In Ontario, the Alcohol and Gaming Commission of Ontario is responsible for regulating the sale of liquor at restaurants or bars as authorized by the Liquor Licence Act and its corresponding regulations. Its mandate is clear: to regulate the sale of alcohol in accordance with the principles of honesty and integrity, and in the public interest. Accordingly, lawyers advising their clients with respect to a restaurant or bar acquisition should have a firm grasp of certain aspects of the Act, namely whether your client is entitled to a liquor sales licence, and the AGCO’s application process.
Is your client entitled to a liquor sales licence under the Act?
Whether your client is purchasing commercial real estate for the purposes of opening a restaurant or bar, leasing commercial real estate – which may or may not have had a licensed tenant – or purchasing an existing restaurant or bar business, it is paramount that you first determine your client’s entitlement to a liquor sales licence under the Act.
The Act identifies several instances where an applicant may not be entitled to a liquor sales licence, including:
- where the applicant cannot reasonably be expected to be financially responsible in the conduct of the applicant’s business;
- past or present conduct of the applicant, an officer or director of the applicant, a person who is interested in another person (as defined in the Act), or a person having responsibility for the management or operation of the business of the applicant that would afford reasonable grounds for belief that the applicant will not carry on business in accordance with the law and with integrity and honesty;
- the applicant carries on activities that are or will be in contravention of the Act or regulations;
- the premises, accommodation, equipment and facilities in respect of which the licence is to be issued are not, or will not be, if the applicant is licensed, in compliance with the Act and regulations;
- the applicant is not able to demonstrate that he, she or it will exercise sufficient control over the business, including the premises, accommodation, equipment and facilities in respect of which the licence is to be issued; or
- the licence is not in the public interest having regard to the needs and wishes of the residents of the municipality in which the premises are located.
If, on the known facts, you determine your client is entitled to a liquor sales licence, the next important consideration is whether a new application or a transfer application, including authorization to contract out, is appropriate in the circumstances.
Transfer application versus new application
In 99 per cent of restaurant or bar acquisitions, a transfer application, combined with authorization to contract out, is the most desirable option for attaining a liquor sales licence from the AGCO due to the expediency and continuous operation of the restaurant or bar until a final decision is rendered.
If your client submits a transfer application, and an authorization to contract out, the AGCO will typically grant the authorization to contract out within 10-15 days, and a final decision regarding the application within 8-10 weeks. To assist their determination, the AGCO requires disclosure regarding the entity applying, personal history reports of proprietors, shareholders, managers and interest individuals, as well as specific details about the premises and a floor plan of the proposed licensed area.
Despite requiring the same information as requested in a transfer application, a new application process may take several months before final approval is issued by the AGCO. The timeline for a final decision regarding a new application depends primarily on whether the premises have been licensed within the past six months. If the premises have been licensed previously, the final decision will likely be made within 8-10 weeks. However, if premises have never been licensed, the application will require public notice, and any issues arising from said notice must be resolved before the application will be considered. In any event, lawyers must properly account for and communicate the timelines involved in securing approval of a new application.
Conclusion
Before your clients are bound by an agreement of purchase and sale or a commercial lease for restaurant or bar, carefully consider the prospects of success for attaining a commercial licence and the best course of action for the application.
Most importantly, lawyers must ensure that all deals involving a potential restaurant are conditional on securing a liquor sales licence from the AGCO. Without said condition, your client may be forced to occupy a premises or take-over a business without the key component necessary for its success.
Daniel Cherney is an associate with Soloway Wright LLP