Popping Up over the Christmas Season - Things to keep in mind for Landowners and Occupiers
As the festive season approaches, we are likely to see additional ‘pop-up’ shops on the High Street setting up in time for the Christmas trade. Being mindful that these arrangements are not traditional landlord and tenant relationships, there are some important points for both landowners and occupiers, of a business premises, to keep in mind when considering their occupation arrangement.
Clarity- It is important for both the landowner and the proposed occupier to be clear from the outset whether they wish to enter into a lease or a licence and to understand the key differences between the two occupation arrangements.
Leases- A lease is a more formal arrangement which grants exclusive possession of a premises to a tenant, for a consideration of payment, for a fixed term period. A lease creates a legal interest in the land and a tenant with exclusive possession of a designated area is entitled excluding all others from the property (with the exception of any rights reserved by the landlord in the lease). Generally, a lease will be for a certain term and cannot be determined as easily by a landlord than a licence.
Licence -A licence, on the other hand, does not create a landlord-tenant relationship, it merely grants permission to the occupier to do or carry out certain activities on the property. A licence does not grant exclusive possession of the premises to an occupier and is typically for a shorter time period than a lease. The licence may also be for an area of land that is shared with others and is a more temporary form of occupation.
Tenant Protection In accordance with the provisions of the Business Tenancies (Northern Ireland) Order 1996 (“the 1996 Order”) any business tenancy, with a lease term of 9 months or more, has security of tenure meaning the tenant will have the right to occupy the premises after the lease term has ended. It is worth noting that neither party can ‘contract out’ out of these provisions, unlike in England and Wales, and the landlord is limited in its grounds for opposition to a lease renewal. A licence however, is not protected by the 1996 Order and a licensee of a business premises is not granted the same security of tenure protection.
For those parties wishing to enter into a licence, to cover the festive period only, it is important to bear in mind that an occupation arrangement labelled a ‘licence’, has been held to constitute a lease by a decision of the Court. The case of Street v Mountford (1985) dealt with the interpretation of a licence and how, as it possessed the key characteristics of a lease, namely by affording exclusive possession of the premises to the tenant, the occupation arrangement was considered to be a lease, not a licence, despite its name.
Both landowner and occupier should consider the implications when agreeing the terms of their occupation arrangement of a business premises. In particular, the parties should ensure that the occupation arrangement intended to be entered into is documented correctly and meets the specific criteria of either a licence or a lease, whether that is for the festive period only or beyond.
If you would like any further information or advice, please contact Oonagh Monaghan from our Real Estate team.
*This information is for guidance purposes only and does not constitute, nor should be regarded, as a substitute for taking legal advice.