I have just returned from a month of mountain climbing in Pakistan where alcoholic beverages are banned.

Pakistan has the world’s greatest concentration of high peaks and glaciers, with more than 160 summits of over 6,000 meters and a beauty, isolation and sheer immensity like nothing else on the planet. It was this wilderness of ice and rock that Eric Shipton called “the epitome of mountain grandeur” that drew me to the confluence of the Himalaya, Karakoram and Hindu Kush ranges and the big mountains Broad Peak and K2.

Over the course of history, the Indo-Aryans, Persians, Greeks, Scythians, Huns, Tibetans, Chinese, Mongols, Russians, and Britons, all climbed these mountains before me, and little has changed on the harsh, immense and unforgiving Baltoro Glacier of crag, cornices, and crevaces since Alexander the Great stood on that glacier in 333 BC.

At the time of its independence in 1947, Pakistani law was fairly liberal regarding liquor laws.

It is suggested that when the sale of alcoholic beverages was prohibited in April, 1977, such was more of a political convulsion than a religious tension. Under pressure from an alliance of various right wing political parties, then Prime Minister Zulfikar Ali Bhutto began to pragmatically address some of the demands made by the right including religious leaders.

Today, alcoholic beverages are legally banned in Pakistan for Muslims only (more than 97% of the population), but the penalty of 80 lashes for drinking was repealed in 2009.

And even with the recent election of former cricketer Iman Kahn’s PTI party, while I was in the country, there will be no immediate softening of religious influence.

Non-Muslims can consume alcoholic beverages after getting license from government, the only place in the world I know of where you need a license to drink. And non-Muslims foreigners are also allowed to order alcohol is some hotels. The sole authorized bar in the country is at the Pearl Continental in Peshwar. And curiously the Murree brewery exists as the nation’s only legal distillery; with a cult like following in the U.S. after Scout Willis was caught underage with a can of Murree beer in New York City.

Of course there are places in the U.S. where you cannot purchase alcoholic beverages. Ten states allow dry counties. Some states allowed counties and cities to ban alcoholic beverage sales following the repeal of Prohibition in 1933, while in others, like Alaska and Mississippi, municipalities didn’t start going dry until the 1960s and 1980s, respectively. But these dry areas are going wet. In Maryland, for example, the last dry town, Damascus, became wet in 2012.

The people of Pakistan are warm and friendly and the mountains are the most spectacular on Earth, but it is very good to be back in Maryland where I can order a cold beer.

 

The transfer of a liquor license often involves issues of life and death, and in some instances, zombies and phantoms.

A decision last year by the Maryland Court of Special Appeals in Liquor License Commissioners for Baltimore City v. Austin was instructive as to when a liquor license is really dead. The court explains at the beginning of the 25 page opinion,

.. a zombie is defined as the supernatural power according to voodoo belief may enter into and reanimate a dead body.

And the opinion goes on to make the distinction that a phantom is defined as “something (as a specter) apparent to sense but with no substantial existence.” Both are used as slang terms to refer to a liquor license that has been permitted by a local liquor board to survive, for transfer purposes, beyond the statutory expiration period.

But then, .. the Maryland legislature enacted HB 1410 that changes the law of zombie liquor licenses in Baltimore County, only, effective July 1, 2018.

Under the current law a liquor license expires 180 days after the licensee has closed the business or stopped active alcoholic beverages business operations unless an application for transfer to another location or another person has been approved or is pending; an application for a certificate of permission or a renewal license for continuation of business has been approved or is pending before the Baltimore County Liquor Board; or a written request for a hardship extension is filed within the 180-day period.

Generally, the licensee or another appropriate party may make a written request to the Board to extend the life of the license due to hardship. The Board may grant the extension if the Board finds after a hearing that existing hardship caused the closing or stopping of business operations. An extension may not prolong the life of the license beyond 360 days after the date of closing or stopping of business operations.

Today if a licensed premises is forced to close because of a casualty loss, the Board may extend the license for not more than two years after the closing.

