- Should I Stay Or Should I Go? – Lease Renewals in the Licensed Sector
Should I Stay Or Should I Go? – Lease Renewals in the Licensed Sector
If, like many other licensees, you lease your premises, you will no doubt have experienced the stresses and strains of a rent review or the lease renewal process, and if you haven’t, then you probably will soon!
A business lease can be a complicated document and if you take nothing else away from this article, always remember the value of timely advice, both from your solicitor and your surveyor, as both these professionals could have a vital role to play in any negotiations you undertake.
The processes around lease renewals are heavily regulated and there can be some very hard and fast deadlines, which, if you miss them, can have devastating consequences for your business. So, it is vital that you act proactively and take the front foot or if your landlord acts first, you respond in a timely manner.
For lease renewals, you need to start thinking about the process no less than 18 months before your lease is due to end. The first thing you need to do is decide whether or not you want to stay in the premises, as that decision will determine some of the actions you may need to take further down the line.
Assuming you do want to stay, the next question is, whether your lease offers the protection of the Landlord and Tenant Act 1954 (LTA54)? Your solicitor will be able to tell you this. If it doesn’t, then you need to engage your surveyor and start forming a negotiation strategy early, as if you cannot reach agreement with your landlord by the lease end, you will have no legal right to remain in occupation.
If it is a LTA54 protected lease, then you have a little more time, but you still need to formulate your plan with both your solicitor and surveyor, as they will be able to advise on the terms you should be offering your landlord for the new lease. Rent, repairing obligations, alienation and user clauses all have a key part to play in this.
Assuming that your landlord does not oppose your application for a new lease, then you should have plenty of time to negotiate and agree the terms of the lease. I If you cannot reach agreement there is always the opportunity to apply to court to have the terms determined, this is the last resort however. If though, your landlord seeks to oppose the renewal under one of the 7 grounds offered under s30 of LTA54, then it is likely, if you want to stay, that an application to court may be your only option.
For licensed premises, there is however a further complication. If you occupy a pub on a ‘tied’ tenancy, you may also wish to think about whether you want to remain on this basis and get the benefit of a lower rent, at the expense of higher beer prices or, under the provisions of the Pubs Code 2016, apply for a Market Rent Option (MRO) lease. Again, this process is tightly controlled, with a number of strict deadlines that you must meet to keep the MRO avenue open. So, if you think an MRO lease might be of interest to you, getting proper advice at an early stage is vitally important, as getting it wrong could prove to be a costly mistake.
If however, you decide that you want to leave the premises at the lease end, don’t think that you can just walk away!
When you end the lease, unless the landlord is going to comprehensively redevelop the premises, there is a likelihood that you may be landed with a dilapidations liability, a legal claim to make good any disrepair deemed (by the landlord) to have occurred. If your landlord serves such a claim on you there are a number of remedies available. You can do the works, assuming you have sufficient time, which unfortunately is often not the case) or you can try and negotiate a better settlement.
In both cases, there is significant value in appointing a surveyor on your behalf, as dilapidations is a complex area of property law and what may seem reasonable and realistic to you, may, in the eyes of the law, simply be not!
As a tenant, one of the primary defences is under s18 (1) of the Landlord and Tenant Act 1927 (LTA27), which effectively places a limitation on the landlords claim, of no more than the diminution in the value of the property due to the repair works required. This however, isn’t necessarily all the proposed costs. As only those costs that are considered value affective will impact on the value of the reversion. This is where the skill of a specialist surveyor is required. Working with a building surveyor, your valuer should assess the costs proposed by the landlord to see whether a) they are reasonable and b) whether the disrepair alleged really reduces the value of the property as much as the landlord’s surveyor suggests. S18(1) can be a really powerful tool in the tenant’s arsenal when defending a dilapidations claim and can potentially save you significant sums.
With any lease event, the old adage of the 5 p’s is as relevant as ever (Proper Planning Prevents Poor Performance) and although it may seem counter intuitive to spend money up front before anything has happened, getting proper advice at an early date, whilst it may cost you some cash, could potentially save you significantly more further down the line.
North East leisure industry - what a wonderful yearWhat a strange and unusual year the last 12 months have given us, with continued upheaval in the casual dining sector; a long hot summer and an unexpected run by England’s football team in the World Cup contributing to a strong performance from the pub sector – and, of course, the dreaded ‘B’ word having an influence (but not necessarily in a bad way). Click here to read the full supplement
What a strange and unusual year the last 12 months have given us, with continued upheaval in the casual dining sector; a long hot summer and an unexpected run by England’s football team in the World Cup contributing to a strong performance from the pub sector – and, of course, the dreaded ‘B’ word having an influence (but not necessarily in a bad way).
