Lease Restructuring After an Unlawful Detainer: When Staying Makes Sense

Lease Restructuring After an Unlawful Detainer Is More Common Than You Think

When most cannabis operators receive an unlawful detainer (UD), they assume the outcome is binary: leave or be forced out.

In reality, that assumption is often wrong.

In today’s cannabis real estate market, lease restructuring after an unlawful detainer is not only possible, it is increasingly common. As rents reset, capital tightens, and landlords confront the same market realities as tenants, many UDs become negotiation leverage rather than eviction endpoints.

This article is not legal advice. It is a practical, experience-based look at what actually happens after a cannabis UD, when staying in place can make sense, and how both sides approach restructuring when eviction is not the optimal outcome.

For background on what operators should expect when a UD is first served, see our prior analysis, When Cannabis Deals Go Wrong: What to Expect from an Unlawful Detainer, which lays the groundwork for this discussion.

When Does Lease Restructuring After an Unlawful Detainer Actually Work?

Lease restructuring after a UD tends to work when economic reality aligns for both parties.

The most successful restructurings typically share a few conditions:

• The tenant still has an operating license and is in regulatory good standing

• The location remains viable for cannabis use under local zoning

• The landlord understands the difficulty of replacing a cannabis tenant

• The original lease rent is clearly above current market

When those factors are present, eviction often destroys more value than it creates.

From a landlord’s perspective, removing a cannabis tenant does not mean instant replacement. Licensing constraints, zoning limits, and capital requirements can leave properties dark for extended periods. From the tenant’s side, relocation often means losing sunk buildout costs, disrupting operations, and risking license continuity.

That shared pain is where restructuring begins.

What Landlords Usually Want vs. What Tenants Expect

One of the biggest disconnects in post-UD negotiations is misaligned expectations.

What Landlords Typically Want

Landlords issuing a UD are rarely trying to be punitive. In most cases, they want:

• Rent certainty and predictability

• A reset to sustainable payment levels

• Reduced risk of future defaults

• A cooperative tenant relationship

Many landlords would rather collect less rent consistently than chase higher rent through litigation and vacancy.

What Tenants Often Expect

Tenants, on the other hand, often expect:

• Immediate rent forgiveness

• Large retroactive write-offs

• One-sided concessions

• A return to “survival mode” pricing

That mismatch can derail otherwise workable deals.

Successful restructurings usually land somewhere in the middle: partial arrears treatment, revised rent schedules, and forward-looking terms that reflect the current market rather than the optimism of 2021-era leases.

Why Some Unlawful Detainers End in Better Deals, Not Evictions

It sounds counterintuitive, but some of the best lease terms operators ever receive come after a UD.

Why?

Because the UD forces honesty.

The filing resets the negotiating table. It strips away assumptions and forces both sides to confront facts:

• What is this space actually worth today?

• How long would it sit vacant?

• What would enforcement or eviction realistically yield?

In many cases, landlords discover that the tenant they already have, even at a lower rent, is the least risky option available.

This dynamic has only intensified as federal policy signals have shifted. Developments around cannabis rescheduling under the Trump administration have begun to stabilize long-term outlooks, but short-term volatility remains. That uncertainty makes continuity more valuable than confrontation.

At the same time, ongoing pressure from the illicit market continues to cap retail pricing power, limiting how much rent licensed operators can realistically support. We have explored these structural challenges in depth in our analysis of threats facing California’s licensed cannabis industry.

Against that backdrop, flexibility becomes rational.

How “At-Market Rent” Gets Recalculated in Practice

One of the most misunderstood concepts in cannabis lease restructuring is “at-market rent.”

At-market does not mean:

• The highest rent ever paid

• The rent needed to cover landlord expectations

• The rent assumed during peak expansion

In practice, at-market rent is recalculated using:

• Recent comparable cannabis leases, not legacy deals

• Current revenue realities for the tenant

• Licensing scarcity and replacement timelines

• Ongoing compliance and operating costs

Often, that recalculation results in rents materially lower than the original lease, especially for deals signed during periods of exuberance.

Importantly, restructuring is rarely just about rent. It often includes:

• Extended lease terms for stability

• Modified escalation schedules

• Adjusted personal guarantee exposure

• Clearer default cure provisions

The goal is not charity. The goal is durability.

When to Fight, When to Fold, When to Renegotiate

Not every lease is worth saving.

From an operator’s perspective:

• Fight when the location is strategic, licensed, and operationally sound

• Fold when rent, taxes, and competition make profitability impossible

• Renegotiate when economics have shifted but fundamentals remain

From a landlord’s perspective:

• Enforcement makes sense when alternative tenants exist

• Restructuring makes sense when vacancy risk is real

• Cooperation makes sense when both sides benefit

The operators who survive downturns are not the ones who avoid hard conversations. They are the ones who engage them early and realistically.

Lease Restructuring Is Part of the New Cannabis Market Reality

Cannabis real estate is maturing.

The days of one-sided leases, unchecked escalations, and assumption-based pricing are fading. In their place is a more sober market where leases evolve alongside revenue, regulation, and competition.

Lease restructuring after an unlawful detainer is not a sign of failure. In many cases, it is a sign of adaptation.

As we continue the Good Deals Gone Bad series, we will explore other scenarios where early optimism collided with market reality and what operators can learn from those outcomes.

Sometimes the smartest move is not walking away. It is renegotiating the terms under which you stay.

FAQ

Q: When does lease restructuring make sense for cannabis tenants?

A: Restructuring makes sense when the location remains viable, the license is intact, and the existing rent is clearly above market. In these cases, renegotiation may preserve value for both parties.

Q: How is at-market rent determined after a cannabis unlawful detainer?

A: At-market rent is typically recalculated using recent cannabis lease comps, current operator margins, and regulatory realities rather than historic peak pricing.

Q: Is lease restructuring legal advice?

A: No. This discussion reflects market observations and real-world experience, not legal guidance. Operators should consult qualified legal counsel before taking action.