Thursday, February 21, 2019

Comment: Concession considerations at Christmas


During this last week before Christmas, high streets and shopping centres become full of last minute shoppers, with hands full of bags, elbows freshly sharpened and a general air of escalating panic.

For these people, a one-stop shop like a department store which stocks gifts for everyone from Great Grandmas to the next door neighbour‘s cat is usually the first port of call. Around this festive period, more shops start offering concessions in-store to further diversify their offerings and boost sales.

Concessions are beneficial for retailers, enabling them to fill empty space in their shops, supplement their offering and appeal to a broader range of customers. They‘re good for concessionaires who can enter into a more flexible, shorter term arrangement than a lease. And they‘re good for shoppers who can buy a designer dress in Topshop, Laura Ashley wallpaper in Homebase, Paperchase products in Waterstones and a Costa medio iced, skinny, decaff, soya, hazelnut latte with an extra shot from WH Smith.

However, concessions aren‘t as straightforward as just letting someone share your shop – there are legal requirements to consider and pitfalls to avoid.

Checking your lease is a vital first step and if concessions aren‘t permitted you will need to ask your landlord for the lease to be varied which will, unfortunately, come at a price. In the future, make sure your solicitor negotiates the right to grant concessions into a new lease, or even better ask the landlord‘s agent to include it in the head of terms – most switched–on, well advised landlords will agree to it. Where a lease allows the granting of concessions you can usually do so without landlord‘s consent, although notice of the arrangement sometimes has to be given.

The next thing to consider is the concession agreement itself which is a potential minefield. It must be careful not to create a landlord and tenant relationship and the concessionaire can‘t be given exclusive possession of part of the shop or there is a danger that they could acquire statutory rights over that area – in other words they can‘t be made to leave at the end of the concession arrangement or (worse from the landlord‘s point of view) at the end of the term of the retailer‘s lease. Therefore concessionaires need to be moved around at intervals. Department stores excel at this – confusing shoppers but ensuring they don‘t fall foul of the law. Of course whilst it‘s easy for Debenhams to swap Jasper Conran for John Rocha it‘s much harder to relocate a concessionaire within a small shop.

Another potential problem is the concessionaire‘s user. If a shop unit has A1 use, planning consent would be needed to use part of it for an A3 restaurant and landlord‘s consent for the change of use might be required as well – both of which involve expense and delay. So plan ahead – take a lease of a unit which already has A3 consent and make sure landlord‘s consent isn‘t required for change of use.

So as long as concessions are put in place properly, they offer a real opportunity for retailers who wish to utilise empty space and introduce innovation and vibrancy into our high streets. And for increasingly time and cash-strapped shoppers, concessions offer the choice and convenience they crave – especially in the run-up to Christmas.