Effective July 1, 2018, as a result of HB 1410, the request for a hardship extension in Baltimore County (but not the rest of the state) automatically extends the life of the liquor license, such that the bill actually repeals the authority of the Baltimore County Board to grant a hardship extension (because it will be automatic).

The bill clarifies that the expiration period resumes on the last to occur of: final action of the Board denying an application for transfer or a request for a certificate of permission or a renewal license for continuation of business; final judgment of the reviewing court if judicial review of the Board’s action on an application or request has affirmed the Board’s action; or the dismissal of a petition for judicial review of the Board’s action.

If a licensed premises is forced to close because of a casualty loss, the Board may extend the license for not more than three years, rather than previous two years, after the closing.

This is a significant change in the life of a zombie liquor license in Baltimore County. Generally, a hardship extension may not prolong the life of an inactive license beyond the total of two years after the date of closing or stopping of alcoholic beverages business operations and any time period during which the license is suspended under an application for approval of a transfer to another location or another person, or an application for a certificate of permission or a renewal license for continuation of business has been approved or is pending.

With 781 alcoholic beverages licensees issued for use in Baltimore County the economic impact of this change in the law should not be underestimated.

And while the licenses beverage industry supported this bill, cosponsored by the entire Baltimore County delegation, its negative impact on the alienability of licenses in a highly regulated industry make the enactment of questionable positive impact on small businesses in the Baltimore County. The bill’s provisions allow a small business licensee to retain a license for a longer period of time after closing or stopping of alcoholic beverages business operations and while this may result in a licensee being able to reopen a business, it does make licenses more difficult to acquire when it slows down efforts to sell the license before the license expires.

While it is difficult to comprehend what new liquor licensing laws could possibly be enacted in Maryland after the legislature passed the largest bill in Maryland history, only 2 years ago in 2016, some 3,180 pages long, re-codifying the alcoholic beverage laws, this is review of just that ..

At the close of the just concluded 438th session of the Maryland General Assembly on April 9, 2018, 1,269 Senate bills and 1,832 House bills were introduced of which 889 bills were enacted, including more than a few that will provide business opportunities for those engaging in the business of alcoholic beverages.

Among the significant issues involving alcoholic beverages are:

Comptroller’s Office

In Maryland, alcoholic beverages manufacturers and wholesalers are regulated by the Comptroller’s Office, while alcoholic beverages retailers are regulated by local boards of license commissioners. House Bill 1316 (Ch. 25) is largely seen as a rebuke to the Comptroller for his legislative activism on craft breweries when it establishes a Task Force to Study State Alcohol Regulation in the State. The 21-member task force, whose membership includes legislators, alcohol industry representatives, law enforcement representatives, and health care professionals, must examine whether the Comptroller’s Office is the most appropriate agency to ensure the safety and welfare of Maryland residents, or whether those tasks should be assigned to another State agency or to one created specifically to carry out those tasks.

Wineries

A Class 4 limited winery license, issued by the Comptroller, authorizes the sale and sampling of wine and pomace brandy produced by the license holder for consumption. Among other things, a license holder may distill and bottle up to 1,900 gallons of pomace brandy made from available Maryland agricultural products. House Bill 972 (passed) establishes stricter requirements for a business to obtain a Class 4 limited winery license. Specifically, the bill changes the broad requirement that a licensee use Maryland agricultural products to produce wine and pomace brandy to instead require the licensee to own or have under contract at least 20 acres of grapes or other fruit in cultivation in the State for use in the production of wine or ensure at least 51% of the ingredients used in alcoholic beverages production are grown in the State. The Secretary of Agriculture each year may grant a one-year exemption to an applicant from the 51% requirement. The bill will not apply until May 1, 2022, to any person who holds a Class 4 license on or before June 30, 2018.

