Licence vs Lease in the world of pop-ups
Pop-ups, by their very nature, do not conform to traditional rules. They are innovative, inherently trendy, even trend setting, with the rest of the UK seeming to replicate what happens in Shoreditch within a year or two.They are being described as the fastest growing trend in the UK food and drink market (with a massive 82% growth of this form of event on Eventbrite) with 75% of people surveyed by Scottish Enterprise in 2017 saying that they would be happy to pay more for a unique food and drink experience.
So, how do the parties to a pop-up, being the property owner and the pop-up operator ensure that their respective legal obligations and property rights are clear and can be enforced should the need arise?
Given the temporary nature of pop-ups, there are two key factors in relation to leases (which do tend to contain more onerous provisions than a licence to occupy) that make them the less preferable option for a typical pop-up.
Firstly, leases give a tenant what is known as a ‘real right’ in the property i.e. a right that is not just enforceable against the person who granted it but is also enforceable against future owners or successors of the property.
Secondly, leases automatically run on for one year after the intended expiry date by a process called ‘tacit relocation’ – unless the landlord or tenant has served an appropriate notice to the other party. No such notice is required under a licence, there is simply a termination date contained in the licence. Therefore, in light of the short term and informal nature of pop-ups, most will operate under a licence to occupy rather than a formal lease.
A licence to occupy generally grants to the pop-up operator a licence to occupy and use the property for the permitted use with all necessary non-exclusive rights of access to and from the property and acknowledges that possession of the property is retained by the owner. They also tend to provide explicitly that the licence is not a lease and that it does not confer any tenancy rights on the pop-up operator.
The licence will contain other standard provisions such as duration, licence payments, permitted use of the property, insurance, occasional licence/premises licences (if applicable) etc. It is important to note that despite their temporary nature, a licence to occupy does not necessarily offer less legal protection than a lease, provided that the licence is correctly drafted.
An added bonus is that licences to occupy do not fall within the scope of LBTT (Land and Buildings Transaction Tax) and accordingly no tax is payable and no LBTT return is required to be made to the Revenue.Therefore, licences to occupy are a great tool for documenting a relatively informal occupation of property to the benefit of both parties but, as informal as they may seem, we always recommend taking independent legal advice.
For more information and advice please contact a member of our expert food and drink team on 0131 226 6541 or 0141 332 5666.< Back