Hospitality industry may suffer if it makes changes without permissionÂ…

Ian Cowan
Ian Cowan

The rush to make the most of the Eat Out Help Out scheme could land some hospitality outlets in trouble, a leading North East solicitor has warned.
Hotels, pubs, bars and restaurants are working hard to try and claw back some of the income they lost during lockdown, while also having to deal with the challenge of lower numbers of customers because of social distancing.


But according to commercial property lawyer, Ian Cowan, of Sunderland law firm Richard Reed, hospitality operators need to be aware that any changes they make to use outside spaces could have consequences.


“Some establishments have rushed to make changes in time for Eat Out Help Out, without considering all the regulations and long-term implications,” said Ian.


“Landlords and tenants need to ensure arrangements are properly documented to avoid a number of pitfalls.”


Anyone operating a pub, bar or restaurant needs to ensure they have permission from the landowner before they put tables and chairs outside of their premises, according to Ian.


“If the external area is owned by the same landlord, such as a car park or garden area, then the landlord may be willing to grant new rights which can be done by a licence or variation to the lease,” he said.


“If neighbouring land which would be suitable is owned by another landowner, then you will need to approach them to get the necessary permission either as a temporary licence or a permanent easement.”


To put seating out in a pedestrianised area or on a high street, café and restaurant owners would need to get permission from their local authority, along with ensuring that the sale of alcohol is covered by the correct license.


“The simplest and quickest approach is for the landowner to grant a temporary permission (known as a licence) to use space outside the premises,” said the solicitor.


“This will be personal to the current occupier and it will enable the landowner to end the arrangement on notice if the occupier breaches any of the terms of the agreement.”


This also gives the occupier the flexibility to see if the al fresco operation is going to work in the long term, without committing to it. If however the plan is for this to be an on-going operation, “the best approach is to vary the lease to add a new right to use an area outside the premises and make any other required changes.”


Mr Cowan said these new arrangements would also raise a number of other key issues for both landlords and tenants.


“Where rights are granted in a licence, the landowner will expect a licence fee (similar to the rent payable under a lease).  Hospitality businesses are struggling with cashflow, so will probably request weekly or monthly payments.  


“They may want to link the licence fee to their turnover, but this will make the drafting more complex and introduce more administrative work for the landlord and occupier.”


The solicitor believes that commercial property owners need to be “realistic” about what a struggling hospitality business can commit to and that “it may be better to allow use of external space with little or no additional payment than to be left with empty premises.”


Mr Cowan added that it was important that operators stick to social distancing measures and that the landlord might want to make this a condition of any short term licence.


“If changes have been implemented to take advantage of the summer sunshine and the ‘eat-out to help out’ scheme, then it’s important the tenant speak to a solicitor as soon as possible.  They will make sure that all the important points are covered in the lease or licence along with a checklist of issues to think about.


“At the same time landlords also need to get legal advice about the implications for them about any changes that are made.


“Getting this right now will ensure that both landlords and tenants can avoid potential problems later.”


For further information, please contact Ian Cowan in the commercial property team on 0191 567 0465 or visit www.richardreed.co.uk

 

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