Class 6 Limited Wine Wholesaler’s License

A holder of a Class 4 limited winery license whose winery produces no more than 27,500 gallons of its own wine annually may obtain a Class 6 limited wine wholesaler’s license. The Class 6 license allows the winery to sell and deliver its own wine produced at the licensed premises to a retailer or other person authorized to acquire the wine; however, a license holder may not sell the wine to another wholesaler. House Bill 896 (passed) increases the annual amount of wine that can be produced, sold, and delivered by the holder of a Class 4 limited winery license that also has a Class 6 limited wine wholesaler’s license from 27,500 gallons to 35,000 gallons. The bill also authorizes a Class 6 license holder to sell its wine to a holder of a wholesaler’s license.

Distilleries

There are two types of manufacturer’s license issued in the State that authorize the production of liquor. A Class 1 distillery license authorizes the establishment and operation of a plant for distilling brandy, rum, whiskey, alcohol, and neutral spirits at the location described in the license. Similarly, a Class 9 limited distillery license, which may be issued to a holder of certain Class B or D beer, wine, and liquor licenses, authorizes the license holder to distill, rectify, bottle, or sell up to 100,000 gallons of the same types of alcoholic beverages; however, the Class 9 license holder may sell at retail on the premises of the Class D or Class B license only 15,500 gallons of liquor each year. Senate Bill 384 (passed) increases the annual amount of liquor that may be sold at retail under a Class 9 limited distillery license to 31,000 gallons.

Manufacturer Off-site Permits

The Harford County Farm Fair is an annual event celebrating Harford County’s agricultural heritage and features rides, farm animals, and food, among other attractions. House Bill 270 (passed) allows the holder of a brewery off-site permit or a winery off-site permit to use the permit to sell and provide samples of beer or wine at this fair.

Retail Sales of Alcoholic Beverages – Licenses from Multiple Jurisdictions

A Class B beer, wine, and liquor license allows a restaurant, hotel, or motel to sell alcoholic beverages for consumption on- and/or off-premises, depending on the license. State law generally limits the number of alcoholic beverages licenses that may be issued to a single license holder to one; however, there are exceptions in some jurisdictions. For example, with certain specified requirements, Montgomery County authorizes a single license holder to obtain up to 10 Class B beer, wine, and liquor licenses. House Bill 1003 (passed) authorizes a single individual to hold multiple Class B beer, wine, and liquor licenses or equivalent licenses issued by different local licensing boards for restaurants, hotels, or motels. The number of licenses that a single individual may hold is only limited by the cap imposed by each local licensing board on the licenses that the board issues. The licenses may be issued for use by the license holder, a partnership, a corporation, an unincorporated association, or a limited liability company.

Continue Reading Alcoholic Beverages in the 2018 Maryland General Assembly Session

Among the more curious environmental issues of the day appears to be criminalizing plastic drinking straws and stirrers.

The “war on drinking straws” must be true because this week there is a viral video viewed on YouTube more than 5.5 million times of a 2015 incident where a Texas A&M University research team in Costa Rica found a plastic straw stuck in the nose of a sea turtle.

Then there is the widely tossed around statistic that Americans use 500 million plastic drinking straws a day, but upon investigation it appears that number is suspect and had as its basis a 2011 environmental group’s print ad, but no science. There is apparently a single manufacturing facility in Virginia that produced nearly 4 Billion straws last year, most of them small plastic straws for juice boxes, but not swizzle sticks.

Interestingly, on April 1, 2016 Bacardi Limited announced “it has launched an in-house initiative to remove straws and stirrers in cocktails at company events” to prevent 12,000 straws going to landfill every year. We are assured it was not an April Fools joke? And while corporate social responsibility is no doubt a good thing, it is suggested this was a spin on a cost reduction effort, gone bad, .. that has not been widely followed by others.

But in response to the current hue and cry over one of the oldest eating utensils, the California cities of San Luis Obispo and Davis both have gone as far as enacting “straws on request” laws and Manhattan Beach has a law banning all disposable plastics. Also, Seattle has enacted a ban on plastic utensils, including straws, going into effect in July.

