It is a common misconception that the licensee owns the liquor licence and that they can take it with them to whatever premises they trade from. Whilst liquor licences are issued to specified persons or entities (the licensee), they are only authorised to sell liquor at an approved licensed premises. Both the licensee and the licensed premises must be approved by the licensing authority prior to any trade commencing.
Given that the liquor licence is so significantly connected to the premises, the result is that a Lessor can have legal rights to the liquor licence that operates from the premises. It is important to check what the lease provides with respect to the liquor licence, especially at the end of the lease term. It is important that any lease of licensed premises has appropriately drafted provisions to govern what happens to the liquor licence once the lease comes to an end.
In certain situations, the Lessor can stand in the shoes of the licensee and operate the liquor licence at the licensed premises. One common example is where the licensee vacates the premises or ceases to carry on business at the licensed premises. This situation can arise in a number of ways such as where the lease is terminated due to a default by the licensee/lessee (i.e. non payment of rent or a breach of the lease provisions). Where a lease is terminated or otherwise comes to an end, the Lessor of the premises can apply for an order for landlord in possession (or a protection order) and can carry on the business operated from the premises with minimal disruption.
The advantage of obtaining such an order is time. Generally, in order to pass a liquor licence from the licensee to another person or entity, an application for the transfer of that liquor licence must be made to the licensing authority. However, such an application can take many weeks (and even months) from start to finish. The result is, that if the lessee/licensee is no longer in possession of the licensed premises, the liquor licence would need to be suspended until such time as the transfer is approved. This can have a significant impact on the business, not only on revenue but also goodwill.
In order to minimise the time that the premises is closed, the Lessor can seek an order, which is usually processed within a week or so (if all the correct documentation is provided to the licensing authority). Prior to terminating a lease and seeking such an order, it is imperative that the timing of events is carefully considered and organised. If done properly, in most cases, the premises need not be closed for more than a few days.
Importantly, if the Lessor does not have the requisite experience to run a licensed premises, they can usually appoint a nominee to run the business, whilst a new (permanent) operator is found. Landlord in possession orders are generally only granted for a short period of time, therefore, the Lessor should try to have the liquor licence transferred (permanently) during this time.
If you have any queries regarding terminating a lease, obtaining a landlord in possession order or transferring a liquor licence, please contact Jarrod Ryan (jarrod@ryandurey.com) or Alyce Cassettai (alyce@ryandurey.com).