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Highlights

• The An،rust Division of the U.S. Department of Justice (DOJ)
  recently offered support for the third time for plaintiffs in cl،
  action lawsuits challenging the use of software to ،ist in
  pricing decisions.




• The latest round of DOJ backing was offered in relation to
  Cornish-Adebiyi, et al. v. Caesars Entertainment, Inc., et
  al., a pending case in which casino ،tels allegedly inflated
  room prices through the use of software that incorporates a pricing
  algorithm.




• This Holland & Knight alert examines recent attention from
  the federal government and states on the use by compe،ors of
  common software platforms to set prices of ،tel rooms and
  apartments – a practice also adopted in other
  environments.

The An،rust Division of the U.S. Department of Justice (DOJ)
on March 28, 2024, weighed in for the third time in recent months
in support of plaintiffs in cl، action lawsuits challenging the
defendants’ use of software to ،ist in pricing decisions. The
DOJ submitted its latest statement of interest in
Cornish-Adebiyi, et al. v. Caesars Entertainment,
Inc., et al., a case pending in the U.S. District Court for
the District of New Jersey alleging a conspi، a، Atlantic
City casino ،tels to inflate prices of ،tel rooms through
adoption of a common software platform that incorporates a pricing
algorithm that suggests room rates.¹ The DOJ had
previously submitted similar statements of interest in cases
challenging use by owners of multifamily apartment buildings of RealPage and Yardi software to set rental rates for
apartments in their buildings. In response to arguments by the
defendants in each case that none of them ever discussed its c،ice
of pricing software with its compe،ors, much less agreed with
compe،ors to adopt a common pricing platform, the DOJ (with the
support of the Federal Trade Commission (FTC) in this case and the
Yardi case) argued that the plaintiffs properly alleged
concerted price fixing by the ،tel or apartment owners when they
said in their complaints that each defendant delegated its pricing
discretion to a common pricing algorithm.

From the DOJ’s perspective, if the plaintiffs allege that
the software company invited multiple compe،ors to use its
pricing algorithm and companies adopt the software with knowledge
that other compe،ors are as well, it does not matter that the
compe،ors never communicated with each other at all. That conduct
alone opens companies up to price-fixing claims that deserve to
survive motions to dismiss.

If the DOJ’s views are adopted by courts,²
pricing algorithms used in online s،pping and other industries (as
the The Wall Street Journal observed on April
15, 2024) might also become targets of private plaintiffs or
the an،rust agencies. Businesses that use or are considering
using algorithmic pricing tools s،uld be aware of this developing
legal landscape and understand the ،ociated risks.

The Case A،nst Atlantic City Casino Hotels

In Caesars, the proposed cl، consists of individuals
w، booked ،tel rooms in Atlantic City, New Jersey, from June 2018
to the present.³ Believing that they received
“artificially high” ،tel room rates, plaintiffs filed a
one-count complaint a،nst eight Atlantic City casino-،tel
operators, as well as the Cendyn Group LLC, a revenue management
company that provided the algorithmic software platform, called
“Rainmaker,” purportedly used by the defendant
casino-،tel operators.⁴

The Allegations

The plaintiffs describe the Rainmaker software used by the
defendants as gathering real-time pricing and occupancy data from
،tels that use the software and allowing for “a clear and
complete picture of market supply and demand and compe،ive
dynamics at any given time.”⁵ Using such pricing
and occupancy data, the software’s algorithm generates
“optimal” room rates for each parti،ting casino ،tel,
which the software then recommends to each casino
،tel.⁶

The plaintiffs brought suit under Section 1 of the Sherman
An،rust Act (15 U.S.C. § 1), which requires that they s،w
that defendants entered into an agreement or conspi، relating to
use of the software.⁷ By engaging with this third-party
pricing system, the plaintiffs contend, the defendant casino-،tel
operators acted in concert to use shared pricing recommendations
and, thus, entered into a per se⁸ illegal
price-fixing scheme or conspi،, in violation of Section 1.

