During the liquor license transfer process, it’s a common misconception that a licensee owns the licence and can take it to whichever premises they choose to trade from. Rather, a liquor licence only authorises a licensee to sell liquor from a particular approved premises. A liquor licence is an integral part of a hospitality business. It is most important that purchasers understand the process of transferring a liquor licence, and how the licence will limit future operations. In addition to adhering to state and local government requirements for transferring a liquor licence, there are a few factors which purchasers must consider.
Sale of business contract
Usually, a contract for the sale of a restaurant will be conditional on the successful transfer of the liquor licence. The processes for transferring a liquor licence depend on the state of the business premises. The contract will provide the obligations on each party relating to transferring the licence, and outline which party will pay the costs associated with the transfer.
Due diligence and conditions of the licence
Purchasers must ensure that they understand how the conditions of the particular type of liquor licence (or permits) held by the business will impact on future operations. For example, in New South Wales, a licensee of an on-premises restaurant licence can only provide alcohol with another product or service (e.g. food service, karaoke), and alcohol service will be restricted to certain trading hours.
New licensees must also understand the implications of past and future disciplinary proceedings. Breaching the conditions of a liquor licence can be disastrous for a hospitality business and can lead to large fines, criminal convictions and further licence conditions. Purchasers should be aware of the history of the licence, as prior incidents may be considered in future disciplinary proceedings. Before entering into a sale of business contract, it is important that purchasers conduct thorough due diligence in relation to the breaches of past licensees.
Often the lease for the premises will include provisions relating to the licence. The purchaser may negotiate for the lease to commence only once they obtain the liquor licence. If the vendor’s lease is to assigned to the purchaser, the vendor should ensure that they are released from their obligations under the lease and indemnified for the purchaser’s breach of liquor laws.
If you need assistance with buying or selling a business with a liquor licence, call Butlers Business Lawyers on (02) 4929 7002 for an obligation free chat or email us at firstname.lastname@example.org. Our team has extensive experience working with vendors and purchasers in the hospitality industry, and act in sale of business contracts all over Australia.
“Butlers prepared standard contracts for every-day use in our business. The team ensured that the contracts complied with Australian Consumer Law and advised on best practices for PPSR registration. Their experience and knowledge in this complicated area was invaluable, and we feel that our business now has the best protection from expensive legal disputes.”