laws legalizing the use of marijuana, the fact remains that growing, using, possessing, selling and distributing are still illegal under federal law, which trumps local regulations. As a result, title insurers are becoming increasingly concerned that their mere involvement in transactions involving real property that is somehow connected to the marijuana industry may expose them to criminal charges under federal law. The concern also exists for regulated financial institutions that may end up unwittingly financing the purchase and operation of real property used in the marijuana industry.

In the transaction I was reviewing, the title insurer required the parties to sign a sworn affidavit stating that the property was not and would not be used in any capacity for the growing, producing, distribution or dispensing of any type of marijuana or marijuana products. It is my understanding that such affidavits are becoming commonplace.

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