Liquor Licensing Changes in Massachusetts Impact Landlord-Tenant Relationships
Retail landlords and tenants are heavily impacted by recent changes in liquor licensing forms generated by the Massachusetts Alcoholic Beverages Control Commission (ABCC) and increased background investigations related to license applications. Although Massachusetts restaurant and package store operators have long been accustomed to disclosing financial, operational and personal information to the ABCC to obtain their liquor licenses, landlords have largely been screened from this process. In recent years, however, the ABCC has updated its liquor license application form to make clear that a landlord with the potential to earn percentage rent from a tenant’s sales of alcoholic beverages constitutes a person or entity with a financial or beneficial interest in the tenant’s liquor license and, as such, must be disclosed on the tenant’s application. This includes disclosure of personal information about principals and officers of the landlord entity and its parent companies in its chain of ownership. Failure to properly disclose all required information has increasingly led to ABCC investigators formally requesting materials from the landlord before approving a tenant’s liquor license application.
These disclosure requests have caught many landlords by surprise. Moreover, given the complex nature of the organizational structure of many landlord entities, some landlords have struggled to comply with the requests. In addition, citing privacy concerns, certain individuals associated with a landlord entity may be unwilling to disclose personal information to the ABCC, particularly when they see themselves as being only indirectly associated with the tenant’s liquor business and the licensing requirements that accompany it. In response to the ABCC’s updated application process, some Massachusetts landlords have altered the economics of their leases and have eliminated percentage rent as a component of their financial arrangements with tenants. At a minimum, these landlords are informing themselves more about the ABCC disclosure requirements and how these requirements could affect their leasing relationships.