March 29th, 2021

Liquor Licenses in PA: Transferring an “H” to “R”

During the last year here at Gross McGinley, we’ve understandably spent a lot of our time writing liquor license blogs addressing issues associated with restaurants and bars arising from the pandemic.  However, because owners of bars and restaurants typically have what are known as “R” (Restaurant) or “E” (Eating Place) licenses, we’ve neglected to spend a lot of time addressing some of the other license types in Pennsylvania. Read on to find out about the possible transfer of a “H” (Hotel) license and what’s changing in light of new PA liquor law.

Provisions of Act 125 of 2020

Governor Wolf recently signed into law Act 125 of 2020, which has a direct impact on a very specific subset of “H” (Hotel) licenses. Specifically, this law allows licensees to convert their “H” into “R” licenses.  As “R” licenses do not require rentable guest rooms for overnight stay, and are considerably more transferable, many “H” license holders might be interested in this conversion. However, there are some very unique limitations on this conversion.

It is important to note that due to legislation back in 2006, there was a class of “H” licenses which, if the license holder applied to PLCB, were able to remove the requirement for overnight stay guest rooms (generally “H” licenses that were in existence prior to 1949).  If the “H” license holder had done this, then the “H” license functioned exactly like an “R” license.  Ironically, despite these “H” licenses functioning as bars and restaurants, they were still classified as “H” licenses. Moreover, due to Pennsylvania’s quota system, these oddball “H” licenses were never counted in the county “R” license quotas.

Act 125 is designed to specifically address this issue and permits the outright change in classification of the license from “H” to “R”.  Upon payment of a $30,000 fee at the time of Application on PLCB+, the “H” license can be converted to an “R” license if:

  1. The License complies with the statutory requirements in section 47 Pa.C.S.A.  § 461(c)(8) of the Liquor Code regarding the prior age and applicability of an “H” license
  2. The license holder applied for an exemption under section 47 Pa.C.S.A.  § 461(c)(9) or 47 Pa.C.S.A.  § 461(c)(9.1) of the Liquor Code prior to January 1, 2019, and
  3. The license is not located in a city of the first class (Philadelphia).

If those conditions are met, and an application is submitted, PLCB will review to determine if there are any outstanding objections to the license renewal.  If no objections are outstanding, then the license conversion will be approved.  Additionally, per the PLCB, there is no need for the posting of a placard for this conversion process.

Considerations when transferring an “H” to an “R” liquor license

While this may seem like an easy decision if you hold one of these “H” licenses, there a few factors you should weigh as to whether this is of value to you.

First, there is a hefty, one-time fee of $30,000 which is due upon submission of the Application for Conversion on PLCB+.

Second, if you sell the liquor license within five years of the date of conversion, there is an additional transfer fee due to the PLCB in the amount of the greater of 25% of the sale price or $30,000.

Third and finally, under 47 P.S. § 4-461(c)(9.2), the option for conversion will expire on January 24, 2023, so this option is time limited.

When weighing these factors and determining if conversion is right for your business, we strongly suggest you consult with an accountant, real estate appraiser and attorney. Our Business Services Group is happy to assist you with your PA liquor license transfer. As always, feel free to reach out to us should you have any questions and would like some guidance on whether you qualify for this type of conversion, or, if you would like to discuss the option.

Attorneys Jason A. Ulrich and Thomas E. Reilly, Jr. practice in Gross McGinley’s Business Services Group, providing legal counsel to local, regional and national businesses.

The content found in this resource is for informational reference use only and is not considered legal advice. Laws at all levels of government change frequently and the information found here may be or become outdated. It is recommended to consult your attorney for the most up-to-date information regarding current laws and legal matters.