However, potentially impacting more than the populations of those few cities, the state of California has pending, Assembly Bill 1884, that would prohibit sit down food facilities from providing a single use plastic straw to customers unless specifically requested by the customer.

Criminalizing the distribution of drinking straws, alcoholic beverage swizzle sticks, coffee stirrers and the like, under the guise of environmental policy, in a state that decriminalized cannabis distribution, appears foolish to many and of concern to even more that this misguided idea might spread East.

The origin of the first drinking straw is not known, but it dates to more than 5,000 years ago. There is a gold straw in a Giza Pyramid that dates to 2589 BC. We are told Sumerians used straws to drink their beer 3,000 years ago to reach the solids at the bottle of the brew.

The origin of drink stirrer’s likely dates to sugar plantations in the West Indies in the 1600s originally a small branch used to stir a refreshing rum elixir called “Switchel.” Queen Victoria was known to use a stirring rod to chase bubbles out of her Champagne, quietly avoiding any embarrassment from those pesky fizzy gasses.

In America it became fashionable in the 1800s to drink from an inexpensive and easily created rye grass straw. The first modern drinking straw was likely the creation of American inventor Marvin C. Stone who began selling paper straws in 1888. And while straws have remained popular, the 1960 era of The Graduate, and “a great future in plastics” has resulted straws becoming part of our culture.

There appears to be little if any science supporting the criminalization of drinking straws? Anti-straw advocacy activists (.. yes, that is a thing) appear focused on post consumer pollution of discarded straws after a single use, but they don’t seem concerned about the associated ‘less than ideally biodegradable’ drink boxes, usually 6 layers of paper lined with aluminum foil, nor is there a hue and cry because plastic drinking straws are typically made from polypropylene, contributing to petroleum consumption?

There are biodegradable drinking straws on the market, but corn based straws have not proven popular when many melt with alcohol. There are paper straws as well as bamboo and straw straws. Metal straws have always had a place, but have carbon footprint issues of their own despite being distributed among Bacardi employees.

Bans do not have a good track record in the alcoholic beverage industry. The 18th amendment may have been ratified in 1919 but Prohibition was overwhelmingly repealed in 1933 with the ratification of the 21st amendment.

Maybe the real issue is that drinking straws are not actually the single greatest environmental threat to life as we know it on this planet?

Bacardi Limited may be the largest privately held spirits company in the world, but most people do not think that the environmental apocalypse will begin with a drinking straw or stirrer, even one in a Mojito served in California. In 2018, possibly the alcoholic beverage industry can find another boogeyman as a last straw for rational environmental policy?

Delivery to consumers will be the biggest change to the alcoholic beverage industry in Maryland during 2018.

A tipping point is now being reached among retail license holders offering delivery to consumers. Despite that it was a change in state law in 2015 that enables delivery, it has taken some time for what is a new rapid and dramatic evolution in operations, widely adopting by the broader retail industry.

The package good store that is not delivering in 2018 has missed the moment of critical mass. Shopping behaviors have changed and while one of the most disruptive Amazon effects is the consumer expecting delivery, Amazon does not delivery alcoholic beverages in Maryland. But as Millennials move into their prime food and beverage spending years, they want everything delivered, not just their prepared food, but also their beverages.

We are not predicting delivery by drones in 2018, but the entire retail alcoholic beverage industry is being reshaped with more modest delivery vehicles.

There are other concomitant trends that both attract Millennials, and also simplify delivery for retailers, like mobile pay. Retailers maximizing delivery opportunities do not limit themselves by only accepting old fashioned credit cards, but also accept Apple Pay, Android Pay, Masterpass, and Visa Checkout. And a retailer can link a PayPal account to Android Pay, or pull from Venmo.

But an alcoholic beverage retailer in Maryland must comply with specific state and local laws to be authorized to deliver.

In Maryland retail delivery to a purchaser of alcoholic beverages is prohibited unless a retail license holder obtains a letter of authorization from the local licensing board to make deliveries. Additionally, and why brick and mortar liquor stores will continue to flourish is that the delivery must be made,

from the licensed premises by the retail license holder or an employee of the retail license holder.

