Retail Law: Rise of pop-up shops
By Ben Sillitoe - 05:15PM - Tue 7th December 2010
Earlier this week jewellery retailer H Samuel opened a pop-up at Westfield Shopping Centre, joining a large number of businesses that have followed this format across the UK.
Retail Gazette caught up with Simon Child, a solicitor with Piper Smith Watton’s retail team, to find out what issues need to be considered.
Child said: The pop-up shop is a concept being embraced by more and more retailers of all sizes for new ventures or as overspill.
Recent examples include the Marmite pop-up stores in Selfridges in Manchester, Birmingham and London, as well as opportunities for well established retailers such as HMV or Hamleys (as seen in its recent Toy Box shops in Bluewater, Meadowhall, and Chapelfield).
The buzz and appeal associated with such temporary offers can attract a lot of attention, and assists in maximising and exploiting trends.
But what are the practical and legal considerations for both tenant and landlord?
Tenant/Occupier
Practical:
-
Tenants can set up relatively quickly and experiment with a new concept or try out a new location without incurring the greater costs and risks associated with long term commitments but often with the flexibility and option to make the arrangement permanent if all goes well. Pop-ups allow greater access by the buying public to a retailer’s products.
-
In light of the numerous voids and vacant spaces left in recent years, landlords are usually very keen to allow tenants to occupy those empty spaces. As such tenants may be able to negotiate favourable terms.
Legal:
-
The tenant should be careful to understand and appreciate its rights and liabilities, especially in respect of repair.
-
Will the landlord expect a form of rent deposit, guarantor or other security?
-
Does the tenant wish to limit its repairing liability by way of a schedule of condition?
-
Will the tenant be obtaining security of tenure?
-
Will a fit-out be feasible and if so, is consent required from the landlord?
Landlord/Owner
Practical:
-
One benefit, apart from the rental income, is the tenant may be required to also bear the costs of insurance and business rates. The same might apply to service charge as well.
-
The occupation of the unit provides security for that shop and, if properly fitted-out, should make the vicinity more appealing and attractive. Neighbouring properties may benefit from the attention drawn to the new pop-up.
-
Is the proposed tenant commercially sound and viable? Will the proposed use of the pop-up conflict with existing tenants nearby?
Legal:
-
The landlord should exercise caution when granting a licence to ensure no greater rights of occupation or a right to renew is given.
-
Should a form of break right (rolling or otherwise) be included to allow for flexibility if the space is required for a more certain and long-term tenant or arrangement? Conversely, will the tenant want its own break right or a mutual right in the event it wishes to vacate sooner than anticipated?
-
Is the consent of a superior landlord or other third party, such as a lender, required to the proposed letting or arrangement? The time taken to obtain such consents and the cost in doing so should be borne in mind.
-
Is the proposed use of the pop-up shop permitted pursuant to the landlord’s headlease or, more importantly, the planning permission for the centre and/or shop? Again, the time and cost of obtaining any change of permissions should be factored in to the viability of the project.
Simon Child is a solicitor with Piper Smith Watton’s retail team.
To discuss any of the points contained in this article or for further information, please contact Simon Child on +44 (0)20 7222 9922 simon.child@pswlaw.co.uk or Tricia Hart on +44 (0)207222 9906 tricia.hart@pswlaw.co.uk Further details on the full range of legal services offered by Piper Smith Watton LLP can be found at www.pswlaw.co.uk.