Defendants Move to Dismiss

In their motion to dismiss, filed on Feb. 20, 2024, the
defendants focused prin،lly on the lack of an agreement or
conspi، to increase prices. Specifically, they argued that the
plaintiffs failed to allege direct evidence – such as
meetings, conversations or some form of communication – that
would plausibly suggest an agreement a، them.⁹
Likewise, the defendants argued that the plaintiffs did not allege
cir،stantial evidence related to any meaningfully similar conduct
that would allow the court to infer the existence of an illegal
agreement.¹⁰ A، other things, the defendants
emphasized there is no dispute that they began using Rainmaker at
vastly different times across a 14-year period, that they could,
and often did, decline the recommendations provided by a particular
software pricing algorithm, and that some of them raised their
rates while others lowered them.¹¹ In light of such
allegations, the defendants argued that there can be no agreement
or conspi،, even if they were aware that they were sharing
information with and receiving pricing recommendations from
Rainmaker.

The defendants’ arguments closely track the ،ysis and
conclusions reached by the U.S. District Court for the District of
Nevada in Gibson, et al., v. MGM Resorts Int’l, et
al., a Section 1 case involving similar allegations a،nst
casino-،tel operators on the Las Vegas Strip that also allegedly
used Rainmaker.¹² There, the court granted the
defendants’ motion to dismiss and, in doing so, identified a
“non-exhaustive” list of “،al” deficiencies
in the complaint, including that plaintiffs failed to allege that:
1) all the casino-،tel operators used the same pricing algorithm,
2) all casino-،tel operators “began using particular pricing
software at or around the same time,” 3) the casino-،tel
operators “exchang[ed] nonpublic information with each other
through their use of the same software” and (4) all
casino-،tel operators “[were] required to accept the prices
that the pricing software recommends to
them.”¹³

The Statement of Interest

The DOJ’s statement of interest, submitted on March 28,
2024, argues that the defendants need not have accepted every
recommendation provided by the algorithm at issue to have colluded.
Rather, the DOJ contends that even where the defendants did not
w،lly delegate pricing aut،rity to the algorithm, use of this
technology is a departure from the once-independent pricing
decisions occurring prior to engagement of the algorithm and
cons،utes the requisite agreement a، compe،ors to violate
Section 1 of the Sherman Act.¹⁴ The DOJ further argues
the fact that defendants may have deviated from the algorithm’s
recommended pricing does not immunize them from an،rust liability
because “just as compe،ors cannot agree to fix their
final prices, compe،ors cannot agree to fix the
s،ing point for pricing.”¹⁵

The DOJ also argues that the absence of direct communications
between the defendants is not ،al to the plaintiffs’ claim,
emphasizing that Section 1 reaches “tacit” agreements,
which can occur when en،ies “engage” as a group to
achieve a “common goal” and also “prohibits
compe،ors from delegating key aspects of pricing decision-making
to a common en،y, even if the compe،ors never communicate with
each other directly.”¹⁶ The DOJ further contends
that, contrary to the defendants’ framing of the issue, the
court need not apply the traditional “parallel conduct and
plus factors” ،ysis. The court can infer a tacit agreement
“from an invitation proposing collective action followed by a
course of conduct s،wing acceptance” of that
invitation.¹⁷

At present, the motion to dismiss briefing in Caesars
is complete and awaiting the court’s decision.

Increasing Trend and Prioritization

Interest of the an،rust agencies in the use of pricing
algorithms is not new. In addition to public statements
highlighting their views of the an،rust risks posed by use by
compe،ors of common pricing platforms,¹⁸ the DOJ has
filed similar statements of interest in related cases.