Local licensing boards across the state have different requirements for approving deliveries by a license holder and issuing the required letter of authorization. Fairly typical is the Baltimore County Rule 9 that establishes a fairly rigorous procedure, both for approval and operation. Written application must be made to the Board and the licensee must appear at a public hearing. The rule further provides,

At the time of application for a permit under this rule, a retail licensee shall submit to the Board information concerning the training of its drivers in verifying the age of recipients of alcohol deliveries.

Once approved, the Board requires that for each delivery of alcoholic beverages, “the person delivering the alcoholic beverages and the person receiving the alcoholic beverages shall complete and sign a form provided by the Board.” The retail licensee must retain the form for not less than a month after the delivery.

The rules goes on to make clear, that the person making the delivery “shall refuse to deliver alcoholic beverages” when the intended recipient is under 21 years of age or when “the intended recipient refuses to sign the form required under this rule, or refuses to provide the person making the delivery with a valid driver’s license or other valid government-issued proof of identity with proof of age.”

Completing the form is the price of doing business by delivery and purchasers have come to accept that mild inconvenience for the greater benefit of having that cold craft beer delivered to their door.

Make no mistake, whether or not a particular retail store is delivering, delivery is here and about to explode. Including there are already national phone apps and websites, enabling ordering with a tap or a click, that have partnered with local liquor stores. Other industries, including a local florist is now approved to deliver alcoholic beverages with flowers and gift baskets. Delivery is going to upend existing retailers who do innovate.

There are those who deliver illegally, including those out of state businesses that ship into Maryland (.. that by some estimates may be up to 5% of all retail sales) and expanding legal delivery outlets will no doubt take a bite out of the scofflaws.

Taking advantage of this huge market shift is very much about how well a retailer adapts. The future of alcoholic beverages involves delivery. All existing licensees should make application to the local licensing board today. If we can assist you with your application of structuring a delivery operation, do not hesitate to give us a call.

Following a hearing it was determined two “yoga and beer” events were permitted at a brewery in Howard County, Maryland. Yes, yoga and beer is a Millennial ‘thing’ and more.

This matter was initiated with a complaint filed by a neighbor of the Manor Hill Farm and Brewery who alleged that the yoga events were not an agricultural activity and that more than 50 people might attend which could increase traffic.

Penultimate in the consideration is that the farm has an Agritourism Special Use Farm Permit for these activities, “Farm tours, farm stays, farm photography sessions, hay rides, corn mazes, classes related to agricultural products or skills, and picnic and party facilities offered in conjunction with the farm visitation.” The County zoning inspector who conducted a field inspection during one of the events, testified that he considered this permit in his conclusions that yoga was well within the activities allowed under this permit.

On cross examination, the inspector testified the yoga “class was held in a field just west of the brewery.” The complainant averred yoga is a prohibited use.

That 25 people actually attended was well within the 50 visitors allowed at one time at a Farm Brewery Class 1 activity, which includes beer tastings.

Board of Appeals Hearing Officer Michele L. LeFaivre reasoned, “[I]t is permissible for an “educational program” to be a yoga event, activity, or performance with fewer than 50 attendees who taste beer during a visit.”

And you will be glad you took the time to read the 25 page written decision In The Matter Of Sara Domerchie, not simply for its legal scholarship but also because the writing is sheer delight when it includes passages like,

The term “educational program” is sufficiently clear. Clarity is a question of reasonableness. As future United States Supreme Court Justice Souter observed in a New Hampshire Supreme Court zoning interpretation opinion, “[a] reference to ‘sufficient’ clarity is, of course, a criterion of reasonableness, and our prior cases have avoided any suggestion that a fussy standard of technical drafting should be applied in passing on the validity of municipal or administrative regulations.” Barton v. H.D. Riders Motorcycle Club, Inc., 131 N.H. 60, 64, 550 A.2d 91, 94 (1988). An absence of fussy precision in the application of the term “educational program” does not credential Appellant’s assertion of yoga as commercial activity, not agricultural activity, and which, in the last instance, is a misunderstanding of how HCZR treats farm uses, which includes more than agricultural activity.

