While 2020 has been a difficult year on the high street, there has also been a surge of new business startups responding to increased demand for online and local shopping. Many startups are born and continue on the kitchen table, but if yours has expanded into the spare bedroom you may be wondering how to accommodate future growth.
With plenty of vacant shop units, the run-up to Christmas could be the perfect time for a startup business to try out physical retailing with a pop-up shop. If you are taking a shop unit for the first time, some advice from a solicitor will be invaluable to make sure you get a good deal and understand what you are signing up to.
‘Pop-up shops work well for small retailers and can also be good news for commercial property landlords’ says Karen du Rocher, commercial property solicitor with Hatten Wyatt in Gravesend. ‘They are a flexible way for a business to get into premises and start trading quickly, with minimal risk. If things go well, a successful pop-up may lead to a longer term letting.’
It may be tempting to rely on a handshake or an informal spoken agreement with your potential landlord but, unless you have things clearly set out in writing, there is a danger of misunderstanding and disagreements later. Landlords need occupiers but their business perspective may not be the same as yours, so you will need help to negotiate a deal that works for your business.
Lease or licence?
You will either be offered a lease or a licence. Both can be short-term and neither needs to be a very long document.
The main difference between the two is that a licence is a personal arrangement between you and the landlord, while a lease creates more formal rights. For short-term occupation, this may not be important, although typically, a lease will give you more physical control over the space you are taking. How much this will matter depends on the nature of your business. Your solicitor will outline your options and advise you.
You may want to share space with another trader. This can work well but it must be agreed with the landlord and properly documented. It is equally important for you to be clear whether one of you is the main tenant or whether you are sharing all the responsibilities and expenses.
Duration of arrangement
The legal agreement must also set out how long the arrangement will last. The landlord may want you to sign up for a fixed period. This can be good for both sides, as it gives certainty, but you may want to negotiate more flexibility, for example a right to leave early if trade does not go as well as you hoped.
The landlord may also want the right to end the arrangement early, for example if they have a potential long-term tenant, but your solicitor should make sure that this can only happen if you fail to comply with the agreement.
Fit for purpose
Check that the space you are signing up for will work for your business and is in an area of good footfall. You will need to be able to get to and from the unit with stock and if this involves passing over someone else’s land, you need a clearly expressed right to do this.
You will also need access to power, water and other services. Contactless payment requires good wi-fi or mobile signal, so make sure you check that too.
A key part of the deal will be what you pay for the right to use the space. The simplest approach is an all-inclusive amount, which will cover insurance, business rates and the cost of services as well as rent or licence fee.
Some retailers prefer to pay a proportion of their turnover, but this usually involves more complex drafting and accounting and so it is something to consider for a longer letting rather than a pop-up.
Conditions of use
While your pop-up shop is trading, the key considerations for the landlord are to make sure that you follow any rules about how you use the unit and do not damage it or cause a nuisance to others.
If you want to install any sort of branding, it may have to be temporary and fit in with other units in the area. The landlord will not allow you to alter the structure.
There will be limits on what you can sell from the unit and on trading hours, so make sure these work for you.
You will be obliged to comply with any legal requirements in relation to health and safety, which will include fire safety and any specific rules about social distancing and opening times.
These will be set out in the legal agreement and you must make sure your solicitor explains them to you.
Shutting up shop
At the end of the lease or licence period, you will have to vacate the unit, remove everything you have brought in and leave the property in a decent condition, but you should not be expected to take on repairs beyond fixing any damage you have caused. Your solicitor will check that the legal document reflects what you have agreed to.
How we can help
A pop-up shop for the festive season and the New Year sales could be an exciting next step and is a low-risk way to try out a different way of trading. Legal advice at the right time will help you avoid any problems with your landlord and will leave you free to concentrate on growing your business.
For further information, please contact Karen in the property law team on 01474 351199 or email firstname.lastname@example.org. Hatten Wyatt has offices in Gravesend, Maidstone, Chatham, Tonbridge and Tenterden, Kent.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.