"Short lets" for retail premises (pop-up shops etc.)

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    "Short lets" for retail premises (pop-up shops etc.)

    I am buying a building which has hitherto been fully retail. I intend to convert it so that it's part-retail part-residential. However, it'll take a few months to get planning permission and prepare for the works.

    I was therefore thinking of trying to let the building on a "short let" basis to a retail tenant for that period, to operate what might be described as a "pop up" shop. I'd be happy not to achieve very much for it – my motive for letting it is primarily so that I have someone "house-sitting" the building for me, as it would feel quite vulnerable otherwise and I could easily see it attracting unwanted attention (it would be a large empty building in a busy city centre street which suffers quite a lot of antisocial behaviour). It'd also be good to have someone else paying the business rates for me. Any rent which would be received during this period would just be a secondary benefit.

    Is this viable? Is there a market for this sort of thing (bearing in mind I wouldn't be asking much at all in rent)? And are there any potential legal issues I'm missing?

    #2
    I think that a lease of less than six months is outside the protections of the landlord and tenant act 1952 but the problem is that if you found tenants that you were getting along with and they were paying their way it could easily happen that you let them stay longer, accepting rent from then they have the right to a new lease, so long as it is at the market rent more or less indefinitely. Of the other options one is to retain a part of the property so that you incoming tenants do not have absolute possession and grant a mere licence. I really think you must be guided by your solicitor. As to whether there would be demand, the answer is always provided you get the price right; and for that you need to consult a local commercial estate agent

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      #3
      You could let it on a tenancy-at-will. Provided the document is properly worded, a true TAW doesn't have protection under LTA54.

      However, since you don't know how long it's going to take to complete the conversion project, I think it would be better to grant a formal lease that excludes s24-s28 LTA54, ie., is outside LTA54. How long it would take to draft and complete the documentation would probably be no longer than drafting and completing a TAW and would properly suit both parties' requirements.

      Whether there would be any demand depends upon the suitability of the premises for the demand. Just because it's little or no rent doesn't mean that a retailer would want to incur the other property costs and overheads. Generally, pop-up shops only work in prime positions where there is sufficient trade to enable the cost of the shop to the occupier to be recouped very quickly. .


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        #4
        There are four ways you can proceed - two are recommended and two are not.

        Recommended:

        1. Grant a fixed term tenancy for six months or less. (Note that a weekly, monthly or other periodic tenancy is NOT a fixed term tenancy for six months or less.) The tenant does not get statutory security of tenure, You can grant two such tenancies - or to be more precise, you can grant any number of tenancies so long as none exceed six months and together they do not exceed a year. There are traps for the unwary so you need to take advice to make sure you do not fall into them.

        2. Grant a contracted out tenancy. Such a tenancy can be for any period. The tenant does not get statutory security of tenure. It is essential to comply with the statutory conditions so again you need advice.

        If you go for 1 or 2 you need to keep a tight diary and keep an eye on expiry dates and make sure that the tenant does not overstay or pay rent for a period after the fixed term ends.

        Not recommended:

        3. Grant a licence. You have to be careful with licences. There are certain situations where a licence is appropriate, but letting a retail space where the occupier has effective control of the premises is not one of them.

        4. Grant a tenancy at will. By its nature a tenancy at will cannot be for a fixed term. Taking rent in advance or setting fixed dates for payment of rent are generally considered to be inconsitent with a tenancy at will, though the authorities are not clear.

        GIven that 1 and 2 are available and do not involve significant hurdles to be jumped over, no sensible landlord opts for 3 or 4 in the sort of situation you have in mind.

        Comment


          #5
          Its donkeys' years since Ive done a contracted out lease. Is it still necessary to go before a county court judge? Could you elaborate on the procedure. Many landlords (wrongfully in my view) use them all the time as a device to deny tenants the right to secure of tenure and hence be able to negotiate harder for renewal rents, although the proper use is, in general, where the landlord is desirous of granting a tenancy of space that it requires to recover for redevelopment purposes

          Comment


            #6
            The need to apply to the court was abolished in 2004. The procedure now involves the service of notices. See here: https://www.josiahhincks.co.uk/2017/...nant-act-1954/

            Comment


              #7
              "Many landlords (wrongfully in my view) use them all the time as a device to deny tenants the right to secure of tenure and hence be able to negotiate harder for renewal rents, although the proper use is, in general, where the landlord is desirous of granting a tenancy of space that it requires to recover for redevelopment purposes"

              With respect, thinking there is a 'proper use' is outmoded. As I understand, most if not all of the shop leases in The Mall, Cribbs Causeway, Bristol are outside the Act and have been since the Mall opened in 1998. Outside the Act is standard for factory outlet centres. Where leases permits underleases, it is rare nowadays for a lease to not require any underlease to be outside LTA54. Some multiple retailers prefer outside the Act as it avoids the hassle and extra cost of LTA54 procedure.

              As for whether outside the Act enables landlords to negotiate harder for renewal (technically 'new lease) rents, that would depend upon whether the tenant's covenant would be worth keeping.


              Comment


                #8
                Sincere thanks to everyone for your advice. I'll come back with any further questions!

                Comment

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