A battle is brewing in Nanaimo where a marijuana dispensary without a business licence appears to have set up shop next door to a day care.

Parents dropping their toddlers off at Kidz Kompany, a child care centre on Terminal Avenue, said they were shocked to see signs go up for “Leaf Labs” on Wednesday, just 25 feet from the day care’s entrance.

“I took notice that there was some signage up and there was a certain scent in the air, and that’s how I found out,” said Stephanie Mielty, who takes her two-year-old son Gabriel to Kidz Kompany three days a week. “I was appalled that the City of Nanaimo allowed this to go through.”

Mielty said she also saw a man in a vehicle rolling a joint while smoking one just steps away from where her child goes to learn and play.

“I think they let this one really slip through the cracks,” she said.

While Nanaimo city staff told CTV News they have been getting numerous complaints about Leaf Labs, they confirmed the city has not issued a licence to the business.

“The city has been made aware of it by some of the occupants of the day care as well as some of the people who are on the strata,” said Nelda Richardson, the city’s business licensing manager. “We’re looking into it. We certainly haven’t issued any business licences nor have we received any applications.”

No staff were onsite at the dispensary Thursday to speak with CTV News, but in an email the company said it would be “discreet, have a strict adult only policy and the clientele are restricted only to medical consumers.”

It also said procedures were in place to prevent smells from escaping the premises and would ban any customers from smoking in or around the building.

The business said it plans on opening in a couple of days.

Parents in #Nanaimo are upset that a marijuana dispensary is planning to open up approx 25 feet from a daycare. Reaction tonight @CTVNewsVI pic.twitter.com/PkU4wi0uyu — Andrew Garland (@CTVNewsAndy) February 9, 2017

The owner of the daycare said she’s concerned that when it does open, having a pot dispensary next door could harm her business.

“A lot of families have reacted in a very negative way. They’re concerned, it’s their children,” said Melissa Burke. “If there’s even just a small per cent chance that there’s going to be people smoking it outside or accessing it that shouldn’t be accessing it, it puts the health and safety of the children at risk and the health and safety of the staff at risk.”

Nanaimo has not enacted regulations for illegal pot dispensaries the same way cities like Victoria and Vancouver have.

It has closed dispensaries before, reasoning that they’re still illegal in the eyes of the federal government until it fulfills its pledge of legalizing marijuana.

The city won’t say what if any action it will take if the dispensary opens for business, but the RCMP is keeping a close watch.

“We are monitoring the situation and we hope to resolve it informally in the near future,” said Nanaimo RCMP spokesman Const. Gary O’Brien. “Anytime there’s a dispensary opening in proximity to a day care, we have to take that into consideration.”

In 2015, Mounties raided three dispensaries in the Harbour City, making nine arrests in a single day.