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Liquor Control Commission Proposes Rule Change Regarding Length of Time Licensee Can Keep License in Escrow

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Ronald D. Richards, Jr.
Foster Swift Municipal Law News
June 2009

Because of the economic conditions that now exist, many persons or entities holding liquor licenses (licensees) have had to close their businesses – indirectly leading to lower tax bases and hurting municipalities’ bottom lines. Those licensees may have tried selling the license, but absent an acceptable offer may have declined to do so. Those licensees may therefore have pursued the Liquor Control Code’s option of placing their license in escrow (i.e., inactive status) while awaiting an acceptable offer for the license or the opportunity to reopen their businesses. Currently, the Liquor Control Code allows a licensee to keep a license in escrow for 5 years. The current status of economic affairs might mean that for some licensees, the 5-year escrow period is not long enough: 5 years can often arrive quickly, forcing licensees to either give up the license or sell it for less than an expected return. Now, though, there is potentially some good news out there for liquor license holders – news that ultimately may help municipalities’ bottom lines.

Recently, the Liquor Control Commission (Commission) has issued a “Request for Rulemaking.” As part of this initiative, proposed rules – including rules regarding the length of time a licensee can keep a license in escrow – are being considered.

The proposed new rules would amend R 436.1107 to allow the Commission to extend the period that a liquor license may be held in escrow beyond the 5-year period currently allowed. The new rules have not yet been adopted, nor is it clear how long the Commission may extend the escrow period. Nevertheless, any licensee currently holding a liquor license in escrow that either just expired on April 30, 2009 (the end of the Commission’s licensing year) or will expire on April 30, 2010, may wish to apply to the Commission to extend the escrow period under the new rule (if adopted). To request an extension, a licensee must (1) submit a request to the Commission for an extension of time to sell or activate a license; and(2) demonstrate good cause for the extension.

Of course, there is no guarantee that the contemplated rules will be adopted. Nor is there any assurance that the rules are adopted every escrow extension request will be granted. However, if passed, the proposed rules change will at the very least allow the Commission to review the request for extension before a license has been deemed expired or terminated.