We have witnessed an unprecedented change to the high street scene. The recession saw off Woolworths, MFI, Austin Reed, BHS to name a few of the old stalwarts. Changes in technology and habits have seen to the loss of Blockbuster, HMV and smaller independent operators, to produce a homogenous and boringly predictable retail offering up and down the high street.
In their wake we have witnessed a proliferation of charity shops, surviving by minimising base cost, enjoying tax breaks and stripped down staffing costs. The over supply (or rather poor demand for high street retail positions) has also seen the emergence of the new kid on the block – the pop up shop, and the demand for “easy in easy out” terms for agile retailers and keen landlords
Mary Portas identified in her report to the state of the high street, and the cycle of decline:-
“The recession is not the only cause of the decline and we shouldn’t mourn the loss of poorly-run retail businesses that weren’t able to adapt to our 21st century needs. An increasing number of shops are falling by the wayside as they fail to meet the expectations of today’s increasingly sophisticated, time-poor yet experience rich, consumer. And we are seeing a downward spiral of decline, as closures reduce footfall, weakening the high street and leading to more vacancies.”
This changing landscape has left a vacuum for the pop up. Pop up shops have increased in popularity, promising a temporary, flexible mutually beneficial solution to fill stubborn voids.
Pop up shops provide a symbiotic benefit to landlords and tenants alike. For the commercial landlord, the pop up helps offset rate bills, or may maximise a yield pending redevelopment. The Landlord of prime sites may use the initial term to test the relationship before deciding whether to grant a longer contractual term.
For tenants, a pop up means they do not have to commit to a long term tenancy without knowing whether the location or footfall is suitable for their business, the arrangement may also lead to a more palatable repair duty. Whilst there are advantages to both Landlords and Tenants to the pop up, there are still pitfalls.
For Tenants, did you fully appreciate that the taking of a lease at the very end of the term may expose you to the terminal dilapidations?
For Landlords, did you intend that the succession of licenses you granted would give the Tenant statutory protection on terms that you would never have normally agreed to?
Both of these scenarios are easily avoided. It must never be forgotten that whilst the arrangement may be temporary in nature, a legal interest in some guise will be created. Proper documentation is required, and good legal advice should mean no nasty surprises!
This article is intended as a general commentary and not a substitute for legal advice. Whether a landlord or a tenant, it is always wise to seek legal advice. Each pop up arrangement will have different needs, and pose different potential challenges.