The Hearing Officer gave great deference to the Department of Planning and Zoning having determined there was no violation and closing out the enforcement case triggered by the complaint. While not directly relevant here, we enjoyed reading that this same complainant protested a “pet day care” conditional use permit on the same street, highlighting the interplay of zoning ordinances and alcoholic beverage laws.

The combination of yoga and beer are safe, at least in Howard County. Okay the pairing of yoga and beer was likely not conceived when the first Howard County zoning ordinance was adopted in 1949 (so it does not appear in the ordinance’s list of permitted uses), but today yoga and beer events are popular from Toronto to Kathmandu and trending across the U.S. are hosting those events to support a local charity.

We are excited that this sounds like a great way to promote not only a farm brewery and also your business in Maryland and beyond.

One of the most common questions asked by callers to the local liquor boards is whether a liquor license is available for a particular location? The answer varies depending upon the local jurisdiction governing alcoholic beverage licenses.

But Baltimore County is typical of many locales. The maximum number of alcoholic beverage licenses in each of the 15 Election Districts within Baltimore County is limited to one On Sale License for each 2,500 of population of each Election District and one Off Sale License for each 4,000 of population of each Election District.

Population reports are updated annually by the County Department of Planning. The County’s population is growing, so many years there are new licenses available on a first come basis in some but not all Election Districts.

No license is transferable from the Election District in which it was originally located.

Of course you can purchase a license from an existing license owner within the Election District and the price of licenses varies greatly. In fact most licenses are purchased from a third party, some in prime Election Districts for hundreds of thousands of dollars.

But the real action in Baltimore County and many other locales are in the Exception Licenses that are generally available from the government without cost. There is an exception from the population requirements for an office building having at least 60,000 square feet of leased commercial office space (down from 75,000 square feet last year) allowing one Class B (On Sale) beer, wine and liquor license.

Hotel and motels having a minimum of 100 rental units are entitled to one On Sale beer, wine and liquor license.

Shopping Centers having a minimum of 200,000 square feet of leased store space (down from 250,000 square feet last year), a minimum of 10 tenants having existing leases for remaining terms of not less than one year each and parking facilities to accommodate a minimum of 400 automobiles are entitled to one Class A (Off Sale) beer, wine and liquor license and one On Sale beer, wine and liquor license.

One additional Off Sale beer, wine and liquor license and one additional On Sale beer, wine and liquor license are available in any shopping center having a minimum of 400,000 square feet of leased store space (down from 500,000 square feet last year) and at least 20 tenants having existing leases for terms of not less than one year each and contiguous off street parking facilities to accommodate a minimum of 800 automobiles.

One additional Off Sale beer, wine and liquor license and one additional On Sale beer, wine and liquor license are available in a shopping center for each additional 200,000 square feet of leased store space (down from 250,000 square feet last year).

Mixed use development licenses may be obtained in addition to other licenses available and the square footage used in calculating mixed use development Exception Licenses shall not also be considered for purposes of determining other Exception Licenses. No more than 5 On Sale Exception Licenses of any type may be issued for use at any location or mixed use development.

And there are also Club licenses that are excluded from the population and numerical requirements.

Again, a major advantage of obtaining a new license from the government, be it by population or an exception beyond its actual availability, is that it can be had at no cost, that is, beyond an application fee it does not have to be purchased.

As one might imagine, the availability of liquor licenses is actually quite elastic and not just in Baltimore County. If you have questions about the availability of an alcoholic beverage license or if we can otherwise assist you in obtaining a license so not hesitate to give us a call.

Maryland law provides, “before deciding whether to approve an application and issue a [liquor] license, a local licensing board shall consider .. the public need and desire for the license,” among other factors.

