Under Florida Law, the first party to properly record a liquor license lien typically has priority over subsequent lienors. However, there are some instances where third parties without a valid recorded liquor license lien can successfully challenge that priority.

To perfect a liquor license lien (the “Lien”) under Florida Law, the secured party shall file (within ninety (90) days of the date of creation of the lien or security interest) a “Mortgagee’s Interest in Spiritous Alcoholic Beverage License” with the Department of Business and Professional Regulation (the “Division”) under Chapter 561.65, Florida Statutes, together with (i) a copy of the promissory note (outlining the terms of the agreement) and (ii) a copy of the security agreement (specifically pledging the alcoholic beverage license by number). The Florida Supreme Court has held that a duplicate filing under the Uniform Commercial Code (via UCC-1 filed with the Secretary of State) is not necessary to perfect the Lien (see United States v. R. McGurn, 596 So.2d 1038; (Fla. 1992). Notwithstanding this ruling, secured parties continue to file a UCC-1 at the State level for precautionary reasons.

In addition to conducting a traditional Division lien search, a secured party should conduct a thorough investigation of the ownership rights of the party pledging the license (including researching the ownership rights of any predecessor in interest to the current owner and requesting copies of all agreements, options, leases and/or management agreements on file with the Division).

One case of particular interest is, Lachance v. Desperado’s of Holly Hills, Inc., 760 So.2d 1023 (Fla. 5th DCA 2000). In Lachance, the Fifth DCA ruled that a landlord who had assigned a liquor license to a tenant had priority over a third party lender (“Lender”) that made a loan to the tenant and filed a liquor license lien with the Division based on reverter language contained in the lease between the landlord and tenant. The landlord had not filed a lien on the license but had provided a copy of the lease containing the reverter language to the Division. The Lender had conducted its due diligence and received a search of the Division’s lien records. The search confirmed that there were no liens on file against the license but did not mention the lease. The court held that the landlord was not required to file a lien on the license as it at all times owned an equitable interest in the license which trumped any subsequent lien filings. The court reasoned that the Lender had no rights against the license and could not foreclose on same as it was on constructive notice of the lease and landlord’s right to the license.

For more information on this topic, please contact Thomas P. Angelo at tpa@www.angelolaw.com.