Up for grabs: monetizing Utah Retail Liquor Licenses.

• Position: Legal Brief

Effective July 1, 2014, the Utah retail license laws changed to allow holders of certain retail liquor licenses to sell such licenses to qualified buyers. The change is a welcome development for businesses that operate or seek to operate in Utah's hospitality industry. For such businesses, Utah retail liquor licenses are a necessity.

The availability of retail liquor licenses in Utah is limited by a statutory quota system. Some argue that the quota system restrains business growth and opportunity by creating a bottleneck when business entrepreneurs seek to open new establishments or purchase existing establishments only to find there are no available retail liquor licenses.

Until now, Utah laws prohibited holders of retail liquor licenses from selling such licenses to another person or business. The new law, the Transfer of Retail License Act, will help to alleviate current statutory supply restrictions by permitting the sale and transfer of existing retail liquor licenses. The Act in essence monetizes existing retail liquor licenses, thereby creating a valuable commodity for those who hold such licenses. Although the Act appears to be simplistic in concept, there is nothing simple about the transfer process, which involves a number of prohibitions, limitations and requirements.

The Approval Process

Under the Act, after an application for transfer of a retail liquor license has been submitted, the application is subject to two levels of governmental scrutiny, one by the Utah Department of Alcoholic Beverage Control and the other by the Utah Alcoholic Beverage Control Commission. The DABC has the power to fully investigate the seller, the buyer and the transfer transaction and can also hold hearings for public comment. The Commission then has the final authority to approve the transfer.

The Commission may consider various factors when making its decision, including location, the buyer's ability to operate and manage a business, the nature and type of operations of the business and "any other factor" the Commission deems necessary. The Commission will also consider all factors that would be considered in reviewing an application for a new retail liquor license. Finally, the Commission and the DABC require that all documents related to the transaction, including all details of the transaction, be submitted for their review.

Under the transfer process required by the Act, the buyer and the transfer transaction are subject to a questionably high...