Escrow for California liquor license transfers

Each California liquor license is separate, and it passes to a new owner or a new address only after the ABC signs off (Business and Professions Code §24070).

Selling a license to a new owner is called a person-to-person transfer. For a retail license, the law sets the order of events. Before the buyer applies to the ABC, an escrow takes in the full price and a notice is recorded with the county. A public notice is posted at the business for at least 30 days while the ABC checks out the buyer and the location. The seller’s money comes last.

We handle liquor license escrows anywhere in California, whether the license is sold by itself or with a restaurant, bar or store.

1. 01

   Step 1: Escrow opens and the price goes in

   If the license changes hands for money or anything else of value, two things must be in place before the ABC sees an application: an escrow run by someone outside the deal, and the buyer’s full price inside it (§24074). The price means everything the buyer pays, not just the cash for the license. The ABC’s list covers inventory, fixtures, the lease, goodwill and a covenant not to compete (ABC).

   HeldThe price waits for the ABC’s decision.

2. 02

   Step 2: The notice is recorded

   The seller or the buyer records a Notice of Intended Transfer (form ABC-227) in the county where the premises are, before the application reaches the ABC (§24073). The notice names both parties and the escrow holder. It identifies the license and the address, and states the full price, broken down into cash, checks, promissory notes or other property. The county recorder certifies a copy. That copy goes to the ABC with the application.

3. 03

   Step 3: The application goes to the ABC

   The buyer files the transfer application at the ABC district office that covers the premises. The ABC then needs proof that the money is really there. Within 30 days, the buyer files a sworn statement, under penalty of perjury, confirming the full price is in escrow. Copies go to the seller and to escrow. No transfer happens until the ABC receives it (§24074.3).

4. 04

   Step 4: A notice goes up at the door

   The public gets notice too. A posting about the application goes up at the entrance, where anyone can see it. It must stay up for at least 30 consecutive days before the ABC can issue the license (§23985).

5. 05

   Step 5: Claims and the ABC’s review

   While the ABC investigates, the seller’s creditors send their claims to escrow. The window closes when the ABC tells escrow it has approved the transfer. Escrow must confirm receipt of every claim within 10 days after it arrives (§24074.1). Judging claims isn’t the ABC’s job, and disputes over them go to the courts.

   CheckedApproval, tax holds and claims all clear before payout.

6. 06

   Step 6: Approval, then payout

   After approval, the money goes out in a fixed order: tax debts that could stop the transfer, then creditors by legal priority, then the seller. First, though, escrow has 10 days after the transfer to tell every claimant whether the money covers all claims, and if it doesn’t, how much each will get and when (§24074.1).

   ReleasedNothing reaches the seller before the taxes and claims.

The ABC sets the pace, not escrow. By the ABC’s own estimate, a person-to-person transfer averages about 75 days. That average already includes the 30-day posting, and the ABC adds that circumstances often stretch the wait (ABC application requirements).

Hold off on opening-day plans. The ABC advises against large financial commitments, such as a grand opening, until the license is approved. A license also has to be current: none transfers while its renewal fee is unpaid.

It can, if the ABC agrees. The ABC may grant the buyer a temporary permit, so the business can keep operating at the same address while the transfer is pending (§24045.5).

To qualify, the premises must have been licensed and operating within the 30 days before the permit request. The seller surrenders the license under ABC rules. The buyer has already filed the transfer application, and the permit fee is paid. A permit is good for up to four calendar months. The ABC can extend it by four more. The request goes in on form ABC-282.

They can. The ABC may turn down a transfer when certain taxes connected to the license are past due. That includes sales and use tax, state income and corporation taxes, alcohol taxes and unsecured property tax that arose from the license, plus unemployment insurance the business owes (§24049). The law lets escrow pay those agencies before closing. The creditors come after the tax agencies (ABC-227 instructions).

Separately, the Franchise Tax Board (FTB) can put a hold on a license when its holder owes tax. The hold blocks the transfer until the tax is paid in full. When the license is in escrow, the escrow holder sends the FTB a payoff request, tells the seller how much it is and pays it out of the sale money. The FTB then lifts the hold (FTB). When several agencies hold a license and the escrow can’t cover them all, the FTB says the money is prorated.

It can be, when the license is sold along with a business’s stock and equipment. Recording the ABC’s notice doesn’t satisfy the bulk sale law, and the ABC won’t advise on that law (ABC-227 instructions).

The bulk sale law has a narrow exception for license sales. The transfer has to follow the ABC rules, and the buyer must also record and publish its own bulk sale notice, with every detail that law asks for. It has to be out no later than the 12th business day before the transfer closes (Commercial Code §6103). Your attorney can tell you whether your sale fits. How bulk sale escrow works.

Be ready to show the source of the buyer’s money, such as bank statements or loan papers, because the ABC may ask. Transfers are filed at the ABC district office that covers the premises. The ABC’s district office list shows which office serves each county, and the ABC posts its current charges on its fee schedule.