Real Estate Law

Bird’s Eye View

Drones are beneficial to the construction industry but not without risk

With the pandemic forcing the business world to adapt and function on a more remote level, the usage of drones has continued to surge in popularity. In fact, business giants such as Amazon have been investing heavily in drone technology even prior to the pandemic. Drones have numerous applications, including real estate marketing, promotional events, agricultural, movie production, news coverage, wildlife monitoring, border surveillance and construction — to name a few.

In the construction realm, drones improve efficiency, reduce costs, lower the risk of injury and increase the quality of work. Drones, for example, can increase safety by visually accessing areas that would otherwise be physically dangerous, examine damage to a site after a storm, assess the quality of work completed by identifying cracks in the foundation, and help monitor the progress of a new real estate development, allowing the builder or owner to inspect progress from multiple perspectives and angles.

While the benefits of drone usage are immense, significant liability can ensue if the drone operator or construction company is not careful. One obvious source of liability risk is if the drone crashes into a building, house or group of people. In some cases, loss of control over a drone and a subsequent drone crash could cause death or severe injury.

Furthermore, if a business contracts with a third-party pilot or third-party company to operate the drone, it is imperative that legal counsel review the contract between the parties to assess the level of contractual risk placed on the business. Appropriate insurance should also be obtained.

Drone laws must be followed, and intentionally or inadvertently running afoul of any of these laws is a risk of using drone technology. To fly a drone for business purposes, a person is required to follow the requirements of the Federal Aviation Administration’s Small Unmanned Aircraft System Regulations (Part 107), which includes passing the FAA’s aeronautical knowledge test to obtain a remote pilot certificate. In Arizona, it is unlawful to operate an “unmanned aircraft,” including drones, in a variety of scenarios, for instance, in a manner that interferes with a law enforcement, firefighter or emergency services operation.

Recently, the FAA implemented new rules regarding drone usage, which includes allowing operations at night and over people and moving vehicles. Under the new rules, the FAA must be able to identify drones in flight as well as the location of their control stations, which will enhance public safety and avoid the risk of harm to people or property.

The increasing popularity of drones has also invoked privacy concerns among residents who do not want a drone operator using a camera to videotape them on or near their property. For instance, if a highrise commercial building is being constructed next to a condominium complex, the condo owners might complain about legitimate privacy concerns or pursue other claims from the usage of the drone that assisted with the construction. The legal issue in these cases is whether the aggrieved resident has a reasonable expectation of privacy.

When drones are used responsibly, they can provide significant benefits in construction. But, as with any new technology, managing risk and liability is a critical component and must be taken seriously prior to take-off.

Benjamin Gottleib MacQueen & Gottleib

Benjamin Gottleib is an attorney and founding partner of MacQueen & Gottleib. If you have questions, you can contact him at ben@ mandglawgroup.com, or call 602-533-2840.

Leasing in the Cannabis Age

What should commercial landlords consider regarding marijuana laws?

Arizona is now one of approximately 30 states that have legalized marijuana in some form. The growth and sale of marijuana in the Grand Canyon State shows no signs of slowing down, and many commercial landlords, along with their tenants, are cashing in. Indeed, landlords have realized that leasing to dispensaries can be financially rewarding as they often can charge higher rents. The legalization of marijuana also has allowed landlords to fill commercial space that was previously difficult to lease. So why don’t more commercial landlords sign leases with dispensaries or manufacturing facilities? And, if there are risks associated with leasing space to a marijuana-related business, what can be done to minimize them?

While the sale of marijuana is permitted under state law, the sale and distribution of marijuana violates federal law. Specifically, since 1970, marijuana has been an illegal Schedule I substance under the Controlled Substances Act. The act enables the federal government to seize any property that is used for cultivating, manufacturing and/or selling marijuana and to prosecute both landlords and tenants. State laws that contradict or are inconsistent with the act, such as Arizona’s marijuana laws, do not provide a defense due to the Supremacy Clause in the U.S. Constitution (the Constitution and federal laws take priority over any conflicting rules of state law). Consequently, unless the federal government changes or amends the act, the marijuana business remains a risky one.

Most landlords leasing to marijuana businesses already know that they need to obtain the consent of their lenders. They also know that their leases need to include an early termination provision that allows the landlord to terminate the lease if there are any federal or state prosecutions of the business owners; a clause that requires the tenant to indemnify the landlord for damage done to the building, the common areas or other tenants’ spaces as a result of burglaries, water intrusion issues or nuisance claims; and a personal lease guarantee in the event the tenant itself is forced out of business.

In order to remove some of the risks associated with leasing commercial space to a marijuana related business, landlords should also consider the following:

Articulating what constitutes an event of default under the lease.Most commercial leases generally address events of default, such as the nonpayment of rent or failure to remain open, but a marijuana lease should specifically identify additional events of default. For example, a landlord may wish to consider including a federal or state enforcement action filed against the tenant or any of its principals and/or if a marijuana license is revoked or not renewed.

Landlord’s disclaimer of interest in the tenant’s product. In many leases, one of the landlord’s standard remedies is the right to keep and/or sell certain inventory, equipment or personal property if the tenant is in default. In a marijuanarelated lease, a landlord should include a provision that all marijuana and products are owned by the tenant and the landlord disclaims any interest in such items.

One man’s trash is another’s treasure. Landlords should consider requiring that tenants have a private trash disposal agreement. Dumpster diving for marijuana and/or equipment has increased around dispensaries and manufacturing facilities. This can result in injuries and expose landlords to personal injury claims.

It is imperative that commercial landlords consider the impact of federal, state and local laws regulating the use, production and sale of marijuana. The suggestions outlined above represent just a handful of the issues landlords face when leasing to marijuana businesses. Numerous additional provisions should be addressed and negotiated to minimize the landlord’s risk.

Patrick MacQueen MacQueen & Gottleib

Patrick MacQueen in an attorney and founding partner of MacQueen & Gottlieb. If you have question, you can contact him at patrick@mandglawgroup.com, or call 602-533-2840.