Liquor Licenses Transactions

Seth P. Tompkins
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Purchasing real estate or businesses associated with the sale of alcoholic beverages are unlike ordinary transactions due to the strict rules and regulations imposed by the Michigan Liquor Control Commission ("MLCC").

With the recent increase in the defaults of commercial debtors in the State of Michigan, banks, credit unions, private equity groups and other financial institutions which typically do not get involved in the day to day operations of the businesses of their borrowers are finding themselves in situations where to protect collateral, they must take on an active role in maintaining the businesses of restaurants, hotels, golf courses, gas stations, markets or other businesses licensed by MLCC.

Depending upon the municipality, it may take several months, or sometimes up to a year, from the time an application is placed with the MLCC, to transfer MLCC licensed real estate or businesses.

Receiverships. Even an order from a court for the appointment of a receiver over the operations of business assets will not immediately transfer the ownership of the MLCC liquor license. A court appointed receiver still undergoes an investigation by both State and municipal authorities. However, if a special receiver, who is also a Michigan licensed attorney, is appointed over the liquor license the investigation is waived and the transfer can take typically take place within 7 to 10 days.

Local Cooperation. Involving the local policing authority and municipal managers in some of the decision making process on your intentions with respect to the MLCC licensed business will make local approval much smoother, and will hasten the timeline in completing the MLCC approval process.

Special Liquor Licenses. In situations in which a business owner or lender finds themselves in a position where a liquor license is needed for a day or more in order to either satisfy their obligations with respect to a contract, or with respect to their customer's demands, (i.e. a existing food service businesses looking to become MLCC licensed, but the approval has not yet been granted, or, a lender (or a lender's receiver) takes over a restaurant, hotel or golf course, and the status of the MLCC license is in dispute or the transfer to the receiver has not yet taken place), partnering with a Michigan non-profit corporation may solve the problem. Because Michigan non-profit corporations are permitted up to twelve (12) MLCC Special Liquor Licenses per calendar year, which allow them to sell alcoholic beverages to the public for fundraising purposes, in situations where businesses find themselves in need of a "gap-filler" to provide alcoholic beverages for their customers, so long as the business does not mind 100% of the profits derived from the sale of the alcoholic beverages going to a non-profit organization, then partnering with a Michigan non-profit or charity can provide that liquor license for the day.

The Michigan Liquor Code and the rules and regulations of the MLCC are important to be mindful of when involving yourself in a transfer of MLCC licensed real estate or businesses.