Effective immediately and without warning, Health Canada has added a major condition to the application process for anyone looking to secure a cannabis cultivation, production, or sales licence.

This morning (May 8), the department announced all new applicants must have “a fully built site that meets all the requirements of the Cannabis Regulations at the time of their application.”

Existing applicants waiting in queue will be subject to a “high-level review” to ensure they have a compliant building secured, and will be sent a letter outlining their status and next steps.

Health Canada says the reason for the new site requirements stem from a review of its current licensing process. The department says more than 70 percent of applicants who successfully passed the initial review have since failed to provide evidence of a built facility that meets the regulatory requirements.

The release reads: “As a result, a significant amount of resources are being used to review applications from entities that are not ready to begin operations, contributing to wait times for more mature applications and an inefficient allocation of resources.”

Since changes to the licensing framework were enacted in May 2017, Health Canada says it has licensed more than 129 new sites totaling more than 600,000 square metres of space under active cultivation.

Thus far, the application process has been tailored to large-scale licensed producers—allowing major corporations to proliferate the market.

Many have already pointed out this new regulatory hurdle as a barrier to access to small businesses and micro-cultivators looking to break in to the industry.

I work with a lot of micro applicants. I would expect some to give up now due to increased risk in an already uncertain environment.

This strongly disincentivises many small business with moderate appetites for risk from participating.

— Travis Lane (@BeardedGreenly) May 8, 2019

This will 100% eliminate a specific wave of entrepreneurs who could've pulled together $200-300k and leveraged a license application into a financed build-out, but are unable to bootstrap $2-4MM+ for a facility as step 1.

— Brandon Wright (@AllWrightByMe) May 8, 2019

Major news for licensing applications - and it’s not good (unless maybe you’re Canopy). https://t.co/dcEKujqtgd

— Jamie Shaw  (@jamiesashaw) May 8, 2019

The barriers to entry just got higher. https://t.co/FK0ukUP8IY

— Dan Sutton (@DSutton1986) May 8, 2019

Statement from ⁦@GovCanHealth⁩ on changes to #cannabis licensing.

Med sites must be fully built pre-application.

The good news is this applies only to medical license applicants. The bad news is that it’s a huge barrier to small medical applicants https://t.co/I731kR1W9u

— KirkTousaw (@KirkTousaw) May 8, 2019

There was no notice given ahead of today’s announcement. Health Canada is holding public conference calls throughout the day to answer questions.