Since the repeal of Florida Administrative Code annotated rule 61A-3.053 (2015), attorneys representing a purchaser of a bar or liquor store must make their client keenly aware of the ticking clock that starts the day a new or transfer quota license is issued to their client.
Before the repeal, effective Jan. 10, the strict activation requirement contained in Florida Statute 561.29(1)(i) (2015) was easily extended by up to 24 months.
Now, attorneys must find creative solutions to delay the ticking clock.
What is a quota license?
A quota license is an alcoholic beverage license issued by the Florida Department of Business and Professional Regulations, Division of Alcoholic Beverages and Tobacco (ABT) that allows licensees to sell alcoholic beverages regardless of alcoholic content (i.e., liquor, beer and wine).
A quota license is required in order to operate a bar or liquor store.
Quota licenses are generally limited by population so the number in any Florida county shall not exceed one license for every 7,500 residents in that county.
As such, these licenses are significantly more valuable than those that are not so limited (such as special restaurant licenses), with current market values ranging from roughly $150,000 to over $700,000.
Why the rush?
Florida quota licensees only have six months plus 155 days (or approximately 11 months total) after obtaining a quota license to open for business or activate their licenses (the activation requirement).
After licensees open for business, they must also meet minimum hours of operation described in the statute.
Specifically, the section requires licensees that are issued a new or transfer quota license after Sept. 30, 1988, to “maintain the licensed premises in an active manner in which the licensed premises are open for business to the public for the bona fide retail sale of authorized alcoholic beverages during regular and reasonable business hours for at least eight hours a day for a period of 210 days or more during any 12-month period commencing six months after the acquisition of the license by the licensee.”
The stated intent is to require licensees to maximize alcoholic beverage sales and tax revenues earned therefrom.
A narrowly defined silver lining benefits licensees who have their licensed premises physically destroyed through no fault of their own, are unfortunate enough to suffer an incapacitating illness or injury that is likely to be prolonged or find themselves in enough trouble that a court prohibits the licensee from making sales of alcoholic beverages at the licensed premises.
The statute provides the ABT may grant extensions to the activation requirement of up to 24 months to those who find themselves in such a predicament.
Thus, if you think your client can find his or her way into one of the three aforementioned circumstances, you should stop reading this article and celebrate your client’s win against the ABT’s unrelenting timer.
If not, stick with me for a few more paragraphs.
Before Jan. 10, a more encompassing silver lining could have been found in 61A-3.053, which required the ABT to grant extensions of the activation requirement to licensees who requested an extension and demonstrated any of the following circumstances:
• The value of the license is less than the licensee’s original cost of the license
• The licensee has listed the license with a broker in a formal written agreement
• The licensee is advertising the license at least monthly in a newspaper of general circulation in the classified section
• If a corporate license has more than one shareholder, then documentation proving that corporate approval is pending for activation of the license at a new location
• Documentation that activation of the license is pending a land use approval of a new site (special exceptions, zoning, variances, environmental approvals, and comprehensive plan amendments)
• Documentation showing the ongoing negotiation of a lease or purchase of a building or land.
In sum, before the repeal of 61A-3.053, a licensee could simply place classified ads for the sale of its license — regardless of whether the licensee intended to sell its license or even respond to any inquiries prompted by the ad — in order to obtain an extension of the maximum activation requirement up to 24 months while tearing down a dilapidated bar and replacing it with a bar that appealed to neighbors and visitors.
Similarly, licensees could obtain extensions for pending land use approvals, which approvals are often extremely delayed due to unforeseen opposition or various procedural issues.
The now-repealed 61A-3.053 was frequently utilized by licensees, as extensions required to be granted by the ABT were often necessary to avoid license revocation due to violations of the activation requirement, such as when licensees faced extended land use approval periods, prolonged lease negotiations or delayed buildouts, all due to no fault of the licensee.
What if 11 months isn’t long enough?
A few ideas to ensure your client does not risk revocation of its quota license:
• Obtain all government approvals before the license purchase closes: Whether your client is purchasing a license as part of a real estate transaction or an independent transaction, make sure the closing of the license purchase is contingent on obtaining government approvals, including required permits and zoning approval of the license transfer application.
• Hire an efficient general contractor: If you know a general contractor who can get the job done in record timing, hire him or her.
• Ask the seller to hold the license in escrow after closing: After a seller activates the license, the seller can hold the license in escrow for up to 155 days before risking revocation of the license. This is a bad idea because, among other reasons, the statute provides that “ny attempt by a licensee to circumvent the intent of this law shall be grounds for revocation or suspension of the alcoholic beverage license.”