An alcohol and entertainment premises licence is an invaluable asset for commercial landlords. This is especially true if that licence was granted before the introduction of restrictive local policies, such as cumulative impact areas which operate to reduce the impact that licenced premises can have on crime and disorder in built up areas. This type of policy can make obtaining a new licence difficult and often means that any new licence will be subject to restrictive conditions.
For example, if your premises is located in a cumulative impact area, this could strictly limit opening hours on any new premises licence. Therefore, if you have a pre-existing licence which authorises extended opening hours then this is likely to be very attractive to an incoming tenant.
Upon letting a property, the premises licence will usually be transferred to an incoming tenant therefore it is important that you have protections in place to protect this asset because the licencing regime (primarily regulated by the Licencing Act 2003) can be unforgiving.
That’s why we have summarised the five key strategies you should be aware of as a commercial landlord when transferring your premises licence to an incoming tenant:
- Lease Covenants – A lease to an incoming tenant should include provisions which provide that the tenant will provide consent to transfer the licence back to you when the lease term ends (however this should end) within a certain timeframe. This is important because generally a transfer of a premises licence must be accompanied by consent of the existing holder. Therefore, f the tenant is not obligated to provide this then you may have to pursue something known as a hostile transfer.
- Hostile Transfers – If consent from the tenant cannot be obtained upon the term ending then a transfer without consent can be pursued. But you have to provide evidence that you have made reasonable attempts to obtain such consent and that if the application were granted you would be in a position to use the premises for the licensable activity. However, case law is limited and licencing authorities are often nervous to grant such transfers for fear of being subject to proceedings;
- Notification of interest – You can apply to the local authority to have your interest as freeholder or long leaseholder noted for a nominal fee with the benefit of this being that you will be made aware of any new applications in respect of the premises licence. For example, if the tenant applied to suspend or vary the licence. However, you should note that this notification only lasts for 12 months and so a new notification is required annually.
- Insolvency - A premises licence automatically lapses if the holder of a premises licence becomes insolvent or is dissolved. You then have a very short window of 28 days to revive this licence before this is gone forever. Administrators often swoop in and revive the licence before landlords are aware and will seek to ransom the premises licence. However, this can often be overcome with tactical advice. But speed is key: as soon as you have a scent of tenant insolvency you should act fast. If the licence is not revived it is gone forever and you cannot guarantee that a new application will be successful or granted on the same terms (especially if policies have changed).
- Shadow Licences – Becoming ever popular since COVID, many landlords now apply for something known as a 'shadow licence' before transferring the original licence to the tenant. You apply for a licence on the same terms as the existing licence (albeit additional conditions may be imposed if policies have changed) with the argument being that there is no reason for the application not to be granted, as it is not providing for anything over and above what is already authorised. You then hold this licence which is essentially 'dormant' and you are then protected against insolvency risks as this shadow licence would not lapse if the tenant went insolvent. The downside is that if the premises has had issues in the past then objectors and consultees may seek this as an opportunity to impose restrictive conditions.
Want to know more? If you have any questions about how you can protect your premises licence, please contact Jasmin Andrews or Rory Stracey in our Planning team at Trowers & Hamlins.
