Premier O’Farrell’s proposed reforms to “tackle alcohol and drug fuelled violence” were given more shape and substance yesterday, with parliament recalled early to consider the Liquor Amendment Bill 2014 (the Bill) and the Crimes and Other Legislation Amendment (Assault and Intoxication) Bill 2014.

Given the populist nature of this issue and the recent political and media fanfare surrounding our drinking culture and the perceived epidemic of alcohol related violence (despite the fact that alcohol related violence in NSW actually decreased by nearly 30% between 2007-2012), we are not surprised that the Bill had an easy passage through parliament yesterday and passed both houses without amendment.

The changes proposed by the Bill and accompanying draft Regulation will create a new precinct, which will span Potts Point and Darlinghurst in the east (and also include Elizabeth Bay) to Cockle Bay and Haymarket in the west and from the harbour’s edge in the north to parts of Surry Hills in the south, with Barangaroo a notable exception.  The precinct will be known as the ‘Sydney CBD Entertainment Precinct’ (the CBD precinct).

Under the reforms:

  • Most late trading licensed premises within the CBD precinct will not be allowed to admit any patrons after 1:30am, and will have to cease serving alcohol after 3am;
  • All licensed premises within the CBD precinct may become subject to more onerous licence conditions
  • All take away sales of liquor will now need to cease at 10pm  throughout NSW;
  • A ‘periodic risk-based licensing scheme’ will also be introduced; and
  • A freeze on new liquor licences and extended trading hours within the CBD precinct will be introduced.

We examine, in detail, the reforms proposed by the Bill below.

What premises are affected?

Although the media attention has focussed on the CBD precinct, there is in fact the potential for a much wider range of venues to be impacted by the reforms, as the Bill gives a broad Regulation making power which would allow the Minister to declare additional areas to be a “prescribed precinct” for the purposes of the the Liquor Act 2007 (the Act).  This would mean that the reforms could be rolled out anywhere across the State, without the need to go back to parliament for approval.

The only prescribed precinct currently proposed in the draft Regulation is the CBD precinct.  This precinct includes any licensed premises that front, back onto, abut, or can be entered from any street within the precinct.  In our view, this captures premises on both sides of the roads which form the boundary of the precinct. Click here to view the Sydney CBD Entertainment Precinct map.

What types of restrictions will affect a particular premises is somewhat confusingly explained in the Bill and the draft Regulation.

Potentially, any licensed premises within a prescribed precinct can be declared a “high risk venue”, which will mean that ID scanning will be required and long term banning orders can be made in relation to the premises. 

By default, any premises that:

  • allow the consumption of liquor on premises; and
  • are authorised to trade after midnight at least once a week on a regular basis
  • have a patron capacity of more than 120 people;

will be deemed a “high risk venue”.

Where a venue is not a deemed high risk venue and is individually declared a high risk venue, this will be a reviewable decision.

The Bill allows for Regulations to impose licence conditions on any licensed premises within a prescribed precinct (not just high risk venues) relating to matters such as:

  • Cessation of alcohol service;
  • Lock outs;
  • Cost contribution from licensees towards measures taken to minimise orprevent alcohol-related violence, antisocial behaviour or other alcohol relatedharm in the precinct;
  • The use of glass;
  • Restrictions on the sale of certain alcohol, such as shots; and
  • Requiring the implementation of security or public safety measures.

The Bill was accompanied by a draft Regulation that proposes to impose a 1:30am lockout and 3am cessation of alcohol service on:

  • Hotel and General Bar licences;
  • Clubs;
  • On premises public entertainment licences (other than cinemas or theatres)and karaoke bars;
  • “high risk venues”; and
  • Level 1 and Level 2 Declared Premises.

In his second reading speech, the Premier stated that other restrictive licence conditions would be developed over the coming weeks, which suggests that we can expect to see more than just the 1:30am lockout and 3am last drinks in the final version of the Regulation.

1:30am lock-out and 3:00am cessation of alcohol

The 1:30 am lock-out and 3am cessation of alcohol will end at the commencement of a new day’s standard trading hours.  For most licences this will be 5am Monday to Saturday and 10am Sunday.

Although premises that currently trade beyond 3am will be permitted to remain open after the 3am cessation of alcohol service, it is difficult to imagine any circumstances where it would be economically viable for them to do so, other than hotels and clubs that have gaming areas that trade profitably in this post 3am period.

Periodic licence fees

Licensees will now be required to pay a periodic fee for their licences, with the amount of that fee varying depending on the perceived risk profile of the premises, having regard to such matters as its location, trading hours, patron capacity and compliance history.  There has been no indication at this stage of what these fees are likely to be.

‘High risk day period’

The new concept of a ‘high-risk day period’ will allow the Director-General to declare a particular day ‘high-risk’ for all or any venues within a prescribed precinct.  Presumably “high risk” days will occur when an unusually high number of patrons are expected, such as on special events of regional or national significance.  This could mean that rather than obtaining the benefit of extended trading hours for such special events (as is currently the case), additional restrictions may apply on these days. 

Small bars and restaurants

At this stage the draft Regulations do not impose a lockout or cessation of alcohol service on venues with small bar or restaurant licences (unless these premises are also “high risk venues”).  However, it would be easy for the Regulations to be amended in the future to extend restrictive licence conditions (such as the lockout) to these premises. 

