Oregon Marijuana: Proposed "Change In Location" Rule Increases Seller Risk

The Oregon Liquor and Cannabis Commission (OLCC), engages in regular rulemaking. This year is no exception. The OLCC proposes a list of rule changes that it considers appropriate to implement 2022 legislation. This round of rulemaking includes many substantial changes to the rules that aren’t required by legislation. These rules go beyond technical changes. This post focuses on a significant change in rules that would have a dramatic impact on sellers of marijuana businesses. It is related to “changes in location”. The current rules for sellers can be found in OAR 845 024-1160 (“Notifications of Changes”)
How OLCC “changes in location” sales works today
First, it is important to remember that a seller doesn’t sell its license. However, people often talk about the “purchase” of a license. Instead, an OLCC applicant must apply for and receive a new license from the OLCC. This is in connection with a licensed sale and surrender by the outbound seller.
A purchaser may request a change of location from the OLCC when they wish to relocate the business. If the deal falls through the seller usually keeps its license and continues to operate. OLCC proposes to remove this safeguard.
The rule proposal for OLCC “change of location” sales
OLCC proposes to add a new rule, OAR 845-0240-1170 (“Proposed Rule 170”), titled “Change of Ownership.” Propose Rule 170(6)(a), provides the following:
If the current laboratory licensee or licensee is not available, a change of ownership application can be filed for a proposed licensed location at a different place than the current licensed premises.
(a) Requests to surrender a license before it is assigned to a Commission staff person following OAR 845-025-8750. It is understood that the license surrender request will still be processed even though the change of ownership application has not been completed.
Proposed Rule 1170(a),(6) states that a licensed buyer can park its license at a new place only if it is requested by the seller before the change in ownership is assigned to an inspector and b) if the deal fails for any reason. (E.g. (E.g.
The possible fallout from the new rule
This is a big risk for sellers. This means that sellers should require that the deal close at the current location and then leave it to the buyer for them to change the location. Alternately, the seller could change the location before the transfer of ownership. These workarounds are not efficient and will not create a market that is efficient. Each represents a radical departure from the established merger and acquisition practices in Oregon’s marijuana industry.
Public hearing and comment deadlines (soon!)
On October 25, 2022, a public hearing will be held on the proposed change in place rule and other proposed rules. The hearing will take place at the OLCC offices of Portland and online between 10:00 – 11:00 AM.
(Yeah! Just one hour! Halloween 31st at 12:00 p.m. is the last day you can comment on these rules. The link above provides contact information.
This issue was handled by Alex Berger, Emerge Law. Check out our Oregon posts for more information on the latest state cannabis licensing trends, and OLCC updates.