Here in the North East, we witnessed a myriad of events, ranging from the Rugby League Magic Weekend to Ed Sheeran playing St James’ Park and the Great Exhibition of The North.
While different, they all drew visitors to the region in increased numbers, with the Great North Run continuing to generate an estimated £24m for the regional economy. The success of the Newcastle Falcons’ Big One at NUFC was also clear, with the fixture returning in March, when we will see the Falcons taking on Sales Sharks at St James Park.
The last 12 months were also a strong year for new openings, from the grand – the long anticipated return of the Spanish City after a £10m redevelopment; to the modern – the opening of the Stack on Pilgrim Street in Newcastle and the By The River Brew Co on Hilgate Quay, Gateshead; to the traditional – the opening of the new £4m, 30 bedroom Amble Inn by the Inn Collection; to the micro, with the opening of the Front Street Tap House, Monkseaton, a micropub with a focus on rum and craft ales and everything in between.
Crate Park - the latest shopping container village set to take the North East by stormPlans have been revealed for the creation of a £20m shipping container business park at one of the UK’s largest office parks, Cobalt Park in North Tyneside. Located adjected to the existing Cobalt Business Park, the new Crate Park will use upcycled shipping containers to create unique retail, leisure or small office spaces, offering affordable solutions for both start-up and existing retail businesses.
Plans have been revealed for the creation of a £20m shipping container business park at one of the UK’s largest office parks, Cobalt Park in North Tyneside.
Located adjected to the existing Cobalt Business Park, the new Crate Park will use upcycled shipping containers to create unique retail, leisure or small office spaces, offering affordable solutions for both start-up and existing retail businesses.[fulltext] =>
If planning is accepted then it is estimated that businesses would be able to start moving in November of this year.
Agents from our Newcastle office have been appointed alongside Lambert Smith Hampton as joint agents and are looking to hear from any businesses interested in hearing further information about the spaces.
Kevin McGorie, agent at Sanderson Weatherall commented, “The popularity of 'By The River Brew Co.' on the riverside and 'Stack' in Newcastle City Centre has reinforced the increasing demand for alternative spaces, especially in the wake of so many closures on British high streets.
“One of the real standout benefits of the Crate Park is that the owners are offering mentoring programmes for those that take space, to help encourage start-ups. The park prides itself on providing the environment for businesses to be successful and with the guidance and support offered it will help to create a very vibrant business community.”
A spokesperson for the Crate Park commented, ““This isn’t just about providing affordable space – it’s about providing a team to hold entrepreneurs’ hands and help them with all the decisions. Whenever you hear people talk about incubators, it’s always about growing tech businesses, never retail. We want this to be a springboard to the High Street; a self-contained group who can all work together, cross-pollinate and create a business community.”
For more information about the Crate Park please click here.
February Deals UpdateOur strong end to last year has been followed by an equally strong start to 2019 with a number of deals and new instructions across our nationwide network of offices. At the start of the year we published our caravan and holiday park market review, including highlights from their year, a review of the holiday and caravan park market and information on parks sold, and parks currently for sale – view the full report here.
Our strong end to last year has been followed by an equally strong start to 2019 with a number of deals and new instructions across our nationwide network of offices.
At the start of the year we published our caravan and holiday park market review, including highlights from their year, a review of the holiday and caravan park market and information on parks sold, and parks currently for sale – view the full report here.[fulltext] =>
2018 was a wonderful year for the North East leisure industry with a calendar packed full of events, ranging from the Rugby League Magic Weekend to Ed Sheeran playing St James’ Park and The Great Exhibition of the North. Our North East property experts have teamed up with Sintons Law LLP to help create the annual leisure supplement published in the Journal. View the full supplement here.
We are delighted to announce the completion of a number of holiday park sales at the turn of the year, including the sale of Woodland Park, a a large residential caravan park sold for over £3,500,000 in Swansea and the Old School Caravan Park, a small touring park sold in Shropshire.
Our machinery and business assets team recently sold the “W1 NGS” number plate by online auction, realising £49,000 in the process. The highest bid on the plate was made by a purchaser on behalf of his son who earned his pilot’s license at the age of 17.
Our Leeds agency team acted on behalf of WYG on the move of their corporate headquarters to the 3 Sovereign Square Development in Leeds city centre. Our Leeds office team also published the Leeds office market report for Q4 2018. The full report is available here.
You can read our previous monthly deal updates by clicking here.