Key Conditions Buyers In Massachusetts Must Consider in Purchase and Sale Agreements Involving License Transfers

In this article, you can discover…

• Why an escape clause is essential when negotiating a lease.
• What a seller should look out for when selecting a prospective buyer.
• How tariffs could impact aspiring business owners.

What Are The Most Important Conditions To Consider When Negotiating A Purchase And Sale Agreement For An Alcohol License?

One of the most important things, if not the most important thing, when you’re buying or leasing a location for a liquor license is protecting yourself.

The buyer must protect themselves in case the license is denied. You can have the best attorney in the world, but the truth is, sometimes a license gets denied for reasons you just can’t foresee.

Take something as simple as negotiating a lease. There are two options for structuring it: you can either rent the space or purchase the property. If you’re negotiating a lease, you must have an escape clause. It should say that if your alcohol license application is denied despite your most diligent efforts, you receive your deposit back. Without that kind of protection, you can get burned.

Understanding The Importance Of An Escape Clause

I currently have a client who, before consulting with me, signed a lease with a major real estate company to open a store in a shopping mall. Unfortunately, the lease did not include an escape clause tied to getting the liquor license.

I was pulling out all the stops and working diligently to obtain the license for him because I noticed the lack of an escape clause and was worried he’d lose everything if we didn’t get the license.

It took us about a year to finally secure the liquor license, but then the landlord said, “You didn’t get it fast enough. You’re not getting the other permits fast enough. We’re declaring the lease null and void. We want you out.” Now, we’re facing a range of complex legal issues and possibly a major lawsuit.

The bottom line here is that when you’re dealing with a liquor license and property, you must always protect yourself upfront. Have an escape clause. Do not gamble away your deposit and your future on something that is not entirely in your control.

What Should The Seller Watch Out When Choosing A Buyer For An Alcohol License?

When you’re a seller, and you’re selecting a prospective buyer, you have to know how the buyer is going to finance the deal.

Traditional banks are hesitant to finance restaurants because they are notoriously volatile and have a high rate of closure. The only time a bank might be interested in financing a restaurant is if the buyer is also purchasing the property. If the restaurant fails at that point, the bank still has the property as collateral.

However, most of the time, the buyer is merely renting the space rather than actually purchasing it. Therefore, most traditional lenders will not touch the deal.

Make sure that the buyer knows what they’re doing and that both of you are working with an experienced attorney who knows about license transfers and can provide appropriate legal counsel.

Advice For Those Hesitant To Open A New Business Over Economic And Trade Concerns

If you are hesitant to open a new business due to current economic and trade concerns, be aware that one of the most important things you need when entering a business like this is a sufficient financial cushion.

Even the people who study the stock market every day and know it far better than I do will tell you that we’re entering a period of financial turbulence. The stock market has been on a downward trend in recent weeks, and once tariffs take effect, the economic impact is expected to intensify.

Take, for example, Kentucky Bourbon, a product with a significant market in Europe. The European Union has already promised to retaliate against President Trump’s tariffs by imposing its own tariffs on American goods. So, if it becomes more expensive for Kentucky Bourbon makers to sell their products overseas, that could lead to financial pressure.

If you’re in the business of selling alcohol, you need a financial cushion to weather hard times.

I also believe that a sound business plan and a great location can make a huge difference. As real estate brokers like to say, it’s all about location, location, location. If you’ve got both – a strong business plan and the right spot – you’ll still have the strong foundation you need for success, even in turbulent times.

Still Have Questions? Ready To Get Started?

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