It is also worth noting that most “small bars” do not actually operate with small bar licences (which is a relatively new type of licence, applying only to venues with a maximum capacity of 60 patrons). 

Where a “small bar” operates with a hotel or general bar licence, it will be subject to the 1:30am lockout and 3am cessation of alcohol, as will any late trading premises with a restaurant licence that has a patron capacity of more than 120 people.

Exemptions

There will be an ability for premises to apply for a special exemption from the proposed reforms.  However, in order to receive an exemption, the Director General must be satisfied that:

  1.  the exemption is unlikely to result in an increase in the level of alcohol-related violence or anti-social behaviour or other alcohol related harm in theSydney CBD Entertainment precinct; and
  2. measures other than the specified condition to which the exemption relatesare in place on the CBD subject premises and that such measures will beeffective in reducing the risk of alcohol-related violence or anti-socialbehaviour on or about the subject premises.

This is essentially the same basis upon which an exemption to the Declared Premises provisions of the Act may be granted, and we are not aware of any such exemptions being given in the five years since the Declared Premises provisions were introduced.  We therefore believe it will be very unlikely for specific exemptions to be given. 

No take away liquor after 10pm

In addition to the new “prescribed precinct” restrictions, the Bill will also prohibit all takeaway sales of alcohol in NSW after 10pm, which is a two hour reduction in trading hours.

Changes to the Kings Cross and Declared Premises provisions

The Bill also makes some minor changes to the existing restrictions applying to Kings Cross and Declared Premises.

The 1:30am lockout will apply to these premises, bringing the lockout forward 30 minutes for a Declared Premises and introducing a statutory lock out for Kings Cross for the first time.

The liquor sales cessation period between 3am and 5am (or 10am on Sunday) will apply in Kings Cross rather than the one hour cessation currently in place for Saturday and Sunday morning only (being Friday and Saturday night).  

Ill-considered reform

The reforms were announced less than eight weeks after the publication of an independent statutory review of the Act (the Review), yet the reforms ignore many of the key findings and recommendations of the Review.

The Review considered over 1,500 pages of comments, research material and discussion in over 100 submissions from the community, government agencies, local councils, industry and the health sector.

In relation to alcohol related violence, the Review noted that since the introduction of the Act alcohol-related violence has steadily declined.  The Review also found that there is currently insufficient research to suggest that 3am is the optimal closing time to prevent alcohol related violence. 

The Review concluded that the closure of all late night trading premises in a particular area at a specified time would result in considerable demand for limited transport and the “resulting queues and frustration experienced by patrons may present significant management problems for licences, other business operating at those times, and law enforcement.”

In our view, 3am is a particularly bad closing time, as it coincides with cab changeover, when it is difficult to find a cab at the best of times.  One of the most significant means of reducing alcohol-related violence is to get people out of late night trading areas as quickly as possible after they decide to call it a night.

Although the Premier plans to introduce a free shuttle bus between Kings Cross and the CBD every 10 minutes, this will only move people from Kings Cross into the heart of the CBD precinct, where they will then have to congregate and wait for the infrequent nightride bus services out of the CBD.  There does not appear to be any proposal to improve transport options from other parts of the CBD precinct to the nightride hubs, or to improve late night transport services out of the CBD precinct itself  to get people off the streets and on their way home faster.

The Review also noted the unfairness of imposing blanket restrictions across an entire area, criticising a ‘one size fits all’ policy, such as the one implemented across Newcastle, as an inappropriate response.  Imposing such measures would unfairly penalise the majority of licensed premises that “consistently operate within the law and make a positive contribution to the late night economy.  The measure would also have a significant impact on local employment and economic activity.”

Although the Premier has pointed to Newcastle as a success story, where no displacement effect was experienced in surrounding suburbs, Sydney is an entirely different environment with a much larger number of venues spread over a much larger area, and a much more sophisticated night time economy.  Sydney is a global city, not merely a regional hub.  At the moment, there are many areas in Sydney not affected by the CBD precinct controls, such as Paddington, Bondi, Coogee, Pyrmont, Newtown, and large parts of Surry Hills.  There is clearly the potential for these bordering suburbs to be impacted by the displacement of patrons from the CBD precinct.

What does this mean for you?

The reforms clearly have the potential to significantly impact the financial viability of licensed premises within the CBD (and any future “prescribed precinct”). 

The biggest financial impact for later trading venues  is likely to come from the  lockout and last drinks provisions, but increased operating costs may also arise from other new licence conditions such as more onerous security requirements, or a mandatory cost contribution toward measures taken by the State government to address alcohol related violence and anti-social behaviour.  These higher operating costs may be experienced by any licensed premises in the precinct, not just the late trading ones.

Smaller venues and venues that close before 1:30am and will not be directly affected by the lockout may nevertheless be indirectly affected as people skip these premises altogether or leave them earlier, to ensure that they can get into a larger or later trading venue before the 1:30am lockout.

This should also be of concern to landlords and financiers of licensed premises as an operator’s ability to pay rent and service it debts will be impacted.  The restrictions are also likely to have negative impact on the value of the real estate asset – particularly in the case of hotels, where the licence adds significant value to the asset and is usually beneficial held by the landlord.

The reforms will be subject to an independent statutory review after two years, which is probably cold comfort for the many licensed venues that may go out of business in the meantime.