Pop-up shops – the legal issues landlords and tenants need to know about
Pop-up shops are a growing phenomenon - a stroll down many UK high streets reflects this.
Once most common at Christmas, pop-ups are now a year round fixture and a market which generates a turnover in excess of £2.3 billion and employs more than 26,000 people. In 2015 alone, there were more than 10,500 pop-up shops located around the country and the number is growing every year.
The concept seems a highly attractive one for both landlords and tenants. For landlords, there's the chance to enter into a short term agreement with a tenant on a property that might otherwise be left empty and for the tenant, there's the opportunity to perhaps test out an on-line brand or concept on the high street but without the commitment of a longer term agreement.
Building brand awareness or trying something new
Some of the world's biggest brands have used pop-ups to test the marketing water or just to do something a bit different with a product, including Google, Apple and Cadburys, occupying everything from small shop units to large commercial premises.
And increasingly, people who run pop-ups are moving into a wide range of different businesses including clothing, cafes, restaurants, street food and seasonal gifts.
But because each pop-up venture will vary in terms of nature and requirement, both landlords and tenants should seek legal advice at the start of negotiations to make sure nothing goes wrong further down the line.
So, what do you need to know?
There's no doubt that pop-up shops can be beneficial for both tenants and landlords but it is important to protect both parties' interests by making sure any venture complies with planning permission laws. Other considerations include:
Whether to choose a lease or a licence
Both parties must consider which type of agreement is best suited for the retail space and the tenant's requirement - a lease or a licence? This is dependent on the length of the tenancy and the kind of occupancy and whether it could turn into a longer term arrangement in the future.
A licence does not confer any legal interests in the retail space but instead gives permission to the tenant to use the location for an agreed purpose over an agreed time period.
A lease gives the tenant exclusive possession of a space in exchange for rent over an agreed term and with a number of agreed liabilities and responsibilities on both sides.
Landlords should be aware that even if a license is used instead of a lease and problems arise - such as the tenant fails to vacate the space when required - the tenant may allege the license still denotes a landlord-tenant relationship exists and claim a right to possession which may result in litigation.
Most agreements will aim to ensure the landlord's property is returned in the same condition as when it was originally let. Both parties will want to ensure an agreement is reached at the outset as to whether the property is to be returned in the same condition or a better condition. Ideally, photographic evidence should be attached to the agreement in order that both parties know where they stand.
A landlord must ensure there is adequate Landlord insurance is in place. The type of insurance will depend on the retail space available to let. Tenants should also have a separate policy for contents and third party liability costs.
A lease arrangement will specify a term but, by its nature, the pop-up shop may want flexibility in the length of its tenancy and so provisions need to be made to extend the agreement or allow early termination.
A lease will always provide greater clarity and better protect the landlord and the tenant
Benefits to both landlords and tenants
A pop-up is an excellent vessel which can benefit landlords and tenants provided that it is set up correctly at the outset. A licensee will not want to be restricted by the terms of a tenancy any more than a landlord wants to have a pop-up which will not pop off!
For more advice contact Wards Solicitors' Commercial Property team by phone or pop in to one of our 11 local offices