And the laws goes on to further provide the “local licensing board shall deny a license application .. if the local licensing board determines that .. the granting of the license is not necessary to accommodate the public,” among other grounds.

But what does that nebulous legal test mean? Among the most frequent question we are asked is, “how do I prove that a liquor license is necessary at a location?”

The answer is different depending upon the location. The structure of Maryland’s liquor board system is local, independent boards, mitigating against any consistency of interpretation. Such is intentional. There is reason to conclude from the elaborate statutory scheme regulating the liquor boards that the legislature well understood that there was a substantial likelihood of differing interpretations of the term “necessary” by different local liquor boards.

In Baltimore County, the local liquor board Rule 19 furnishes a population based formula for determining the maximum number of licenses that may be issued for each election district, and that rule does not mention the term “necessary.” In determining the legal meaning and effect of Rule 19, the population based nature of Rule 19, that one off-sale liquor license is appropriate for every 2,500 people, suggests that this is the number of licenses that is most appropriate for the population. Is it possible that this number is “necessary for the accommodation of the public?”

No, because the final paragraph of Rule 19 states that the rule is in addition to those State law factors and that the Rule is not sufficient, alone, to meet the requirements for new licenses.

If Rule 19 does not control the standard for necessity, then how is that standard to be given meaning? The Maryland Court of Appeals defined the term “need” in the context of zoning law involving a challenge to the location of a doctor’s office in a residential area. The relevant law stated that a doctor’s office was a permissible use in a residential area if, inter alia, there was a “need” for such services in the area. The Court held that, in this context, “need” meant that which was “expedient, reasonably convenient and useful to the public.”

That zoning case is analogous to liquor licensing matters. State law allows for the transfer of a liquor license if, among other things, “need” is shown. The statute itself indicates that “need” should be considered in light of what is “necessary for the accommodation of the public.” When accommodation is the ultimate goal, it is reasonable that absolute physical necessity is not required. This is especially true when, as here, the accommodation at issue involves the location of a liquor store.

Black’s Law Dictionary states that the meaning of “necessary” varies with the context in which it is used:

[The word] may import absolute physical necessity or inevitability, or it may import that which is only convenient, useful, appropriate, suitable, proper, or conducive to the end sought. It is an adjective expressing degrees, and may express mere convenience or that which is indispensable or an absolute physical necessity.

The Baltimore County licensing board determined, here, a definition of need that focuses on convenience is, given the context, most appropriate.

The Maryland Court of Special Appeals, in 2000, concluded that “necessary,” in this instance, means that the transfer of the liquor license to the transfer site will be “convenient, useful, appropriate, suitable, proper, or conducive” to the public in that area. And this is proven at a liquor board hearing with both expert and lay witness testimony.

We can provide you with expert witness testimony for your liquor board hearing to prove that a liquor license is necessary at a location.

 

A liquor license requires a location in a proper zoning district.

An August 22, 2017 decision by the Howard County, Maryland Board of Appeals Hearing Examiner is both a detailed exposition of a liquor store as a permitted use under the zoning regulations and a wonderful treatise on the broader topic of land use law in that suburban Maryland county.

But this decision is much larger than this Howard County case alone. Today in commercial real estate, alcoholic beverage licensed businesses are increasingly more valuable because they are largely free from the downturn that most retail is seeing as a result of the Internet and online shopping. In most places alcoholic beverages cannot be bought online and shipped. And restaurants with food costs supported by alcoholic beverages are increasing in dramatic numbers.

This Howard County appeal was about an application by the property owner Science Fiction, LLC to the Planning Board to “clarify a liquor store does not have to be contained within the full service food and grocery store to be a permitted use.”

The prior existing regulation included as a permitted use, “l. full service food and grocery stores, and related uses, of 100,000 square feet or more.” The Planning Board’s counsel repeatedly told the Board, the issue was whether a liquor store use is compatible with a grocery store. Science Fiction also asked the Hearing Examiner “to consider [the FDP amendment application] as a zoning matter, not a liquor licensing matter.”