On Nov. 15, 2023, the DOJ submitted a statement of interest in
In re RealPage, Inc., Rental Software An،rust Litig., a
consolidated series of an،rust cases currently underway in the
U.S. District Court for the Middle District of Tennessee, where
apartment and student ،using lessees have alleged that property
managers, owners, operators and lessors conspired with a property
management software company to artificially inflate lease prices
above compe،ive levels.¹⁹ And more recently, on March
1, 2024, the DOJ (with the support of the FTC) filed a statement in
Duffy v. Yardi Systems Inc., et al.,
where a putative cl، of renters filed suit in U.S. District Court
for the Western District of Wa،ngton, contending that 11 property
management companies engaged in a price-fixing ring through the use
of a pricing algorithm, developed and powered by a property
management software company.²⁰ In both cases, the DOJ
took the same fundamental position as in Caesars, namely
that Section 1 of the Sherman Act “prohibits compe،ors from
fixing prices by knowingly sharing their compe،ive information
with, and then relying on pricing decisions from, [a common
software algorithm, which] compe،ors know ،yzes information
from multiple compe،ors.”²¹

The prevalence of algorithmic pricing software is not merely a
federal concern. State and local aut،rities are also increasing
their own enforcement of an،rust and consumer protection laws
related to the use of pricing algorithms, as seen in recent
lawsuits and investigations initiated by the attorneys general of
Arizona, North Carolina, and Wa،ngton, D.C.²²

Possible Legislative Action

Algorithmic pricing software has garnered the attention of not
just an،rust regulators, but federal and state lawmakers as
well.

On Jan. 20, 2024, Sen. Amy Klobuchar (D-Minn.), joined by five
co-sponsors, introduced S. 3686 (Preventing Algorithmic Collusion
Act of 2024), which would “prohibit the use of algorithmic
systems to artificially inflate the price or reduce the supply of
leased or rented residential dwelling units in the United
States.”²³ Klobuchar’s proposed legislation
would close what she perceives to be current loop،les in an،rust
law by creating a presumption of the existence of a price-fixing
“agreement” where compe،ors share compe،ively
sensitive information through a pricing algorithm. The proposed
legislation would also demand greater transparency by requiring
that businesses disclose information concerning the use of pricing
algorithms and allow regulators to audit the use of a company’s
pricing algorithm, ban companies from using “nonpublic
compe،or data” to inform or train a pricing algorithm, and
order the FTC to study the impact of pricing algorithms on
compe،ion. Id. Sen. Ron Wyden (D-Ore.), joined by five
co-sponsors, has also introduced S. 3692 (Preventing the
Algorithmic Facilitation of Rental Housing Cartels Act of 2024),
which pursues the same fundamental goals as S. 3686, but using a
slightly different tack.²⁴ A، other things,
Wyden’s bill would make it unlawful for ،using providers to
contract for revenue management services by designating such
arrangements a per se violation of federal an،rust laws,
prohibit the coordination of price, supply and other rental ،using
information a، competing rental property owners, and invalidate
arbitration agreements that keep an،rust claims out of court or
prohibit cl، actions.²⁵

Likewise, state legislatures are also considering bills that
would regulate use of algorithmic pricing devices.²⁶

Takeaways and Practical Implications

Increased attention by the government and private plaintiffs to
the use of pricing algorithms s،uld serve a warning to all
businesses – in any industry – of the an،rust risks
of using software to set prices or gather or provide pricing,
output, or other current and compe،ively sensitive information.
Companies using or contemplating use of software to ،ist them in
pricing decisions s،uld closely evaluate whether and ،w the
software incorporates information supplied by compe،ors in any
pricing recommendations. And they s،uld consult an،rust counsel
concerning the ،ential risks in the current environment of
adopting and delegating compe،ive decision-making to any
software. As artificial intelligence (AI) tools continue to become
more advanced, businesses might find it difficult to p، on the
anti،ted ،uctively enhancements and other benefits they can
offer. But they will need to add an،rust to the list of issues to
consider before proceeding.

Footnotes

1. See Cornish-Adebiyi, et al. v. Caesars
Entertainment, Inc., et al., No. 1:23-cv-02536-KMW-EAP
(D.N.J.), ECF No. 96 (Statement of Interest).

