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Navigating Through The New York State Liquor Authority

By Donald Bernstein

T he issuance of a liquor license in New York is a privilege. The New York State Liquor Authority is vested with the broad discretionary power to determine whether the “public convenience and advantage” will be promoted by the issuance of licenses to traffic in alcoholic beverages. The State Liquor Authority is granted the power to issue or refuse to issue licenses, and to revoke, cancel or suspend licenses.

Obtaining a Liquor License

A prospective restaurateur is most concerned about three matters when applying for an on-premises liquor license. First, whether the premises are licensable. Second, whether the individual owners of the company to be licensed may be disqualified in any respect. Third, if the “500 foot rule” applies, and it usually does in New York City, whether the applicant can demonstrate, as required by statute, that it is in the “public interest” for the license to be issued.

Before signing a lease for restaurant space or purchasing an existing business, it is critical to investigate those matters thoroughly with experienced liquor counsel.

Are the Premises Licensable?

Two of the most important rules in New York are what are commonly known as the “200 Foot Rule” and the “500 Foot Rule.” The 200 Foot Rule disqualifies any location from obtaining an on-premises liquor license if its entrance is located within 200 feet on the same street or avenue of a building used exclusively as a school, church or other house of worship.

There are a number of nuances to this rule. For example, premises around the corner from a church, school or house of worship would not be disqualified since they are not on the same “street or avenue” as the premises sought to be licensed. Additionally, if the building housing the school or church is used for any non-church or non-school purpose, the preclusion will not apply. In a close situation, there are also very specific rules as to how the 200 feet is measured and which exits or entrances count and which do not.

What is most important about the 200 Foot Rule is that if and when it applies, there are few and very limited exceptions to this rule. It is therefore critical to conduct an area survey before you sign a lease.

The “500 Foot Rule” is a bit more complex in its application and has proven to be the greatest obstacle to obtaining a liquor license in the City of New York. The rule essentially states that no license for on-premises liquor consumption may be granted for any premises within 500 feet of three or more existing premises licensed and operating with an on-premises liquor license, except that the State Liquor Authority may issue the license. If, after consulting with the local community board and after holding a public hearing upon notice, the Liquor Authority determines that the license would be “in the public interest.”

The statute identifies a number of factors to be considered in applying the “public interest” test, including the number, classes and character of licenses in proximity to the location, evidence that all necessary licenses and permits have been obtained, the effect of the grant of the license on traffic and parking, history of prior liquor violations and criminal activity at the location, its effect on noise level, and any other factors relevant to determining the public convenience and advantage.

Naturally, the location of the business to be licensed, and its method of operation, are primary factors in determining the ease or difficulty of satisfying the 500 Foot Rule test. For example, a white tablecloth restaurant in midtown should have few problems. However, a bar open late at night, or a restaurant with an outdoor courtyard in a residential area may be expected to meet more community resistance.

A prospective licensee must deal with both the local Community Board and the State Liquor Authority in satisfying the 500 Foot Rule test, although ultimately the decision rests with the State Liquor Authority. The Community Board has limited power, which is only to recommend approval or disapproval to the State Liquor Authority, and that recommendation is not binding. Nevertheless, the Community Board can be persuasive, depending on the extent of any opposition. The best strategy is to try to win over the Community Board and not simply wait for the 500 Foot Rule hearing at the State Liquor Authority.

The applicant must be prepared to make presentations to both the Community Board and the State Liquor Authority to demonstrate why it is in the “public interest” to obtain a license when the 500 Foot Rule applies, which, in some situations, requires careful and thoughtful planning and preparation.

Who May Be Licensed?

There are also numerous restrictions by law as to who may be licensed. For example a person convicted of a felony or certain misdemeanors may not be licensed unless he or she has received a Certificate of Relief from Disabilities. A police official also cannot be licensed.

Another important rule, the “Tied House” Rule also makes it unlawful for a liquor manufacturer or a wholesaler to be interested directly or indirectly in any premises where any alcoholic beverage is sold at retail. This rule is an absolute prohibition and cannot be waived by the State Liquor Authority. There is, however, a limited exception allowing a licensed brewer to apply for a license to sell beer or liquor.

An applicant must also keep an eye on timing - a license application cannot even be filed until thirty days after written notification of an intent to file is given to the Local Community Board. This has to be taken into account in negotiating a rent concession period, and even more critically, in planning an opening.

Keeping the License

Liquor license issues do not end merely upon the issuance of the initial license and the opening of the restaurant for business. The restaurateur must make sure that any changes to the ownership of the company, or in the physical space that is licensed, all comply with law.

For example, the Alcoholic Beverage Control Law states that if there is any change after the granting of the license in any facts required to be set forth in the original application, a verified notice of such change is required to be filed with the State Liquor Authority within ten days of such change. Failure to do so, if willful and deliberate, may be cause for revocation.

If there is a change in the officers, directors or shareholders of a corporate licensee, or a change in the members of a limited liability company, the change must first be approved by the State Liquor Authority. A change in the tradename of the business must also be approved.

The law also requires that before any “substantial alteration” is made to a licensed premises, an application for approval must be filed. This includes any enlargement or continuation of the licensed premises, or any other physical change that materially affects the character of the premises or any change in the location or size of bars. If a licensee wishes to serve liquor at a private function outside the licensed premises, it also must apply for and obtain a caterer’s permit.

The licensee should also have its staff educated on most common liquor license violations that could be cause for suspension, cancellation or revocation of a liquor license. The most common violations are sale to a minor, disorderly premises, and infestation of bottles, although there are many others. Repeated violations not only prove very costly, but also, depending on the number and character of the violations, could jeopardize the continued existence of the license.

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