Since October 17, 2018, Ontario residents have been able to legally purchase recreational cannabis online through the Ontario Cannabis Retail Corporation, a Crown corporation operating as the Ontario Cannabis Store (OCS), the exclusive wholesaler and distributor of (non-medical) cannabis. In many municipalities, however, the availability of legal cannabis to adult consumers will change dramatically with the opening of privately operated licensed cannabis retail stores in April 2019.1

To Opt In or Opt Out?

Under the Cannabis Statute Law Amendment Act, 2018, Ontario municipalities have until Tuesday, January 22, 2019 to pass a resolution prohibiting cannabis retail stores from operating within the boundaries of the municipality, although the municipality may later opt in. If a municipality does not formally opt out, it will be deemed to have opted in. Once operation of retail cannabis stores is permitted within a municipality, this decision is final and cannot be reversed.

Municipalities are faced with significant potential implications in light of the pending retail cannabis store regime including:

  • municipalities will not be able to designate specific land use or buildings for cannabis retail sales as distinct from any other form of retail
  • municipalities have no control over the granting of retail licences which is under the sole jurisdiction of the Alcohol and Gaming Commission of Ontario (AGCO)
  • municipalities will have little to no say where retail cannabis stores will be located within their boundaries
  • while the AGCO may refuse to authorize a store if it is in the public interest, this is limited to consideration of public health and safety, protecting youth and preventing illegal activities in relation to cannabis
  • municipalities that do not opt out will receive a substantially greater share of the $40 million in provincial funding directed at helping municipalities implement the new cannabis regime
  • if Ontario’s portion of the federal excise duty on recreational cannabis for the first two years after legalization exceeds $100 million, the Province will provide a share of the surplus only to municipalities that do not opt out by January 22, 2019
  • on-going budgetary concerns relating to implementation and enforcement

Licensing

Operators of retail cannabis stores in Ontario must first obtain a retail operator licence, which allows the operator to run one or more retail cannabis stores in the province. Each store must have a separate retail store licence.

In order to promote fairness, the AGCO will implement a “lottery system” to randomly select 25 applicants to open the first retail cannabis stores in Ontario. Applicants must be at least 19 years of age and the proposed store must be located in a municipality with a population in excess of 50,000. A retail operator’s licence will not be denied on the basis that the applicant has been charged or convicted with a past cannabis-related offence under the Controlled Drugs and Substances Act. The AGCO began accepting lottery applications as of January 7, 2019.

In the initial phase of the retail store regime, the AGCO will distribute the 25 stores over five regions across the province:

  • five stores will be located in the East Region (Stormont, Dundas and Glengarry, Prescott and Russell, Ottawa, Leeds and Grenville, Lanark, Frontenac, Lennox and Addington, Hastings, Prince Edward, Northumberland, Peterborough, Kawartha Lakes, Simcoe, Muskoka, Haliburton, Renfrew)
  • six stores will be located in the GTA Region (Durham, York, Peel and Halton)
  • two stores will be located in the North Region (Nipissing, Parry Sound, Sudbury, Greater Sudbury, Timiskaming, Cochrane, Algoma, Thunder Bay, Rainy River, Kenora)
  • five stores will be located in the Toronto Region
  • seven stores will be located in the West Region (Dufferin-Wellington, Hamilton, Niagara, Haldimand-Norfolk, Brant, Waterloo, Perth, Oxford, Elgin, Chatham-Kent, Essex, Lambton, Middlesex, Huron, Bruce, Grey, and Manitoulin)

Current Retail Store Regulations

Retail cannabis stores are required to be at least 150 metres away from schools, must only sell legally-sourced cannabis and related products, and anyone under the age of 19 must be barred from entering the store. Retail stores will only be allowed to operate daily between 9 a.m. and 11 p.m. The Registrar (under the Alcohol, Cannabis and Gaming Regulation and Public Protection Act, 1996), has express authority to establish further standards including equipment and facilities, security, surveillance, advertising and promotional activities, record-keeping and training on the responsible use and sale of cannabis.

Municipalities’ Critical Enforcement Role

In addition to enforcing the new retail store regime, municipalities will continue to be at the forefront for enforcement relating to the unauthorized sale or distribution of cannabis. Pursuant to the Cannabis Control Act, 2017 (CCA), transportation of cannabis by anyone who is in care or control of a vehicle (or boat) is prohibited unless the cannabis is in the original, unopened packaging or in baggage that is closed or not readily accessible to any person in the vehicle. If police have reasonable grounds to believe cannabis is being contained or transported in a vehicle (or boat) in any other manner, the officer may enter and search the vehicle and any person found therein at any time, without a warrant. Police are also expressly authorized under the CCA to inter alia seize property (including cannabis) if there are reasonable grounds to believe it will afford evidence of an offence under the CCA, to require persons to vacate a premises2 that is being used in contravention of the CCA, and close the premises immediately if a related charge is laid.

Importantly, the CCA expressly extends many of these enforcement powers3 on persons so designated by the Attorney General, including municipal by-law officers.

Deadline: January 22, 2019

While the deadline for opting out is fast approaching, many municipalities have already reached a decision regarding whether to permit retail cannabis stores within their boundaries. According to the AGCO4, of 411 Ontario municipalities, 23 (or 5.6 per cent) have formally opted out whereas 54 (or 13.1 per cent) have opted in. Municipalities that have opted out include Mississauga, Markham and Niagara-on-the-Lake, whereas Toronto, Ottawa and London have opted in.

To date, the position of the vast majority of municipalities, being the remaining 334 (or 81.3 per cent), is unknown. It remains to be seen how these municipalities will reach this important decision which requires not only extensive cost/benefit analysis, but also consideration of the specific interests of constituents as well as the fundamental goals of the new cannabis regime: keeping cannabis out of the hands of youth, keeping profits out of the pockets of criminals and protecting public health and safety.5


1 See the Ontario Cannabis Licence Act, 2018, SO 2018, c 12, Sch 2 which came into force on November 16, 2018 and provides for the provincial licensing of retail cannabis stores in Ontario.

2 This does not apply to persons residing within the premises (s. 17(3), CCA)

3 S. 21(1) of the CCA expressly limits the power to police only to arrest without a warrant a person who refuses to give his/her name and address, or where the officer has reasonable grounds to believe the name and address given were false

4 The running list of Ontario municipalities’ positions regarding opting in or out of permitting retail cannabis stores can be found online.

5 Objectives of Cannabis Legislation and Regulations, AGCO.

Authors

Kathryn Kirkpatrick 
kkirkpatrick@blg.com
416.367.6337

Natalie Salafia 
NSalafia@blg.com
416.367.6705

Other Author

Elizabeth White
Articling Student

Expertise

Cannabis
Municipal Liability
Insurance and Tort Liability