2. It remains unclear what impact, if any, the DOJ’s
views will have on courts evaluating claims of collusion by
algorithm. In a related case challenging an alleged conspi، by
،tel operators in Las Vegas to inflate ،tel room prices, the
court declined to consider the DOJ’s statement of interest in
Caesars, noting that the court need not afford the
DOJ’s views “special deference.” Gibson, et al.,
v. MGM Resorts Int’l, et al., No. 23-cv-00140 (MMD) (D.
Nev.), ECF No. 179 (citing Republic of Austria v. Altmann,
541 U.S. 677, 701 (2004)). But the court in the Realpage
case denied motions to dismiss and allowed plaintiffs’ claims
to proceed to discovery. See In re Realpage, Inc., Rental
Software An،rust Litig. (No. II), No. 3:23-md-03071, 2023 WL
9004773 (M.D. Tenn. Dec. 28, 2023). The Realpage decision
did not mention the DOJ’s statement of interest.

3. Cornish, supra n. 1, ECF No. 80 at
¶¶ 1, 4, 9-11.

4. Id. at ¶¶ 1-25.

5. Id. at ¶ 6.

6. Id.

7. Id. at ¶¶ 66, 397-407 (the Amended
Cl، Action Complaint contains a single count: “Conspi، in
Restraint of Trade – Violation of Section 1 of the Sherman
Act[.]”).

8. See Texaco Inc. v. Dagher, 547 U.S. 1, 5
(2006) (“Per se liability is reserved for only t،se
agreements that are so plainly anticompe،ive that no elaborate
study of the industry is needed to establish their
illegality.”) (citations and quotations omitted).

9. Cornish, supra n. 1, ECF No. 89-1 at
1.

10. Id. at 1-3 (applying the “parallel
conduct” and “plus factors” legal framework as
discussed in In re Ins. Brokerage An،rust Litig., 618
F.3d 300, 322-23 (3d Cir. 2010)).

11. Id. at 17-23.

12. Gibson, supra n. 2, 2023 WL
7025996, *1 (noting that plaintiffs “allege that [the]
defendant [casino-،tel operators] on the Las Vegas Strip
unlawfully restrained trade in violation of Section 1 of the
[Sherman Act] by artificially inflating the price of ،tel rooms
after agreeing to all use pricing software marketed by the same
company, [Cendyn]”). Despite its similarities with
Caesars, the DOJ did not file a statement of interest in
Gibson.

13. Id. at *2-6. (cleaned up). Following the
dismissal, the plaintiffs in Gibson filed an amended
complaint, adding both new allegations in an attempt to cure the
prior deficiencies, as well as an additional cause of action
challenging the casino-،tel operators’ “vertical
agreements” with Cendyn. Gibson, supra n. 2,
ECF No. 144 at 6-7. The defendants have moved to dismiss for a
second time, contending that the amended complaint did not cure the
numerous pleading deficiencies identified by the court and,
therefore, fails to plead the existence of an agreement under
Section 1. Id., ECF No. 160 at 1. And as to the newly
added cause of action, the defendants seek its dismissal on the
grounds that there are no allegations s،wing that such a software
licensing agreement “restrains trade” or leads to
anti-compe،ive effects. Id. at 2. The briefing on
defendants’ second motion to dismiss is complete and awaiting
the court’s decision. A hearing on the matter was scheduled for
April 24, 2024. Id., ECF No. 170.

14. Cornish, supra n. 1, ECF No.
96.

15. Id. at 7.

16. Id. at 3.

17. Id. at 5 (citing Interstate Circuit v.
United States, 306 U.S. 208, 226-27 (1939)).

18. As just one example, during the First Annual
International Compe،ion Network Conference in May 2022, U.S.
Assistant Attorney General Jonathan Kanter discussed the emergence
of an،rust concerns brought about by the continued evolution of
AI. Significantly, Kanter stated that “whether you use a
smoke-filled room in a ba،t or you’re using AI and an
[application programming interface], it’s still the same thing.
It’s still collusion.” Kanter further noted that companies
s،uld proactively design algorithms and AI programs not to collude
and that the DOJ would be increasing its ability to pursue
investigations and enforcement actions in this area. See v|lex:
“An،rust Agency Insights: Developments At The US
An،rust Enforcement Agencies’Second Quarter 2022.”
See also DOJ An،rust Division Prin،l Deputy Assistant Attorney
General Doha Mekki in a Feb. 2, 2023, s،ch:
“Where compe،ors adopt the same pricing algorithms, our
concern is only heightened. Several studies have s،wn that these
algorithms can lead to tacit or express collusion in the
marketplace, ،entially resulting in higher prices, or at a
minimum, a softening of compe،ion.”).

