Can a commercial lease require that a liquor license be pledged to the landlord to secure the restaurant tenant’s performance under the lease? No, only a loan may be secured by a liquor license pledge.
Under Massachusetts law, any party who seeks a security interest in a liquor license must be approved by the Alcoholic Beverages Control Commission (ABCC), and the local city or town. The ABCC will approve a secured creditor only after public hearing, and public disclosure of the creditor’s interest in the restaurant. If the creditor is a limited liability company or partnership, than each LLC member or partner must disclose its financial interests to ABCC.
Restaurant landlords, as a general rule, may not take a security interest in a liquor license to secure performance under a Lease. However, if a landlord lends money to the restaurant owner, landlord may seek a pledge of the license to secure the loan, following review and approval by the ABCC. If such approvals have not been given, the landlord may not take a pledge of the liquor license.