Psychedelic Healing Centers in Colorado: Are Landlords Prepared?

Share Post:

In November 2022, Colorado voters approved Proposition 122, known as the Natural Medicine Health Act of 2022 (NMHA). This legislation decriminalized the personal use and possession of certain psychedelic substances, including psilocybin and psilocin mushrooms. Additionally, the NMHA established the legal foundation for healing centers – places where adults may consume and experience the effects of regulated natural medicines (such as mushrooms) under the supervision of licensed facilitators. Given the nascent stage of the psychedelic industry in Colorado, landlords and tenants should tread carefully in negotiating a commercial lease for space to be used as a healing center.

I. Federal Enforcement Actions under the Controlled Substances Act.

As with marijuana, certain psychedelic substances decriminalized under Colorado’s NMHA are classified as Schedule I drugs under the federal Controlled Substances Act (CSA) – meaning that the manufacturing, distribution, and dispensing of psychedelic substances is subject to compliance with the CSA. Violating the drug trafficking provisions of the CSA may result in criminal prosecution of those involved (which may include large fines and lengthy prison sentences).[1] It also means the federal government does not recognize any accepted medical use for psychedelic substances and takes the position that such substances have a high potential for abuse.

Accordingly, leasing space to be used as a healing center will likely result in legal exposure to the landlord and tenant. Nonetheless, as we have seen with marijuana, certain landlords and tenants are willing to risk such exposure. While there is nothing in a commercial lease agreement that can fully insulate either party from such liability, the parties can mitigate their liability to one another by considering the following:

  • In the event the government takes enforcement action, who can terminate the lease?
  • What level of enforcement action is necessary to trigger any such termination right?
  • Will the parties indemnify one another under any circumstances related to law enforcement efforts?
  • What happens if tenant is unable to obtain their requisite permits?
  • What efforts are necessary to obtain such permits?

II. Local Regulation of Healing Centers.

The Natural Medicine Advisory Board, established by NMHA, is currently formulating state-level rules and regulations for the operation of healing centers and their employees. Given that local governments have the authority to regulate the time, place, and manner in which these centers operate, it should be expected that some municipalities will choose to regulate the operation of healing centers. It will be critical for landlords and tenants to understand these requirements to ensure that each party’s expectations for a particular space align with what is possible under applicable law.

If a local government requires an operator of a healing center to obtain certain permits or approvals, then the lease should address the possibility of potential delays and the impact of such delays on landlord/tenant’s work in the space and what happens if tenant is unable to obtain such permits or approvals (and the level of effort required to do the same).

III.  Other Considerations.

Beyond the aforementioned factors, several additional considerations should be addressed when leasing commercial space for a healing center:

  1. Insurance: Will the regular presence of individuals under the influence of psychedelics affect the landlord’s or tenant’s ability to obtain commercially reasonable insurance policies?
  2. Space Planning: What are the state and local regulations regarding the storage of psychedelic substances on the premises and the required security systems for the facility?
  3. Permitted Use: Does the permitted use clause in the lease allow the healing center to possess and utilize all psychedelics permitted under state law, or only those allowed at the time of lease execution?

This blog post is the first in a series exploring the decriminalization of psychedelic substances in Colorado and its implications for commercial leasing. It is not the recommendation of this author, this blog, or the firm that you violate any laws, including the Controlled Substances Act. For questions about such topics and negotiating your commercial lease, reach out to the real estate team at Milgrom & Daskam.

[1] See the Congressional Research Service Report titled,  “The Controlled Substances Act (CSA): A Legal Overview for the 118th Congres”, dated January 19, 2023:



Alex Finch joined Milgrom & Daskam as a Partner in May 2023. His practice focuses on commercial real estate development and leasing. He regularly advises real estate developers, landlords, and tenants in commercial transactions involving the purchase, sale, lease, and financing of office buildings, shopping centers, industrial buildings, and undeveloped/raw land.

More Articles

Work-Life Balance

A D-Day Wake Up Call

Travel and reflection, particularly when it takes us out of our comfort zone, strengthens our ability to empathize with others, improves our self-awareness and helps us better understand our place in the world; both as humans and as lawyers. We return to our roles more informed and better able to connect with our community and serve our clients in an ever more challenging world.

Read More »
Business & Corporate Law

Navigating the SBA’s Collection Efforts on COVID-19 Loans

During the height of the COVID-19 pandemic, the Small Business Administration (SBA) launched various loan programs, such as the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) program, to support businesses grappling with unprecedented economic challenges. These programs were lifelines for many, providing essential funds to keep businesses afloat. However, as we move forward, the SBA has started to collect on these loans, leading to new challenges and questions for borrowers.

Read More »
Business & Corporate Law

The Best-Laid Plans of Lawyers and Businessmen

As a transactional attorney, I focus my practice on helping clients plan for and react to business events much more so than I do on interpreting statutes or legislation. Sometimes, however, a statutory change or judicial ruling will have a wide-ranging—and retroactive—impact that is impossible to ignore.

Read More »