The 39 page decision is a great read beach weekend read for zoning geeks as it reveals the history of zoning, from the first 1916 New York City ordinance to the inapplicability of Euclidean principals in the James Rouse’s planned community of Columbia within Howard County where this liquor store was proposed.

But the liquor license industrial complex will delight in the portion of the decision discounting economic competition as a valid objection,

To the extent the Planning Board considered economic competition in its November 4, 2016 denial, meaning the impact of the proposed FDP amendment on other liquor stores, the Board’s action was arbitrary and capricious. Kreatchman v. Ramsburg, et al., 224 Md. 209, 219-220, 167 A.2d 345 (1961) (holding a liquor store owner in the Normandy Heights shopping center whose sole reason for objecting to a Zoning Board action was prevention of competition from a proposed shopping center further west on US 40 was not aggrieved when “[h]is only concern is with the threat of competition from a possible package liquor store in the [other] shopping center. It is to protect himself against that possible competition that he seeks the protection of the zoning regulations.”) Appellant Exhibit 6 is a Hearing Examiner decision and order addressing the inapplicability of economic competition considerations in zoning actions.

Appropriate zoning is required for all uses, not only alcoholic beverage related uses. The application of Science Fiction was approved, adding new subsection “.m” to the § 7D Permitted Uses text criteria, in the New Town zoning district,

m. Liquor store – located on the full service food and grocery store property and partitioned from the full service food and grocery store building. The liquor store has an independent entrance for deliveries and customers. “Partitioned” means walls or other physical divisions separating the full service food and grocery store and liquor store uses.

With zoning in place, an application may now be made to the liquor board for this liquor store adjacent to a Wegmans grocery store.

We are often asked, “what do I need to know about buying a restaurant in Maryland?” While each prospective purchase is driven by the unique facts of the situation and there are no two restaurants, bars or taverns that are alike, each has as its key asset an alcoholic beverage license. This blog post is a “Top 10” list of issues to consider (.. okay 10 plus 2 extra issues):

  1. What are you buying? Is this a purchase of the stock in the business entity owned by the principals or a purchase of the assets of the business? There are justifications for each option, but on balance, an asset purchase is likely more advantageous for a buyer.
  2. Does the sale include the building where the restaurant is located or is the space leased and, if so, is that lease assignable by the seller (with or without landlord consent)? Most restaurants in Maryland are in leased spaces.
  3. Is a covenant not to compete by the seller and its principals for some number of years part of the deal?
  4. What is the agreed purchase price? How much is the deposit, the amount to be paid at closing on the transaction, is there any seller financing, and the like?
  5. How is the purchase price allocated for income tax purposes? How will transfer and recordation taxes be shared and are there other taxes due for the business and on this transaction?
  6. What representations and warranties is the seller making about the business, including about what business assets exist, the financial condition of the business, etc.? Or is this an “as is” transaction?
  7. What type of due diligence will be undertaken by the buyer, including how long a study period will be provided, before the deposit becomes nonrefundable?
  8. Among the most important issues (because of the large dollars that alcohol sales contribute to a restaurant) is the contemplated transaction contingent upon transfer of the alcoholic beverage license, including possibly allowing for the running of any appeal time.
  9. Will each party comply and cooperate with the other party to assure compliance with bulk sales laws, including notices to all creditors.
  10. What is the closing date on the contemplated transaction?
  11. Will the business will continue to be operated in the ordinary course pending closing?
  12. Is there a broker to be compensated?

This Top 10 plus 2 list of issues to be considered is really just the starting point. Some are easily dealt with between the parties and others, like the transfer of the alcoholic beverage license, which is key in the value of the business, require an application, public hearing and approval by a board of liquor license commissioners.

And not just because you are reading a blog written by attorneys, but given that large dollar amounts involved, the complexity of the transaction and potential liabilities involved, the purchaser of a restaurant or other alcoholic beverage business in Maryland should be represented by legal counsel. We do that work and would be pleased to speak with you.