January 18, 2023 By Michael McQueeny
Categories: Recreational Industry , New Jersey
The New Jersey Cannabis Regulatory Commission (“CRC”) has been busy in 2022 reviewing thousands of applications submitted for Class 1 Cultivators, Class 2 Manufacturers, and Class 5 Retailers, and has added an additional use – consumption lounges – that will undoubtedly be met with additional applications and activities for those endorsements in 2023 and beyond.
By way of brief background and reminder, at the end of 2021, the CRC issued a notice of application for personal use cannabis licenses, and specifically, cultivators, manufacturers, retailers, and testing labs (the “Notice”). Importantly, pursuant to the Notice, the CRC did not solicit applications for Class 3 Wholesale, Class 4 Distributors, and Class 6 Delivery Licenses, which awaited the proposal and adoption of regulations governing same, which will be finalized in early 2023, resulting in a new notice of applications for those classes of uses. However, recently, the CRC also proposed certain rules for consumption lounges, which are not a standalone license in New Jersey, but rather an additional endorsement that attaches to a Class 5 Retailer – though does require an additional application and submission to both the CRC and the local municipality where the Class 5 Retailer is authorized.
So what do these regulations provide?
The proposed regulations, while not identifying the form of application, do prescribe the process. Specifically, within 14 days of receiving a complete application for a consumption area endorsement, the CRC will forward a copy of same to the municipality. Within another 14 days from there (and 28 days after the submission of a complete application), the municipality is obligated to notify the CRC whether the consumption area complies with its local restrictions. Thereafter, the CRC is permitted to make a determination on the application.
Where the municipality denies a request for an endorsement, an applicant may challenge that determination in the Superior Court by filing a request for a hearing within 30 days. A hearing must be scheduled by the Superior Court within 30 days of the filed request. Interestingly, the rules identify that no formal pleading or filing fee is required for the hearing (in contrast with the general requirement that all actions in the Superior Court are initiated via complaint).
In terms of the operation of the facility, the CRC proposed regulations permit both indoor and outdoor consumption areas. For indoor consumption areas, the rules identify that they must be:
For outdoor consumption areas, the rules identify that they must be:
A few interesting peculiarities of the consumption areas:
The big open question discussed by many is how to make consumption lounges economically viable. Given that municipalities have traditionally zoned Class 5 licenses in higher value downtown or retail districts, these areas have the potential to have higher price per square foot costs, with a limited return on value given that the products consumed themselves are purchased in the retail portion of the facility anyway. What the regulations are silent on, however, and thus presumably permissible, include charging a fee to enter the retail area. Also silent are the type of recreational (as opposed to adult-use) activity that can occur on-site, such as live music, live performances, movies, or other such social activities, which may justify a fee that is ultimately charged.
Written comments must be submitted to the CRC by no later than March 18, 2023.