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You are asking . . .

Q. : Is a lender who takes a security interest in beer or liquor inventory required to obtain a license before selling off the inventory in the event of a foreclosure?

A. No. As a general rule, any person who sells beer or liquor at wholesale in the State of North Dakota is required to obtain a license. N.D.Cent.Code § 5-03-01. However, lenders who acquire alcohol inventory by reason of a security interest foreclosure are exempt from obtaining such a license. Note that this has not always been the case. As recently as ten years ago, the Attorney General issued an opinion stating that a lender was required to obtain a wholesale license. But, the relevant statutes have since been amended.

In doing so, there are two requirements. First, the inventory must initially be offered to the wholesaler. N.D.Cent.Code § 5-03-01. The unanswered question with respect to this requirement is whether there is a price limitation. Second, any lender who takes possession of beer inventory must dispose of that inventory within ninety (90) days of taking possession.

As you will note, the above discussion allows a lender to sell wholesale. In reviewing this matter, North Dakota law does not permit a lender to sell off beer and liquor inventory at retail without a license. As far as North Dakota law is concerned, this may not be a big deal because lenders who take a security interest in alcohol inventory commonly take an interest in the liquor license. In doing so, the institution will have to follow the local procedures for transferring the license into its name. However, a lender may run afoul of other banking laws when it operates a retail liquor store.