Obtaining comprehensive and affordable insurance is a struggle for marijuana businesses owing to federal cannabis prohibition.
The plant’s federally-controlled status and the myriad of state-level cannabis laws places extra burdens on cannabusinesses, and puts off many insurance providers.
Title insurance is one such form of coverage that marijuana businesses often find difficult to secure, and it can prove to be one of the most important protections to have.
It is a premium paid by insurers to property owners that protects against title defects, which are issues related to the property that prevent it from being lawfully transferred or sold. In essence, title insurance protects you from financial hardship as a result of issues with the property that weren’t disclosed at the time of the sale.
With this type of insurance, the insurer runs a public records search on the property to ensure there are no liens or ownership disputes. If satisfied, the insurer will offer title insurance and pay out should any issues arise down the line.
It is an essential layer of protection for real estate buyers to be certain they are not taking on unforeseen liabilities to the property.
For most businesses, obtaining this insurance is fairly straightforward, but marijuana title insurance for cannabusinesses is a more complicated affair. Most insurers are hesitant to offer cannabis title insurance on a property that will be used in relation to a federally-controlled substance.
Many insurers in states where marijuana is legal have explicit policies in place against providing cannabis real estate title insurance, even on properties that are no longer used for state-legal cannabis purposes.
The perception of insurers is that such properties present an unacceptable risk of undisclosed or unknown issues, since it is at least theoretically possible such properties may become subject to a federal investigation.
There are, however, some title companies that issue marijuana title insurance, but if you are unable to source one there are still some options open to you to secure your property purchase and be sure you won’t face unwanted surprises in the future.
Before purchasing a property you intend to use for legal marijuana purposes, conduct a thorough title search in the same way a title insurance company would. This will reveal most title issues pertaining to the property which will allow you to make an informed choice on what the risks are before committing to a purchase.
If you are still unsure, then you can always ask the seller to provide a warranty deed. While not as comprehensive as cannabis title insurance, this affords the buyer certain courses of action should any defects arise.
Title insurance is one of many examples of the additional challenges faced by cannabusinesses but it is one that can be met so long as you do your research and reach out to insurance companies that specialize in marijuana businesses.