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Big Changes in Liquor Licensing

Michigan’s liquor licensing rules have changed significantly under the direction of a new Chairman of the Michigan Liquor Control Commission (“MLCC”). Reforming the liquor licensing system to create a more business-friendly regulatory scheme has also led to changes in the role townships play in liquor licensing. This E-Letter highlights the changing role of townships in the liquor licensing process, and provides some suggestions for ways that townships may enhance their new role if they wish to regain or retain some control over liquor-licensed establishments within in their boundaries.

The Old Rules

The MLCC is the entity principally responsible for issuing liquor licenses. But until very recently, the courts, local governments and the MLCC itself believed that local approval was an absolute prerequisite for any approval by the MLCC. This required local approval was clear throughout the licensing process. The MLCC provided both notice of any pending application to the affected local government, and strongly considered local law enforcement recommendations regarding applications for both new and transferred licenses. The MLCC also required local approval for dance, entertainment and topless activity permits. At the end of the day, the MLCC did not override a local government’s decision on whether to issue or transfer a license.

The New Rules

Effective last year, however, things changed quite dramatically. As part of the MLCC’s effort to streamline the application process, the local approval requirement has been drastically reduced or eliminated. Local approval is no longer required to transfer ownership or interest in a license, to transfer the location of an existing license, and for many other types of liquor license approvals. This means that townships no longer exercise the same level of control over the transfer of liquor licenses in their own jurisdictions.

On a practical level, here is what liquor licensing looks like under the new rules:

  • Courtesy Notice. Although the MLCC formerly provided notice of any application to the township, now the MLCC simply provides a courtesy notice that an application is pending. Many townships have discovered that this courtesy notice is delivered very close to the time when the MLCC will decide whether to issue the license or approve the transfer. The MLCC also now requires the applicant to submit the required forms to the township, so the township is waiting on the applicant to get the documents necessary to provide its feedback and recommendations.
  • Tight Timelines.The courtesy notice typically requires the township to respond within 60 days or less. So, within a very short timeframe, the township must obtain the proper forms for consideration (from the applicant), investigate the applicant and the requested use, and otherwise prepare a response to the MLCC.
  • Non-Binding Comments. Except in limited circumstances, the days of required local approval are gone: whatever the township submits to the MLCC is treated as comments for the MLCC’s consideration. Local law enforcement recommendations are not required, except in very few cases. The result is that licensees can add space, change hours, add bars and catering, dance entertainment (even including topless activity), outdoor service, and change ownership altogether and no township approval is required.
  • Number of Available Licenses May Be Unknown. Among other changes, there is also a current bill pending that would permit inter-county transfer of licenses, which means that it will be difficult for a township to identify with any certainty how many licenses are truly available to township business owners.

What Can Townships Still Do To Control Liquor-Licensed Establishments?

Even though there have been a lot of changes at the MLCC, the township still plays an important role in the state’s liquor licensing system.

  • Township Approval Still Required for Certain Actions. Some liquor licensing matters do still require local approval, such as new Class C, Tavern, Brewpub, Hotel, Club and Resort licenses.
  • Prompt Township Action. Act quickly if you receive notice of a pending application from the MLCC, since untimely responses may be ignored or simply too late to consider.
  • Revocation and Renewal. When appropriate, request revocation or object to renewal of a license. Also note that requesting revocation or objecting to renewal of an on-premises license requires that the township have in place standards, notice and hearing procedures, and a submission process for making that determination. Objection and revocation are important tools for ensuring compliance within township boundaries.

Objections to license renewal must be received by the MLCC no later than March 31. All retail licenses automatically expire on April 30, but if the MLCC timely receives the proper materials it will not renew that license. Sales of alcoholic beverages after that date would then be illegal. A license that is not renewed can remain in escrow up to five years, but it cannot become active or be transferred without the township’s approval of the renewal. If a license is revoked, there will be no escrow, because revocation is a permanent action that strips the licensee of all ownership rights to the license and prohibits the licensee from applying for another license for a two year period.

Although the MLCC may no longer require local approval in most cases, the township has other means of establishing and enforcing local requirements for the operation of a liquor-licensed establishment.

  • Liquor Ordinances. Townships may adopt (or amend) a liquor licensing ordinance. This type of ordinance enables the township to exercise more control over the number and type of liquor-licensed establishments in your boundaries. This may include not only limiting the number of licenses granted to applicants, but also retaining licenses for the most desirable applicants in the right areas. Liquor licensing ordinances may identify many helpful and necessary items:
(a)    specific criteria for determining whether the application should be granted, denied, revoked, or renewed;
(b)   required application materials;
(c)    processes for obtaining local approval; and

(d)   required conditions for local approval.

The liquor licensing ordinance may also include a requirement for an annual review of the licensee’s compliance. This type of review assists the township in obtaining and ensuring continued compliance and timely preparing for potential nonrenewal or revocation proceedings. Liquor licensing ordinances may also regulate the conduct of licensed establishments within your boundaries by specifically addressing what is prohibited or what activities may be conducted only under certain conditions.

  • Zoning Ordinances. The MLCC’s issuance of the license (or approval of transfers) could be out of the township’s hands, but the township still has one very powerful tool in its toolbox: zoning. Townships may require liquor-licensed establishments to obtain a special land use permit. This type of permit allows the township to exercise a different type of control (and monitoring) that is significantly different from the liquor licensing revocation and nonrenewal concerns. A special land use permit can be used to limit the scope of these establishments (from seating to hours, catering and outdoor music) and retain a closer review of proposed changes that might otherwise be approved by the MLCC without the township’s input, like the addition of an outside bar, seating and service, and the like.
  • Licensing Agreements. Some townships have had success with entering into agreements with the licensee regarding the license. These agreements, if properly drafted and enforced, can help townships deal with unique circumstances. They can, for instance: (1) address transfer of the license outside the municipality, by requiring or prohibiting it; (2) address whether the licensee will request additional permits from the MLCC or change the classification of the license, from a tavern license to a Class C license for instance; or (3) require notice to local law enforcement in certain types of circumstances, etc.

More Information

Understanding when and how to become active in liquor licensing and control is critical to effective regulation and safe operation of liquor establishments. The MLCC has a “Local Approval Chart” that describes the various types of local approvals that are still required, and identifies the local recommendations that may be considered. We strongly recommend downloading and reviewing this chart so your township can make an informed decision about how it will address liquor control matters within your boundaries. The chart is available at this link: http://www.michigan.gov/documents/lara/Approval_charts_383073_7.pdf.

We Can Help

Fahey Schultz Burzych Rhodes PLC’s team of experienced attorneys is well-qualified to assist townships with liquor control issues. If you have any questions about liquor issues or wish to discuss any of the matters in this E-Letter, please contact us.

Helen (Lizzie) Mills hmills@fsbrlaw.com

Click here for a PDF version of this publication.

Fahey Schultz Burzych Rhodes PLC, Your Township Attorneys, is a Michigan law firm specializing in the representation of Michigan townships. Our lawyers have more than 130 years of experience in township law, and have represented more than 130 townships across the state of Michigan. This publication is intended for our clients and friends. This communication highlights specific areas of law, and is not legal advice. The reader should consult an attorney to determine how the information applies to any specific situation.

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