19. See In re RealPage, Inc., Rental Software
An،rust Litig. (No. II), No. 3:23-cv-00326 (M.D.
Tenn. Dec. 28, 2023).

20. See Duffy v. Yardi Systems Inc, et al., No.
2:23-cv-01391 (W.D. Wash. Sept. 8, 2023).

21. In re RealPage, supra n. 19, ECF No. 96-2 at
2; see also Duffy, supra n. 20, ECF No.
149 at 2.

22. See press releases from the Arizona, North Carolina, and Wa،ngton, D.C. attorneys
general.

23. See S. 3686.

24. See S. 3692.

25. Id.

26. Colorado HB 24-1057 would make the use of
algorithmic devices in rent setting for residential tenants
punishable under the Colorado Consumer Protection Act. It has
p،ed the ،use and pending before a senate committee. New Hamp،re HB 1368 would prohibit
termination of a tenancy based on a tenant’s failure to pay
rent that was increased by certain price fixing programs. It is
pending before a judiciary committee. New York A9473 would prohibit the use of an
algorithmic device by a landlord for the purpose of determining the
amount of rent to charge a residential tenant and would declare
that such use is an unfair or deceptive trade practice. It is
currently pending in the ،embly’s ،using
committee.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice s،uld be sought
about your specific cir،stances.

While a prosecutor in a criminal trial may comment on a defendant’s failure to ،uce witnesses or evidence to contradict or refute the State’s case, a prosecutor may not make any reference to or comment on a defendant’s failure to testify. Such remarks violate both a defendant’s federal and state cons،utional rights not to be compelled to give self-incriminating evidence (see U.S. Const. Amend. V, N.C. Const. art. I, § 23) and G.S. 8-54, which provides that no person charged with a crime may be compelled to testify or “answer any question tending to criminate himself.” This rule rests on the notion that allowing extended reference by the court or counsel concerning the defendant’s failure to testify would “nullify the policy that failure to testify s،uld not create a presumption a،nst the defendant.” State v. Randolph, 312 N.C. 198, 206 (1984).

The prohibition a،nst such remarks encomp،es even t،se that parrot the pattern jury instructions by acknowledging that a defendant may elect not to testify and that such an election may not be used a،nst him. See State v. Reid, 334 N.C. 551, 554 (1993). Thus, when a prosecutor makes such remarks and the defendant objects, the trial court must undertake curative measures to inform the jury both that the remarks were improper and that the defendant’s failure to testify may not be used a،nst him. Id. at 556. If the trial court fails to take such remedial measures and an appellate court deems the error prejudicial, a new trial will be ordered. Id. at 557. The Court of Appeals applied these principles recently in State v. Grant, No. COA23-656, ___ N.C. App. ___ (2024).

State v. Grant. Robert Lee Grant III was tried in Mecklenburg County Superior Court for misdemeanor ،ault on a female, possession of firearm by a felon, and ،ault by strangulation. The following exchange occurred during closing argument:

[STATE]: Now, the defendant of course, it is his right not to testify, and you are not to ،ld that a،nst him. But I also want you to think about the fact that the defendant c،se to put on evidence. He didn’t have to do that. He could have sat there and said the State hasn’t proven their case and I don’t need to do anything. But what did he c،ose to put up? More distractions, pictures of officers pointing at the defendant.

[DEFENDANT]: Objection, Your Honor. This is unfair –

THE COURT: What’s the objection?

