Whether or not you agree that they are assisting Britain’s ailing high streets, there is no denying that we are smack bang in the middle of the ‘pop up’ revolution. Most owners faced with the choice of pop up or board up seem to be opting for pop up. Is it a short term or long term fix? Does it matter? Isn’t the more important question (okay possibly three) – why, how and would one ‘pop up’?
The ‘why’ is answered from the owner’s perspective by this symbol - £. Empty shops cost owners plenty of £ in business rates, insurance and, depending on the scenario, service charge costs that other retailers won’t pick up. All of these cost bases can quickly move a property from the asset to the liability column of the owner’s spreadsheet. There are some legitimate ways and means (and some that are not so) to reduce liability for business rates on an empty shop but that still potentially leaves an owner with an unenticing boarded up shopfront. From a retailer’s perspective, pop ups provide a relatively inexpensive platform to test a new business, a new product or a new location before having to commit to the heavy costs that accompany the roll out of any long term legal and financial commitment
The ‘how’ is (or should be) easy. Sign a lease! The owner will produce it. It could be two or 100 pages depending on the owner’s commercial attitude to the deal. There are various pre-printed standard short form leases produced by RICS and The Law Society floating around. Chances are that the owner’s solicitor will avoid these and want to deliver something bespoke to the property. No matter which form of lease is used, it still needs to be scrutinised.
Would you? The devil is always in the detail and in an effort to minimise costs in keeping with the pop up ethos, the temptation for any retailer is to sign whatever legal document is presented without worrying too much about the small print. It’s only a temporary shop, how much trouble can I get into? However, insurance rent, service charge, ground rent, dilapidations, contamination, asbestos, energy performance certificate, health and safety laws, fire risk assessment, statutory compliance etc. could cost a retailer a lot more money than they thought. An unscrupulous owner might look to pass all of these hidden gems onto an unsuspecting retailer. Even if you don’t intend to get legal advice, read the small print. If you think something doesn’t sound right, it probably isn’t. Make sure all terms of the deal that you have negotiated with the owner are included in the lease, otherwise you are only setting yourself up for disappointment.Tips for retailers keen to pop:
Planning Use – When looking for suitable properties, be aware that since 30 May 2013, certain temporary (up to two year) uses are permitted which will not affect a property’s usual use class status. This is a major selling point for a pop up and is something that the owner may not be aware of. This new flexible use class is Class D. Properties with a use class status of A1 – A5, B1, D1 or D2 can change to A1 – A3 or B1 without needing permission for change of use. Exclusions apply, the most common being – the floor area cannot be more than 150sqm, the property hasn’t previously relied on Class D flexible use and the building is not listed.
Utilities –These are likely to have been disconnected and you should get the owner to re-connect the utilities before signing the lease otherwise you may find yourself literally trying to trade in the dark.
Asbestos - If you’re planning on carrying out any works to the property, ask the owner for an asbestos survey to ensure that there is no asbestos in the property. If asbestos is present and your planned works will disturb it then your works may end up costing you a lot more money than you think.
Schedule of Condition – Your repair liability under the lease should be limited by reference to a photographic schedule of condition to avoid dilapidations arguments later.
Tenant identity – You should take the lease in an SPV unrelated to any other business or personal activities, particularly if you don’t plan on getting legal advice on the lease terms.
If the pop up proves pop-u-lar, the owner and retailer can agree terms for a longer lease at a more leisurely pace. Both parties are likely to be more relaxed about making a longer term commitment given that they have tried and tested each other out.