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Could I mitigate my losses by using my premises for other purposes?

14 April 2020. Published by Catherine Young, Associate

With the inevitable impact of the coronavirus on retail businesses, many will be looking to mitigate their losses. One obvious way of doing this would be to use their premises, often their single largest overhead, for other uses. But is this possible and what must you consider?

Property title

Many titles contain restrictions against certain uses, most commonly restrictions against the sale of alcohol or other uses which elements of society may consider to be socially undesirable.  These should be clearly set out in the title deeds to the property. 

Lease provisions

Most leases contain controls on the tenant's ability to use the property which the landlord includes to retain some control over its investment.  In many cases this enables the landlord to acheive a desirable mix of tenants within their portfolio.  If the proposed new use is expressly prohibited or falls outside the general uses permitted your landlord's consent should be sought.

 If you wish to allow others to operate from your premises this may also be problematic without your landlord's consent.  Some leases allow concessions to operate within a limited area, most allow group sharing to take place, but anything more than this will almost inevitably require landlord's consent and, depending on the terms of the lease and the exact proposals, it may not need to be reasonable when considering the application.

Planning permission

Although changes of use within a use class are permitted without permission from the local authority, change of use outside of the specified use class is deemed to be development and normally requires planning permission.  However, it is possible to change between use classes without permission if this change is "permitted development", although it is often necessary to notify the local authority in advance.  In addition to permanent changes of use, shops may be able to benefit from temporary flexibility for 3 years if the new use does not take up more than 150 square meters of the premises and other conditions are satisfied. As has also been widely publicised, recent changes mean that restaurants may provide takeaway services for up to a year if the local authority is notified.

Licencing requirements

As well as the property and the lease, legislation will need to be considered.  Most people are aware that the sale of alcohol requires a licence but other lesser known licences may be required, such as a licence for the handling of animal food products.  If the proposed new use is in an unfamiliar sector it is important to consider whether permission from any other authorities is necessary.

Conclusion

It is possible to change the use of the property but interests of other stakeholders, such as the landlord and local authority, must be carefully considered.  In today's climate, with an unprecedented emphasis on working together, such hurdles may be easier to overcome than they would have been previously. This is particularly so if the change of use will be merely temporary to mitigate losses in the current crisis.