Somerville Awash In New Liquor Licenses

Law Offices of John P. Connell, P.C.: As perhaps a harbinger of things to come across the rest of Massachusetts should the state legislature ever eliminate the current quota system for liquor licenses which makes only a certain number of licenses available to each city and town, the City of Somerville is about to become awash with new liquor licenses. In July of this year, the Massachusetts Legislature granted a so-called “Home Rule Petition” by Somerville and authorized that city the ability to issue sixty-five (65) new liquor licenses, albeit non-transferable licenses. These new liquor licenses shall become available to applicants in 2017 and no longer will aspiring restaurateurs in this trendy city be required to purchase an existing license, sometimes costing as much as $250,000.00, on the private liquor license market in order to open up a new restaurant.

While there are many proponents in favor of eliminating the state quota on liquor licenses, and while there are many good arguments for doing so, there are many in favor of keeping the quota system as it preserves the value of existing liquor licenses in towns and cities, such as Boston, where a license can be sold, borrowed against or used to pay the DOR any remaining taxes owed at the end of a restaurant’s existence. Other opponents to removing the quota systems ask, ‘how many restaurants can any given municipality sustain if the liquor licenses are essentially free?”

Somerville may be the “canary in the coal mine” with respect to many of these issues, as 65 new liquor licenses, a 60% overnight increase in available liquor licenses, is such a significant increase that is it may have done away with the “quota system” in Somerville for all practical purposes.

Accordingly, existing licensees in Somerville will now have to re-value their businesses if they consider selling them; they may have to provide a bank with substitute collateral if their loan was secured by a pledge on their once valuable license; and they may now have to come up with alternative plans on how to pay creditors, including the DOR, should they be at the end of their life cycle. All existing restaurants in Somerville, for sure, can expect more competition and one will see how perhaps how a great influx of new competitors may shape what is currently a very trendy restaurant destination. Somerville may provide a good example, for better or worse, in the current drive to make Massachusetts “quota free” when it comes to unlimited liquor licenses.

© 2016 Law Offices of John P. Connell, P.C.

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