MedMen & Other Cannabis Companies Face Lien Claims

At least three cannabis companies and dispensaries owe over a dozen contractors $5.1M in total mechanics lien claims since December of 2019, according to the lien affidavits.

The three companies linked to the unpaid construction invoices include MedMen, Coda Signature, and Sovereign Cannabis Solutions (SCS) Joint Venture.

In total, at least 15 mechanics liens have been filed against the companies, with 12 liens filed against MedMen alone since December 2019. The actual value of the 15 liens is $5,178,783.53.

According to the lien affidavits, the liens were filed against properties in three different states, including California, Florida, and Nevada.

With an increasing number of states legalizing marijuana use, payment risk on cannabis construction projects can linger over contractors as protections afforded by the federal government do not exist for these types of projects.

As reported by Vox in 2018, cannabis is still illegal under federal law, even as state governments begin to legalize it.

MedMen Cannabis Company Linked to 12+ Liens

At least 12 liens have been filed against MedMen as of December 2019, totaling approximately $585,593.02 in unpaid construction work.

According to all 12 lien affidavits, each lien filed against MedMen was processed in the State of Florida. MedMen currently operates eight dispensaries across Florida, and the lien affidavits state that the troubled dispensary projects took place in Jacksonville, Orlando, and Miami. The Florida liens were filed among the Miami-Dade County, the Duval County, and the Orange County clerk’s offices.

However, as stated in a 2018 news release from MedMen, the company is now based in Los Angeles, CA, and has expanded dispensaries to Nevada amid recent legislation and into Florida. MedMen currently operates a total of 30 dispensaries across the U.S., with additional locations in New York, Illinois, and Arizona.

While faced with $585.5K in mechanics lien claims, the founders of MedMen resigned from their board positions in June of 2020 amid a lawsuit that alleged them of breaching fiduciary duty, according to Bloomberg.

The beleaguered cannabis company also faced a lawsuit in Arizona from May 2020 that temporarily closed their shops in Tempe and Scottsdale. As of July 2020, MedMen is reportedly on the brink of losing its retail license in Pasadena, CA.

Additionally, MedMen’s former Chief Financial Officer, James Parker, is seeking at least $600K in legal fees, according to Law360. As reported by Marijuana Business Daily, the lawsuit was filed for a breach of contract and additional misdeeds against the former CFO of MedMen.

California Cannabis Facility Allegedly Owes Contractor $2.2M

As of February 2020, prime contractor Distinctive Development is owed approximately $2,279,014.07 in unpaid construction work on a facility for Coda Signature, a cannabis manufacturer in Oakland, CA.

Distinctive Development filed two liens against Coda Signature on February 11th with the Alameda County clerk’s office. The East Oakland cannabis production site is located at 5601 San Leandro St.

The contractor’s largest lien totaled $1.8M, followed by their second lien valued at $412.5K.

Contractor files $2.3M Lien Against Cannabis Project on Nevada Tribal Lands

On May 8, 2020, prime contractor Net Development Co. recorded a $2.3M mechanics lien claim against SCS Joint Venture following the construction of a cannabis project in Wadsworth, NV.

According to the lien affidavit filed with the Washoe County clerk’s office, the property is owned by Pyramid Lake Paiute Tribe.

As reported by the Indian-Country-Today, the site is “the largest cannabis dispensary in the world.”

Following Nevada State Bill 375 in 2017, fourteen Native American tribes were granted the ability to sell marijuana on tribal lands in the state.

Risks Associated with Cannabis Construction Projects

Contractors still carry lien rights when they work on cannabis construction projects. Additionally, title insurance can potentially add payment projection for contractors working on risky cannabis projects, as the insurance is used to cover any mechanics liens filed during the life of the project.

Because cannabis is still illegal under federal law, many federally-insured banks and financial institutions avoid funding these types of projects, according to CNBC.

As a result, contractors may look to cash financing, crowdfunding, or private financing when looking to finance a cannabis construction project.