Pop-up shops: temporary salvation or long-term headache for landlords?

Pop-up shops continue to be popular in many high streets with landlords being unable to secure long-term tenants for commercial retail premises due to adverse market conditions. They can operate as an ideal solution in filling empty properties but the following points should be kept in mind:

Benefits for landlords

• Removal of liability and responsibility for rates, insurance and security costs.
• A market rent can often be achieved.
• Units can be ‘showcased’ to tenants with the possibility that they take on a longer term lease commitment should trading be successful.
• Reviving flagging shopping centres and high streets by removing rental voids and increasing footfall.

Benefits for tenants

• Flexibility. Temporary use for up to 28 days does not require any form of planning permission. Landlords and tenants often agree an ‘easy come, easy go’ arrangement and notice period.
• Shops can be quickly and cheaply set up.
• Limited repairing obligations are often the norm.
• Low cost exposure – complicated long-term leases do not have to be negotiated with associated costs such as stamp duty land tax and Land Registry fees.

Potential pitfalls

• Both parties should ensure that the agreement is documented in writing.
• Licence arrangements are potentially dangerous. A failure to document the arrangement might lead to security of tenure being conferred on the tenant within the meaning of the Landlord & Tenant Act 1954, and this could potentially affect long-term re-letting or redevelopment plans for the property.
• Check that the proposed use does not breach any current planning permission for the property.

The benefits of pop-up shops for landlords with vacant space on their hands are clear, but they must tread carefully to ensure that they are not left with a security of tenure hangover.

A short-term lease for a fixed period excluded from security of tenure but allowing early termination by either side on giving notice is often the best way forward. These leases can be short-form and uncomplicated, sometimes including a ‘global’ rent to cover service charge and insurance costs.

 For further legal advice on pop-up shops or for any other commercial property matter please contact commercial property partner Nigel Whittaker. He is a “highly regarded property specialist” who acts for a diverse range of business and charity clients as well as investors on the acquisition and disposal of high value commercial premises.