Liquor licensing 101: Threshold issues to consider when buying or beginning a licensed business
Obtaining a liquor license in the state of New York can be a complicated process, and the ongoing backlog at the New York State Liquor Authority (the SLA) is resulting in application processing times of between six and eight months; however, in many cases, applicants may be able to obtain a temporary permit to operate while the application is reviewed.
If you are thinking of starting or purchasing a business requiring a liquor license, there are a number of threshold issues to consider before you begin the application process. Further, both the Alcoholic Beverage Control Law, and the application process itself are undergoing a series of changes which can create confusion for applicants.
Understanding the immediate area surrounding your proposed premises is crucial. For those looking to open a new package (wine and liquor) store, the number and proximity of existing package stores can directly impact whether your license will be granted. Similarly, if you are looking to open or purchase a bar, hotel or restaurant, and there are three or more liquor licenses located within 500 feet, the SLA cannot approve your license unless, and until, there is an affirmative finding by an administrative law judge that issuing the license is in the public interest. This process also delays your ability to obtain a temporary permit.
In addition, in order to submit the license application, you must have some right to the premises, which can be via lease, deed or a binding letter of intent to lease or buy. Merely identifying the location is not sufficient for the SLA to process the application; you must submit documentation showing you have the sole right to use and control the premises to be covered by the license, for a period of at least the duration of the license in question, typically one to three years.
This requirement, combined with the SLA backlog, can create issues for applicants who do not have clauses in their agreements that give them flexibility based on the timing and/or ultimate approval of the license.
The SLA has specific requirements regarding who needs to be disclosed and licensed as part of the application process. All required principals, officers and investors of the applicant entity must submit personal questionnaires and photo identification and be fingerprinted. The SLA does not allow an applicant to make changes to the investors or the corporate structure between the time the application is submitted and the time it is approved.
Once the application is approved, the applicant entity can then file an application for approval of corporate change to make changes to the corporate structure and to add and/or remove principals and investors. This approval can take an additional six to eight months. As a result of the cumbersome process, applicants should ensure that they have sufficient funds to be able to operate for one to two years without the need to bring on additional investors.
Further, any investors and/or principals should be aware they will be affiliated with the license and thus retain responsibility for at least that period of time.
In an effort to cut down on processing times, the SLA in September 2022 announced an initiative to simplify the application process. A number of items are no longer required to be submitted including proof of citizenship, financial documentation and certain insurance information. The SLA also issued clarifications with respect to diagrams, required disclosure of licensed principals, changes to the method of operation and availability of temporary permits. Though these changes are already in effect, the application documents have not yet been updated, which can create confusion for applicants.
Further, the Commission to Reform the Alcoholic Beverage Control Law formed by New York Gov. Kathy Hochul in 2022 recently released its recommendations which are aimed at industry reform and modernization. These recommendations include a number of changes to the application process itself, including the elimination of the 200- and 500-foot laws and allowing submission of the application to the SLA simultaneously with notice to the relevant municipality.
Other recommendations include allowing changes to corporate structure prior to SLA approval, permitting individuals to have an interest in more than one package store, loosening of the tied-house laws, changing the standard required to approve new package stores and an expansion of the products permitted to be sold in package stores. While the commission’s recommendations will require legislative action, there will likely be at least one bill introduced shortly to implement these recommendations. If such a bill is passed during the current legislative session, set to end on June 8, 2023, these changes could be implemented in the near future.
If you have questions regarding the operation of your existing New York licensed business or are contemplating applying for a new license, please reach out to Alexandra Becker at Whiteman Osterman & Hanna.
Whiteman Osterman & Hanna, the Capital Region’s largest law firm with over 100 attorneys, has developed a reputation for innovative solutions and professional leadership. For almost 50 years, the firm has served the legal needs of business, government, non-for-profits, and individuals in the Capital Region and across New York State.
As seen in the Albany Business Review - view here.