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Q: I am in the process of purchasing an operating restaurant business with a liquor license. The Seller has not renewed his health/sanitation permit, and this is preventing the PLCB from approving the transfer. I am willing to take the risk and go to settlement ahead of the PLCB approval. I know what has to be repaired to get the health permit, so I see little risk to myself.

A. You should consult with your attorney who prepared the Agreement of Sale. My opinion is that to proceed to settlement prior to obtaining the health permit and the subsequent PLCB license transfer approval is very unwise. The Agreement of Sale for a restaurant with a liquor license should contain a provision requiring the Seller to possess a current health license, and furthermore that the Seller’s restaurant premises has to be maintained in a condition to continue to qualify to possess the health license. This is to protect you in the event that there are uncorrected violations of the local health code despite the existence of the health license. The Agreement will also contain a provision that the Agreement is contingent upon the Pennsylvania Liquor Control Board granting an approval to the transfer of the liquor license to your corporate nominee within a specific time frame. Otherwise, the Agreement becomes null and void. Without a current health license the PLCB will not approve the liquor license transfer, or authorize the liquor license to be released to the restaurant premises. You will be assuming a tremendous financial risk should you complete your financial settlement without being in possession of a current health license or the PLCB approval to your liquor license transfer application. Require the Seller to fix the health code violations. Although you may feel confident that you can repair the health code violations, you could, after settlement, discover that the violations are far too expensive for you to undertake (for example, a broken sewer pipe). Also, the local municipality may require a new certificate of occupancy or there may be taxes due by the Seller. Any of these events will prevent you from being able to operate your restaurant until you spend a great deal of money to fix the problem. Remember, you will not be able to operate the restaurant without the health permit since it is an absolute fundamental requirement for restaurant liquor licensees to be in possession of a current health license.
You could find yourself in a financial and legal mess.

OPERATING WITHOUT A HEALTH LICENSE

Q: The City of Philadelphia has revoked my health permit (food prep license) because of outstanding taxes, which I dispute. As a PLCB restaurant liquor licensee would I be able to continue to operate and sell alcoholic beverages until I receive my heath permit from the City?

A. You may not sell alcoholic beverages while you wait to resolve your tax problems with the City of Philadelphia. All restaurant licensees are required to possess a health license or permit (Philadelphia titles its health permit as a Preparing and Serving Food License.). Possessing a current health license, which is properly posted on the licensed premises is a basic requirement for the licensed premises to qualify to hold the restaurant liquor license and to conduct sales of alcoholic beverages. Without the health license you must cease sales of all alcoholic beverages. The Pennsylvania State Police Bureau of Liquor Control Enforcement will issue you a citation if they discover that you do not possess the health license.  The lack of a current health permit prohibits you from selling food items. Remember, you possess a restaurant liquor license which requires you to sell food at all times when you sell alcoholic beverages.

As seen in the Observer Magazine, a monthly beverage journal magazine. Edward Taraskus contributes the Know the Law column.