LIQUOR CONTROL BOARD
[ 40 PA. CODE CH. 7 ]
Right to Occupy
[45 Pa.B. 2614]
[Saturday, May 30, 2015]
The Liquor Control Board (Board), under the authority of section 207(i) of the Liquor Code (47 P. S. § 2-207(i)), proposes to amend §§ 7.2 and 7.4 (relating to transfers of ownership; and transfers of ownership and location).
The Board's regulations require an applicant to establish its right to occupy the proposed licensed premises. While this is typically done through a lease or deed, some entities have acquired the right to occupy a premises through a contract between it and the owner of the premises. Sections 7.2 and 7.4 are proposed to be amended to reflect the fact that the right to occupy may be obtained through a means other than a lease or deed.
The principal beneficiaries will be those entities involved in the ownership and operation of hotels. Management companies typically operate a chain of hotels under a common name on behalf of different real estate holders. However, they typically occupy the premises under a management agreement with the real estate owner rather than with a deed or lease. Since §§ 7.2 and 7.4 contemplate that the licensee will have a lease or deed to the premises, the real estate owner typically applies for the license in his name and list the actual operator of the hotel as a management company.
While management companies are permitted under the Liquor Code (47 P. S. §§ 1-101—10-1001), the management agreement between the parties are subject to the Board's review and the agreements must clearly state that the final decision making authority rests with the license holder, not the management company. This requirement in the Liquor Code often results in the Board refusing to approve the management agreement until it is modified to give the real estate owner/license the ultimate authority.
While applicants will ultimately comply with the Board's directive, they have made it clear that giving the real estate owner rather than the actual operator the final decision making authority in the operation of the hotel is not how they would prefer to conduct their affairs. Allowing the management agreement to be the basis for the hotel operator's proof that it has the right to occupy the premises will allow the management company to apply for the liquor license in its own name and would be more consistent with the parties' desired business relationship.
Affected parties include future applicants for a liquor license whose right to occupy the proposed licensed premises is based on something other than a deed or lease.
The proposed rulemaking will not require additional paperwork to be filed.
The proposed rulemaking may result in a hotel operator applying for a liquor license in its own name, rather than being listed as the management company for a different applicant. In those circumstances, there would not be a need to have a management company and the license would save itself the $350 fee that is required when a licensee uses a management company.
This proposed rulemaking will become effective upon final-form publication in the Pennsylvania Bulletin.
Interested persons are invited to submit written comments about the proposed rulemaking to Rodrigo Diaz, Executive Deputy Chief Counsel, or Norina Blynn, Assistant Counsel, Office of Chief Counsel, Liquor Control Board, Room 401, Northwest Office Building, Harrisburg, PA 17124-0001 within 30 days after publication in the Pennsylvania Bulletin. Comments submitted by facsimile will not be accepted.
Public comments will be posted on the Independent Regulatory Review Commission's (IRRC) web site. Personal information will not be redacted from the public comments received.
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on May 5, 2015, the Board submitted a copy of this proposed rulemaking and a copy of a Regulatory Analysis Form to IRRC and to the Chairpersons of the House Liquor Control Committee and Senate Committee on Law and Justice. A copy of this material is available to the public upon request.
Under section 5(g) of the Regulatory Review Act, IRRC may convey any comments, recommendations or objections to the proposed rulemaking within 30 days of the close of the public comment period. The comments, recommendations or objections must specify the regulatory review criteria which have not been met. The Regulatory Review Act specifies detailed procedures for review, prior to final publication of the rulemaking, by the Board, the General Assembly and the Governor of comments, recommendations or objections raised.
Fiscal Note: 54-84. No fiscal impact; (8) recommends adoption.
TITLE 40. LIQUOR
PART I. LIQUOR CONTROL BOARD
CHAPTER 7. TRANSFER, EXTENSION, SURRENDER, EXCHANGE AND SUSPENSION OF LICENSES
Subchapter A. TRANSFER OF LICENSES
§ 7.2. Transfers of ownership.
When an application is filed for transfer of a license from one person to another, a bill of sale of the business or fixtures shall be executed by the licensee and shall be exhibited to the Board or its representative. The purchase price of the business, either in the form of cash or legal obligation as security for the purchase price, shall be placed in escrow with an attorney or financial institution, to be paid to the original licensee upon the approval of the transfer by the Board. The actual transfer of ownership of the business may not pass until approval of the transfer of license has been given. The transferee shall exhibit a deed or lease for the premises, [or] bill of sale[, or both] or other written proof of its right to occupy the proposed premises, as the case may be. The license may not change hands until the license transfer has been approved by the Board and the original licensee may continue the operation of the business and may sell liquor or malt or brewed beverages until formal approval of the transfer is given. If the original licensee does not continue operation of the business under the license, no liquor or malt or brewed beverages may be sold and the license shall be surrendered to the Board until the transfer is approved.
§ 7.4. Transfers of ownership and location.
When a transfer involves a change of both location and ownership, the new establishment, if retail liquor or retail dispenser, shall be ready for operation before the license transfer will be approved. The new applicant shall satisfy the Board that he is the owner [or lessee of], lessee or otherwise has the right to occupy and use the premises, the fixtures and equipment therein. Liquor or malt or brewed beverages may not be sold by the applicant until the transfer of the license has been approved. The transferor, provided his fixtures and equipment are not involved in the transfer, may continue to operate at his original place of business until notified that the transfer of the license to the applicant has been approved, at which time the license and Wholesale Purchase Permit Card, if any, shall be surrendered by the transferor to the Board.
[Pa.B. Doc. No. 15-1009. Filed for public inspection May 29, 2015, 9:00 a.m.]
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