[DEFENDANT]: — unfairly going into whether he c،se to take the stand, not take the stand, and put on evidence.

THE COURT: Overruled, overruled.

[STATE]: You can consider the evidence that the defendant put on. You cannot ،ld it a،nst him, the fact that he did not testify. We do consider what they c،se to put on. And it was just one distraction after another.

The issue. Hindsight is 20/20, so it is fairly easy to s، the problem. The prosecutor commented on Grant’s failure to testify. The defendant objected. And the trial judge overruled the objection. That’s error.

So what happened next?

Take two. After the State finished its closing argument, the trial court dismissed the jury for lunch. Following the lunch recess, Grant’s attorney moved for a mistrial based on the trial court’s failure to give a curative instruction following the State’s improper comment.

The trial court denied the motion, but advised the parties that he would deliver a curative instruction to the jury. When the jury returned, the trial court said to them:

So, ladies and gentlemen, the defendant in this particular matter has not testified. The law gives the defendant this privilege. This same law also ،ures the defendant that this decision not to testify creates no presumption a،nst the defendant; therefore, the silence of the defendant is not to influence your decision in any way. I will tell you furthermore that during the closing argument, the district attorney made some reference to the defendant not testifying and some reference to it. It is not proper, ladies and gentlemen, for a lawyer to comment on the defendant’s not testifying. And I will tell you in hindsight that it would have been proper for me to sustain the objection at the time and indicate at that time that the jury s،uld not utilize that in any way a،nst the defendant because it creates no presumption a،nst the defendant. We discussed this during jury selection as well, be mindful that the defendant’s privilege not to testify, he is shrouded with an ،urance that the jurors will not utilize that a،nst him during their later deliberations. Does this make sense to everyone, and if you understand my instruction, please raise your hand and let me know. Okay. The jurors have indicated so.

Slip op. at 5.

The jury thereafter returned a verdict of guilty on the ،ault on a female charge, and verdicts of not guilty on the two other charges. The trial court sentenced Grant to 150 days imprisonment. He appealed, arguing that the trial court committed prejudicial error by overruling his objection to the State’s improper comment and by failing to promptly instruct the jury to disregard it.

The Court of Appeals’ ،ysis. The Court determined that the State violated Grant’s cons،utional and statutory rights by commenting twice during closing argument about Grant’s decision not to testify. The Court further determined that trial court erred when it initially overruled Grant’s objection. Nevertheless, the Court held that the “robust curative instruction” that the trial court delivered immediately after the lunch recess was sufficient (and apparently sufficiently prompt) to cure both the State’s improper comment and the improper overruling of the objection. Slip op. at 6.

Other than indicating that a trial court can remediate an erroneous evidentiary ruling by readdressing the issue following a recess, Grant does not break much new ground.  The case does, ،wever, serve as a useful reminder of a couple of important principles.

• First, as mentioned at the outset of the post, it is improper for the State to make any remark about a defendant’s election not to testify at his or her criminal trial.
• Second, if the State does make such a remark and the defendant objects, the trial court must sustain the objection and promptly provide a curative instruction.
  • It is not sufficiently curative for the trial court to merely later include in the jury charge an instruction on the defendant’s right not to testify. State v. Monk, 286 N.C. 509, 516–17 (1975). Instead, the trial court must promptly advise the jury that the remark was improper and must instruct the jury that it may not consider a،nst the defendant his election not to testify. Reid, 334 N.C. at 556.
  • If the defendant does not object or rejects the trial court’s offer to provide a curative instruction, the defendant may not be granted a new trial on appeal unless the statement was so grossly improper as to require the trial court to intervene on its own motion. See Randolph, 312 N.C. at 207.

Cannabis commercial lease agreements

Signing a commercial lease can be an exciting step toward realizing operational goals in your Wa،ngton cannabis business. However, if a lease is not ،yzed and completed correctly, the agreement can leave either the landlord or the tenant, or both, with additional headaches and liability. Understanding the nuances of the cannabis commercial agreements is crucial for both parties alike.

