Wannabe nightclub owners have come up with a new way to side-step the city's strict licensing regulations, CBC Toronto has learned, and it's led to scores of night-spots operating outside the law.

Coun. Jim Karygiannis, who represents Ward 39, Scarborough-Agincourt, says entrepreneurs are applying to the city for restaurant licenses, which are relatively easy to get. But late at night, they're morphing into full-blown nightclubs, with large dance floors and thumping music.

"At 11 o'clock, out go the tables, in comes the crowd," Karygiannis said Wednesday. "This is something I've asked [the city's municipal licensing and standards department] to look into."

Karygiannis co-chairs the city's municipal licensing and standards committee. His motion, asking city inspectors to report on what's being done to crack down on the problem, passed at last week's committee meeting.

Nightclub owner Spencer Sutherland, who also sits on the city's music advisory council, acknowledges that the practice exists.

Early Mercy, on King Street West, operates under a restaurant licence, but is used as a nightclub, Coun. Jim Karygiannis says. The club's owner hasn't yet responded to CBC Toronto's request for comment. (Mike Smee)

"Absolutely, Lots of places do that," he said. "At least 100. I could name 50 off the top of my head."

But he said the city is at least partially responsible for the proliferation of improperly licensed night-spots because it's presented so many obstacles to owners who want to go through the proper channels to get an entertainment license.

He said they must first locate in a properly zoned part of he city, then present detailed security, noise and crowd control plans.

Because it's become so difficult to get the proper licence in a properly zoned part of the city, many business have simply given up trying to follow the letter of the law, Sutherland said.

Coun. Jim Karygiannis, who co-chairs the city's municipal licensing and standards committee, has asked the city to crack down on nightclubs that get past red tape by operating on a restaurant licence. (CBC News)

"They're all over the city," he said. "Any up-and-coming area has that type of activity and the city needs to provision for that problem."

He says the licensing system needs to be streamlined — something that Tracey Cook, executive director of the city's licensing and standards department, said is already happening.

"We are looking very, very hard at the administrative burden, at the regulatory burden that we've placed on restaurateurs in particular," she said Wednesday.

Licensing review underway

Cook expects the licensing review to be compete by the end of this year.

In the meantime, she said the city is investigating venues that are operating as nightclubs without the proper paperwork. The city can fine those establishments, or apply to have their business licences removed, she said.

In an email to CBC Toronto on Wednesday, MLS spokesperson Tammy Robbinson said there are only 40 properly licensed nightclubs in the city.

$40,000 in fines

Since 2015, the Municipal Licensing and Standards Department has laid 158 charges against establishments using a restaurant license to operate a nightclub, the email states. Those charges have resulted in a total of $39,750 in fines.

Karygiannis said Wednesday he wants to see a crackdown not because he's trying to discourage business, but because he's concerned about noise in neighbourhoods that aren't zoned for entertainment hotspots.

He said he's also concerned about the the security of the patrons at improperly licensed nightclubs, which he said often advertise capacities that are far larger than their floorspace warrants.

"My personal greatest concern is the capacity and the safety of the patrons," he said.