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The Balmoral, an occupancy hotel, sits in Vancouver’s Downtown Eastside and is home to roughly 140 tenants.

Rafal Gerszak/The Globe and Mail

The City of Vancouver has rejected a marijuana dispensary application from a company linked to a family that owns several rundown single-room hotels in the Downtown Eastside.

Two dozen housing activists protested a hearing Wednesday afternoon related to Herban Legends, a proposed dispensary overseen by a manager of one of the Sahota family's five single-room occupancy hotels. Three of the Sahota's hotels are located in the Downtown Eastside, including the Balmoral, which was ordered evacuated by the city last month amid concerns the building was structurally unsound.

The hearing was at the city's independent board of variance, which can grant people exemptions from zoning bylaws. The dispensary application was initially denied because the proposed location is closer than the allowable 300 metres from a nearby kindergarten.

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Speaker after speaker urged the board to reject the appeal because of the track record of the Sahota family's property management.

"If the developers have money to invest [in a dispensary], why aren't they fixing up those hotels?," said Doug Bruce, who lives near the proposed pot shop on the city's west side. "They shouldn't be charging off in other directions."

Two years ago, the City of Vancouver introduced a system to licence and regulate dispensaries, even though the shops remain illegal under federal law. The system includes licensing fees of up to $30,000 and imposes conditions that include limits on how close dispensaries can be to schools, community centres and other cannabis shops.

In response to Herban Legends's application, the board unanimously denied the appeal to continue the licensing process. Despite the protest outside and elevated security at the hearing, the five board members said it was irrelevant whether the Sahotas were behind the application, only that the location was too close to the school.

The aspiring dispensary business is owned by a numbered company whose director is the current manager of the Astoria Hotel. Before and after the hearing, the man refused to answer any questions about his role in the dispensary application.

The Sahotas have gone back and forth with the city for years over maintenance and safety concerns at their SROs, which serve as housing for many of the Downtown Eastside's poorest residents. Last month, about 140 tenants of the Balmoral Hotel were ordered to leave after the city concluded the building was unsafe to occupy and must be repaired to ensure it doesn't collapse.

Tenants of the Balmoral and another hotel, the Regent, have also filed proposed class-action lawsuits against the family.

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The Sahotas have not commented publicly about the alleged problems at the Balmoral or their other single-room hotels.

Kirk Tousaw, a prominent cannabis lawyer who represented the applicant in their appeal, said the hearing was not the forum "in which the board can or should debate the very serious issues of single-room occupancy housing and the city's response to that."

"I don't think many of the comments were relevant to the issues," he said of the dozen or so speakers from across the city.

Mr. Tousaw argued that the school in question was a daycare that was not listed as a school on the city or Vancouver School Board's website. He said the students at the daycare were five years old or younger and had no concept of what a dispensary is, plus they are always accompanied by at least two adults whenever they are taken off the grounds during the day.

Board members said the kindergarten in question meets the bylaw's definition of a school and, as such, must be kept further away from any pot shops.

Vancouver is among several cities in Canada that have decided to provide licences to illegal marijuana dispensaries ahead of the federal government's plan to legalize the drug for recreational use next year. The federal government plans to leave it to provinces to figure out where legal marijuana will be sold, and politicians in some parts of the country have been pushing for pot to be sold through liquor stores or pharmacies instead of dispensaries.

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Vancouver has so far given nine pot shops business licences and is processing another two dozen or so applications of stores that are either far enough away from schools and community centres or have been granted variances by the independent board.

Another 60 or so have stayed open illegally and are subject to daily fines from the city after failing to receive a licence .

Meanwhile, housing and legal advocates say the city has been lax in issuing fines to SRO owners such as the Sahotas under its standards and maintenance bylaw, allowing landlords to let their buildings slide into disrepair.

The city prosecutor's office is considering up to 64 bylaw charges against the Sahotas for the Balmoral.

Across Vancouver, there were $6,800 in penalties issued under the bylaw in 2014 and about $15,000 in 2015, city spokesman Jag Sandhu said.

A breakdown of those penalties was not made available to The Globe and Mail. The Balmoral has an assessed property value of about $10-million.

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