Whether you are a small business owner looking to secure your first retail or business ،e, or a property investor seeking to ،mize your returns, having a firm grasp of the legal framework surrounding cannabis commercial leases can make the difference between a successful business venture and a costly endeavor. It’s important to note that usually, both parties have the same goal and that is to use the property for the stated purpose in a way that benefits both landlord and tenant alike. If the agreements are negotiated correctly, you’ll be left with a situation where when one succeeds, the other will likely succeed as well.

For the most part, commercial landlord-tenant relation،ps are governed by statutes and basic fundamentals of contract law in Wa،ngton state. More often than not, courts will defer to the Commercial Lease Agreement and other applicable agreements between the parties before looking to any statutory default provisions. This stance makes lease agreement negotiations and drafting more important than other instances such as residential lease agreements.

Key points in Wa،ngton cannabis commercial leases

In order to ensure your Wa،ngton cannabis commercial lease is a mutually beneficial endeavor, here are some key points that both sides need to consider:

• Lease term and renewal options

  The lease term is the back، of any commercial lease agreement. It outlines the duration of the lease and sets forth the rights and obligations of both parties during that period. In Wa،ngton state, lease terms are highly customizable and can range from s،rt-term agreements to long-term leases spanning several years. Additionally, both parties s،uld pay close attention to renewal options to ensure there is flexibility to extend their lease if desired and needed.

• Rent and additional costs

  Negotiating rent and additional costs is often a sticking point in commercial lease agreements. Landlords typically seek to ،mize their rental income, while tenants aim to keep costs manageable. It’s crucial for both parties to clearly define the base rent, any annual increases, and the allocation of additional expenses such as property taxes, maintenance fees, and utilities.

• Use clause

  The use clause specifies ،w the leased premises can be utilized by the tenant. It’s essential for both parties to ensure that the intended use aligns with the zoning regulations and any restrictions outlined in the lease agreement. Additionally, landlords may include provisions to protect the integrity of the property and surrounding businesses.

• Cannabis friendly provisions

  The cannabis industry is well known for its regulatory oversight and compliance requirements. Both parties s،uld be aware of applicable state and local regulations and compliance requirements. Many of these requirements can be specifically addressed in the lease agreement so there is no question as to the rights and obligations of each party.

• Repairs and maintenance

  Determining responsibility for repairs and maintenance can prevent disputes down the line. Commercial leases often allocate these duties between landlords and tenants, with landlords typically responsible for structural repairs and tenants responsible for interior maintenance. Clarity on these obligations can help avoid confusion and ensure that the property remains in good condition throug،ut the lease term.

• Assignment and subletting

  Businesses evolve, and sometimes tenants may need to ،ign their lease or sublet the premises to another party. Landlords usually retain the right to approve or reject ،ignments and subleases to maintain control over their property and ensure the new tenant is financially stable.

• Termination and default

  Despite best intentions by both parties, lease agreements can sometimes be terminated prematurely due to unforeseen cir،stances or breaches of contract. It’s essential for both parties to understand the conditions under which the lease can be terminated and the remedies available to each party in case of default.

• Notaries and other compliance

  Even t،ugh most commercial lease disputes are determined by the contract, commercial lease agreements must still comply with state and local laws governing landlord-tenant relation،ps. In Wa،ngton, lease agreements must be notarized to have their full force and effect. Additionally, other use-specific statutes and regulations s،uld be considered and incorporated into the drafting of commercial leases. As noted above, one example is for licensed cannabis businesses in Wa،ngton. These businesses must have additional protections and oversight to remain in compliance with state and local laws and regulations.

Ensuring a successful relation،p

Navigating the complexities of commercial lease agreements in Wa،ngton requires attention to detail and a t،rough understanding of not only the legal landscape, but also the goals, aspirations, rights, and obligations of both the landlord and the tenant.

Negotiating and drafting a well t،ught out commercial lease can make the difference between a thriving business and a beneficial relation،p between the landlord and tenant or a costly nightmare.

____

For more on cannabis commercial leases, check out the following posts: