Earlier this year New Jersey legalized cannabis for recreational use, and now entrepreneurs are lining up to get a slice of what could be a $1.5 billion industry, But there are still numerous questions around zoning and permit regulations for potential marijuana dispensaries, and it might still be too early to know exactly how the state will regulate this new industry.

But the state has a robust regulatory framework already in place for medicinal marijuana dispensaries, which have been legal in the state for more than a decade. It's likely several of the laws already in place for medicinal marijuana will be applied to recreational dispensaries, so these serve as a useful guide for potential businesses.

Continue reading to learn more about the legislation that recently passed and how each local municipality will regulate the construction and operation of marijuana businesses within it's jurisdiction.

What is permitted under the new legislation?

During the most recent state election in November 2020, New Jersey residents voted by a more than two-thirds majority to add an amendment to the state constitution legalizing the recreational use of cannabis for individuals aged 21 and over, as well as the sale and cultivation of the crop. The amendment went into effect on Jan. 1, 2021.

In February, Governor Phil Murphy signed a series of enabling bills affirming the statewide legalization of cannabis for adult use and the decriminalization of underage use.

"This November, New Jerseyans voted overwhelmingly in support of creating a well-regulated adult-use cannabis market," the governor said in a statement. "Although this process has taken longer than anticipated, I believe it is ending in the right place and will ultimately serve as a national model."

First steps in planning out your project

First things first — when embarking on building a new building, you should have a zoning analysis conducted on the municipality in which your proposed business will be located, The purpose of the zoning analysis will be to check if the municipality has approved retail sales of cannabis within it's jurisdiction. Additionally, it will allow you to check if the municipality has imposed any cannabis restrictions. All towns throughout New Jersey are currently within the 180-day review period following the date Governor Murphy signed the cannabis bills into law. This 180-day review period will expire on or about August 21.

Each town in NJ will need to decide on the following 3 key questions prior to August 21, 2021:

1. 1. 1. 1. 1. 1. 1. 1. 1. 1. 1. 1. Should the municipality permit some types of marijuana businesses and ban others?
                                     
                                 2. If some classes of marijuana businesses are permitted, should the municipality impose a municipal tax?  
                                     
                                 3. If the municipality allows some classes of marijuana businesses, should the municipality  regulate the number, location, manner, delivery services options, and times of operation for those businesses?

In regards to cannabis delivery services, the law states that a municipality can ban the physical location of a delivery business within it's jurisdiction, however, it cannot ban the delivery of cannabis inside their municipality by a delivery business that is operating out of another municipality.

Each municipality will have the option to prohibit classes of marijuana businesses by their ordinance. Under the New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act, there are six classes of licensed cannabis businesses: 

• Class 1: Cultivation.
• Class 2: Manufacturing
• Class 3: Wholesaling
• Class 4: Distribution
• Class 5: Retail
• Class 6: Delivery 

5-Year Period: Once a municipality bans one or more of the business classes stated above, that action cannot be undone for a period of 5 years. 

Existing Marijuana Laws: Any current local ordinances that exist to regulate or prohibit cannabis within a municipality will be null and void and they will need to be readopted to be effective after August 21, 2021.

Taxes: If a municipality decides to enact a local cannabis tax, it cannot exceed a 2% tax for the cultivator, manufacturer, or retailer; and 1% for the wholesaler. It cannot be applied to distributor and/or delivery charges.

How do you begin the legal approval process?

Applications for medical marijuana dispensaries are currently handled by the New Jersey Department of Health's Division of Medicinal Marijuana, ensuring that proposed businesses comply with all relevant local, state and federal regulations. 

Prior to submitting an application form, applicants are required to receive approval from their local municipal authority. At the processing phase, they must pass relevant background checks, provide evidence of dispensary location and municipal approval, and comply with all zoning and security regulations.

In the future, the newly created Cannabis Regulatory Commission (CRC) will handle reviewing and approving applications for cannabis retail licenses. The new law also offers businesses the opportunity to create "cannabis consumption areas” in which patrons can socialize and consume marijuana on the same premises as the retail location.

Zoning regulations for marijuana dispensaries

The regulatory framework governing recreational marijuana businesses could mirror that which currently exists for medicinal dispensaries. These businesses are considered alternative treatment centers (ATCs) and are subject to all zoning laws pertaining to ATCs.

The New Jersey Drug Free Zone has strict guidelines when it comes to establishing dispensaries near schools. It prohibits ATCs from being located within 1,000 feet of any school, school bus or other school property. According to New Jersey's school zone law, possessing or distributing illicit drugs on or near school property (within 1,000 feet) is considered a third-degree offense that carries a mandatory three-year prison sentence.

The ATC permit request form details further zoning stipulations for the construction of new enterprises. According to Section 15(a) of the request form, proposed locations must be "in compliance with local codes and ordinances, including, but not limited to, compliance with minimum required distances from the closest school, church, temple, other places uses exclusively for worship, playground, park, and/or child daycare facility."

Security requirements

In addition to complying with the municipality's local code and zoning regulations, the Division of Medicinal Marijuana also has a number of security requirements with which ATCs are obligated to comply to ensure dispensaries can control their inventories.

Current security requirements include:

• ATCs must have an effective security and safety system to prevent the theft or loss of cannabis.
• Provide law enforcement and any neighbors within 100 feet of the dispensary with the name and phone number of a staff member to notify in case of problems.
• Exterior and interior must be equipped with electronic monitoring, panic buttons and video cameras.
• Only specially authorized employees can have access to marijuana inventory, and this number should be limited.
• Prevent loitering of non-authorized individuals to limit the risk of break-ins and thefts.
• If an ATC becomes aware of any sort of loss, it must immediately notify relevant law enforcement officials and the permitting authority.
• ATCs must also report to the permitting authority in the event of any security breach, alarm activation or security malfunction.
• An authorized employee must always be present if it is necessary for an unauthorized individual to access marijuana storage areas.

Security requirements are likely to remain mostly unchanged for recreational dispensaries. Permits will be approved in part based on the ability to prove compliance with the above regulations and others.

Work with an experienced NJ-based code consultant

Now that recreational adult-use of marijuana is legal in New Jersey, a massive new industry is set to spring forth, and potential businesses will be lining up to get their businesses approved and open their doors.

The approval process can be complex and cumbersome, so it's important to have the right experts on your side to perform a comprehensive initial zoning analysis on your proposed location and then strategize a project timeline that will ensure you are able to open your business on time and on budget. Our team has more than 30 years of experience navigating the ins and outs of New Jersey's local code and zoning laws and various permitting regulations for our clients. Contact our New Jersey office today to learn more about our Garden State code, zoning, and permitting services.