In the summer of 2020, Michigan approved an amendment to the Liquor Control Code. House Bills 5781 and 5811 and Senate Bill 942 amended the MLCC, giving cities the freedom to create “Social Districts.”

These are approved and designated areas where citizens can purchase and consume alcohol in an outdoor setting. The idea was intended to ease liquor laws for businesses hurting during the pandemic, but has since gained steam and could now be a permanent fixture.

Background

Before we get ahead of ourselves, let’s discuss some definitions first: “Social districts” are the whole area that a municipality designates to allow special open containers of legally purchased beverages that can be enjoyed. A “common area” refers to specific public spots created by the municipality that is not tied to a specific business where people can enjoy their legal drinks together. The ‘common area’ resides within the district.

These designated districts allow for a walkable, outdoor area to dine and drink at your leisure. We’ve seen many downtown areas driving new and exciting foot traffic to bars and restaurants all across the state, from Zeeland, MI in June to most recently Royal Oak, MI last month.

The Michigan Liquor Control Commission designates these as “common areas” which are used by “qualified licensees,” retailers that hold a Class C, Tavern, A-Hotel, B-Hotel, Club, G-1, G-2 or Brewpub license, or manufacturers that hold on- or off-premises tasting room permit or license. These are restaurants, bars and pubs downtown, as opposed to off-premises Specially Designated Distributor (SDD) and Specially Designated Merchant (SDM) licensees like grocery stores and convenience stores selling packaged alcohol, wine, and liquor. 

Business owners, as well as cities, may be thinking to themselves, “This sounds great, but there must be a maze of red tape involved.” With an experienced municipal attorney at the helm providing sound guidance, businesses and cities can rest easy.

Establishing or Revoking Social Districts

Local governments do need to follow certain steps in order to set up or revoke a district under state law, including:

• Designating a district that contains a “commons area” (commons area is an area clearly designated and clearly marked by the governing body that is shared by and contiguous to the premises of at least 2 other qualified licensees)
• Establishing a local management and maintenance plan for things such as hours of operation for the commons area
• Defining and clearly marking the commons area with signs
• If the district would close a road, the governing body needs prior approval from the road authority with jurisdiction over the road
• Maintaining the commons area in a way that protects the health and safety of the community
• The governing body may revoke the designation, if it threatens the health, safety, or welfare of the community or it has become a public nuisance, but must hold one public hearing on the matter before revoking, and must give notice of the hearing as under the open meetings act
• The designation or revocation of a district is filed with the Michigan Liquor Control Commission

Gaining Municipality Approval

After a district has been designated, licensees must then apply to the local municipality and gain approval to be included in the district. Only then may licensees apply for a Social District Permit with the Michigan Liquor Control Commission. The licensee’s business must be contiguous to, or in other words, touching the commons area to qualify. 

Liquor licensees with on-premises licenses, such as Class C licenses, may sell alcoholic liquor for on-premises consumption in the restaurant, bar, etc. which are then taken into the district to be consumed. Most importantly, licensees cannot sell alcohol in the commons area; it can only be sold in the licensed premises of the restaurant, bar, etc. 

Another important rule is that serving containers need to comply with certain restrictions:

• Prominent display name, logo or unique mark of the licensee
• Prominent display of logo or mark of the commons area
• No glass containers
• No containers over 16 oz.   

Revitalizing The American Downtown

I often wonder how American cities and downtowns differ from their European counterparts. Where narrow, stone-cobbled streets line famous cities like Venice, Italy, or small towns in Bavaria. While the American downtown has been in decline in recent decades, it seems younger generations are more inclined to the scene, having a fonder appreciation for the central atmosphere than previous generations. As a result, cities are refocusing on downtown areas where citizens can gather, share ideas, and enjoy community events such as music festivals and art shows.

It may be the case that these districts allow cities to re-shape the way we view the downtown area. From just an area to drive through to a walkable, community gathering place. These social districts help facilitate this idea and make them a little more similar to European cities of old. Who knows, maybe these districts will spark a renewed focus on grand downtown plans with a central focal point or area. Only time will tell.

Business and Municipal Law | Fausone & Grysko, PLC

If you are a restaurant, bar, or pub owner looking for advice or guidance on how to apply for a social district permit, or if you are a municipality looking to establish one, contact Fausone & Grysko, PLC today at (248) 380-0000 and we can help make the process smooth and easy for you.