What a Recent Decision Means for Restaurant, Bar Owners
A Liquor License Lesson
By Joshua M. Goldstein, Esq.
Operating a restaurant, bar, event hall, or other business that utilizes a liquor license is hard enough without accidentally tripping over a clause in your lease that turns into a legal disaster. The Massachusetts Supreme Judicial Court’s recent decision in Nicosia, et al. v. Burn LLC, et al. (2025) is a good reminder that, when it comes to liquor licenses, contract terms still matter, and creative financing can come with some very sobering consequences.
How This All Started
This case arose out of a fairly common commercial setup and straightforward set of facts. N&M Trust VII (Nicosia) leased a commercial property in downtown Boston to Burn, LLC (Burn). As part of the lease agreement, Nicosia sold its liquor license associated with the property to Burn for the sum of one dollar. The lease terms included an ‘anti-pledge’ provision, which prohibited Burn from pledging the liquor license as collateral for a loan, and provided that any pledge in violation of such provision constituted a default under the lease. In addition, at the end of the lease term, Burn was required to transfer the liquor license back to Nicosia for one dollar.
Joshua M. Goldstein
“Pledging a liquor license as collateral may seem like an easy solution when money is tight, but if doing so violates your lease terms, it can lead to lease termination, an awkward conversation with your landlord, and very expensive consequences.”
Before the lease term expired or otherwise terminated, Burn pledged the liquor license to its principal, Brian Lesser, as collateral for a loan to Burn in the amount of $445,000. When Nicosia discovered this, it declared Burn in default of the lease, terminated the lease, and demanded the return of the license.
Nicosia initiated the lawsuit, and Burn challenged its claims, arguing that the lease’s anti-pledge provision is unenforceable as it violated public policy and Massachusetts General Laws c. 138 § 23, the statute which governs and expressly permits the pledge of liquor licenses.
The Court’s Holding
The court disagreed with Burn’s argument and upheld the anti-pledge provision as enforceable. The court reasoned that the clause did not violate public policy concerns as financing agreements among commercial sophisticated parties do not generally raise public policy concerns.
Further, the court distinguished this case from its decision in Beacon Hill Civic Assoc. v. Ristorante Toscano Inc. (1996), where it found that a private agreement not to apply for a liquor license was unenforceable because it thwarted public participation. In the case of Nicosia, et al. v. Burn LLC, et al., the anti-pledge provision does not interfere with public participation but rather is only a limitation on the licensee’s ability to use the liquor license as collateral to secure financing. No loopholes. No judicial sympathy for “but we needed financing.”
Why This Matters to Business Owners
Liquor licenses are often viewed as valuable assets, and they can be to a business. However, Nicosia makes it clear that their value can be tightly controlled by contract. Here are the key takeaways:
• A Liquor License is Not Always ‘Your’ Asset. Even if a license is technically in your business’s name, contractual restrictions can dramatically limit what you can do with it. If your lease says “no pledging,” that means no pledging no matter whether the lender is a bank, a private investor, or your own business partner.
• Courts Will Enforce Anti-pledge Provisions. This decision confirms that Massachusetts courts will uphold contractual limits on liquor licenses so long as they don’t limit a prospective licensee’s ability to participate in the licensing process or conflict with statute. Public policy is not a magic eraser for inconvenient lease terms.
• Financing Shortcuts Can Trigger Long-term Pain. Pledging a liquor license as collateral may seem like an easy solution when money is tight, but if doing so violates your lease terms, it can lead to lease termination, an awkward conversation with your landlord, and very expensive consequences.
Practical Advice for Local Restaurant and Bar Owners
If you currently operate, or plan to operate, a business that utilizes a liquor license, this case offers some practical lessons:
• Read the Entire Lease (Yes, Even That Section). Anti-pledge clauses are easy to overlook, especially when they’re buried in lengthy lease sections or among boilerplate provisions. But as this case shows, it is very important to read the entire lease, whether you have an existing lease or are considering entering into a new lease. Further, it is important to review the lease to ensure that any anti-pledge provisions apply to real property or personal property other than a liquor license.
• Coordinate Legal Advice Before Financing. Before pledging any business asset as collateral, make sure it doesn’t conflict with your lease or other applicable agreements. A quick legal review can be a lot less costly than litigating or defending a default of a lease.
• Assume Enforcement, Not Flexibility. Courts generally assume that sophisticated parties mean what they sign and expect to be bound by the same. It is very important not to rely on hoping a judge will ‘balance the equities’ later.
Final Pour
Nicosia is not flashy, but it’s important. For local business owners, the lesson is straightforward: treat your lease like required reading, and don’t assume that creative financing will survive creative lawyering on the other side.
If you’re ever tempted to pledge a liquor license as collateral without reviewing your lease first, just remember: the hangover from that decision can far outlast the term of the loan.
Attorney Joshua M. Goldstein is an associate with Bacon Wilson, P.C. whose practice areas include banking and finance and business and corporate law, with additional specialties including liquor licensing and other licensing matters. He is administered to practice law in the state of Massachusetts and is an active member of the Hampden County Bar Assoc.
