Wake-up call: Can a shadow licence protect your business and property
When building a business that is unique to its premises, a shadow licence may ensure that it can be preserved for the future, says Rebecca Thomas
THE PROBLEM
However, the council believes that the application does not fully satisfy the terms of the 2003 Licensing Act, and refuses to grant a shadow licence.
What action can the landlord and tenant now take?
THE LAW
Section 16(1) (a) of the Licensing Act 2003 states that the persons who may apply for a premises licence is someone who carries on, or proposes to carry on, a business which involves the use of the premises for the licensable activities to which the application relates.
The problem set out above recently arose in the case of Extreme Oyster Ltd and Star Oyster Limited, the freehold owner and trading companies of two nightclubs in Guildford.
In May 2012, the companies applied to Guildford borough council for shadow licences in respect of these two premises. Guildford declined the applications on the basis that they had failed to satisfy the terms of Section 16 of the Licensing Act 2003.
The companies challenged the legality of this decision in the High Court. In finding for the companies, Mr Justice Turner decided it was lawful for the landlord to apply for a shadow licence, as long as the extent of the shadow licence application provided for the same licensable activities as those set out on the original premises licence.
EXPERT ADVICE
The value of commercial premises can be severely affected by the loss of a premises licence, particularly if the premises can only be used as a specific type of venue (eg a basement nightclub).
Landlords and freehold owners of licensed commercial premises should consider applying for a shadow premises licence to preserve the integrity of the premises licence in case it is suspended or revoked. Such applications may entail a different operating schedule but must provide for licensable activities in the same terms as the tenants' premises licence.
Tenants may invest time and money building a business which may be forfeited by a landlord or freeholder who has acquired a shadow premises licence. Tenants need to check the terms of the lease or management agreement to ensure that, should this situation arise, the landlord cannot use their trading name, branding or style.
A tenant can oppose an application for a shadow premises licence, though this will obviously place them in direct conflict with the landlord.
Landlords who consider that their tenant's premises licence may be at risk can register their interest on the licensing register, where they will be notified if the premises licence is in jeopardy and will have an opportunity to act to preserve it.
CHECKLIST
- Check whether the lease includes an obligation that the tenant obtains and maintains a premises licence.
- Check whether a copy of the tenant's premises licence is to be provided as a condition of the lease, and when granting a new lease, ensure that this condition is included.
- Submit an application for a shadow premises licence with the same licensable activities as those on the licence held by the tenant.#
- It is advisable to consult a licensing lawyer specialising in such applications to ensure that the application for the shadow licence is in the correct format.
BEWARE!
The term "shadow licence" is not defined in the Licensing Act 2003 and Mr Justice Turner described it as "no more than a convenient label".
An applicant for a shadow premises licence must demonstrate a sufficient link between its business and the relevant licensable activities, so applications from businesses with a more tenuous link, such as developers, may be excluded from holding shadow premises licences.
CONTACT
Rebecca Thomas is head of licensing at Seddons Solicitors
rebecca.thomas@seddons.co.uk
