Prohibited Business Activities

You won't find a list of named prohibited industries like marijuana, CBD, or hemp in the GoDocs loan documents, and that's intentional. Rather than enumerating specific businesses (which would require constant updating as laws and lender policies evolve), the documents use broader legal and compliance frameworks that accomplish the same goal more durably.

Here's where those protections live:

1. PROPERTY USE LOCKED AT APPLICATION — NO MATERIAL CHANGE REPRESENTATION

The Loan Agreement includes a representation that there has been "no material change in the occupancy of the Mortgaged Property, or the business, financial condition or results of operations of Borrower, the Mortgaged Property or to the best of Borrower's knowledge, any tenant of the Mortgaged Property, since the date of Borrower's application for the Loan."

This is the starting point of the use-restriction framework. Whatever the property's use was when the Borrower applied — the use the Lender underwrote and approved — is the baseline that is locked in at closing. If a Borrower represented the property as a multi-tenant retail center or warehouse and then converted it to a cannabis operation, that representation would have been false at closing, and any subsequent change would breach the covenants that follow.

2. CHANGE IN USE REQUIRES LENDER APPROVAL — D.11 "USE OF MORTGAGED PROPERTY"

Section D.11 of the Loan Agreement states that Borrower shall not "allow changes in the use for which all or any part of the Mortgaged Property was being used at the time this Loan Agreement was executed" except for any change in use approved by Lender. This covenant runs for the entire life of the loan.

This is the forward-looking companion to the representation above. Together, they create a clean bookend: the Borrower declares the property's use at application, that use is confirmed at closing, and the Borrower cannot change it without the Lender's explicit approval. If a tenant or the Borrower pivots to a restricted business — marijuana dispensary, cultivation facility, processing operation — without seeking and obtaining Lender approval, that is a breach of this covenant and an Event of Default. Lender approval would, of course, never be granted for a use that conflicts with the Lender's own compliance obligations as a federally regulated institution.

3. ILLEGAL ACTIVITIES COVENANT — "LOAN AGREEMENT"

The Loan Agreement contains an affirmative covenant requiring that Borrower "take appropriate measures to prevent, and shall not engage in or knowingly permit, any illegal activities at the Mortgaged Property that could endanger tenants or visitors, result in damage to the Mortgaged Property, result in forfeiture of the Mortgaged Property, or otherwise materially impair the lien created by the Mortgage or Lender's interest in the Mortgaged Property."

Your outlined business activities may be, or later become, illegal at some level of government.  The Borrower is bound from day one of the loan, not just at origination.

4. NO PROCEEDS FROM ILLEGAL ACTIVITY — LOAN AGREEMENT

The Loan Agreement includes a representation that "no portion of the Mortgaged Property has been or will be purchased, improved, equipped, or furnished with the proceeds of any illegal activity." This covers the property itself — meaning the Lender has a documented basis to act if it discovers the property was acquired or improved using proceeds tied to federally prohibited commerce.

5. USE OF LOAN PROCEEDS — ANTI-MONEY LAUNDERING COVENANT

The Loan Agreement expressly states that "Borrower will not, directly or indirectly, use the proceeds of the Loan in any manner that would violate any of the Anti-Money Laundering Laws." The Anti-Money Laundering Laws are broadly defined to include the USA PATRIOT Act and the Currency and Foreign Transactions Reporting Act, among others. Funneling loan proceeds into a federally prohibited enterprise would trigger this provision directly.

6. COMPLIANCE WITH ALL LAWS — BROAD OPERATIONAL COVENANT

The Loan Agreement requires Borrower to "comply with all laws, ordinances, regulations and requirements of any Governmental Authority" relating to or affecting the Mortgaged Property, including laws pertaining to health and safety, zoning and land use. This catches any activity that is lawful under state law but unlawful under federal law — exactly the marijuana/hemp gray zone — because federal law is included within "all laws."

7. FORFEITURE AND RACKETEERING REPRESENTATIONS

The Loan Agreement includes representations that Borrower has not engaged in any "pattern of racketeering activity" within the meaning of 18 U.S.C. § 1961, and that no act or omission has given any Governmental Authority a right of seizure against the Mortgaged Property. Federally prohibited drug activity is a classic predicate for civil asset forfeiture — so a Borrower operating a marijuana business on the property would be in breach of these representations, giving the Lender a clear Event of Default.

8. CRIMINAL CHARGE / CONVICTION — EVENT OF DEFAULT

The Loan Agreement defines it as an Event of Default if Borrower, any Equity Owner, any Guarantor, or any Responsible Officer is "criminally charged, indicted, or convicted for... violating a state or federal law... that could lead to a forfeiture of any material assets of Borrower... or the Mortgaged Property." 

WHY THE DOCUMENTS DON'T NAME SPECIFIC INDUSTRIES

The document architecture avoids naming specific prohibited businesses deliberately, and it's the right approach for a few reasons:

  • Laws change. 

  • Federal vs. state conflict is already built in. The "comply with all laws" and "illegal activities" covenants implicitly capture the federal/state conflict without the Lender having to take a public policy position on any specific industry.

  • A named list creates gaps. If the document prohibits marijuana but doesn't name a future analogous substance, an argument could arise that it's permitted. Broad legal compliance language deferring to the lender's discretion and determination has no such gap.

  • The use-change framework is the cleanest protection of all. By requiring Lender approval for any change in property use, the Lender retains discretionary control regardless of what the prohibited activity is — named or unnamed, existing or emerging. No list needed.

The bottom line: the Lender is fully protected across the entire loan lifecycle. The Borrower's use of the property is established at application, confirmed at closing, and cannot change without Lender approval. Any pivot to a federally restricted business — without that approval — would simultaneously breach the use covenant, the illegal activities covenant, the compliance-with-laws covenant, and potentially the forfeiture and racketeering representations. Each of those independently constitutes an Event of Default giving the Lender the right to accelerate and pursue all remedies.