Advice

Three ways to preserve the value of your premises licence

By Craig Baylis

- Last updated on GMT

What restaurant and bar operators need to consider when looking to preserve the value their premises licence

Related tags: Licence, Hospitality

What restaurant and bar operators need to consider when looking to preserve the value their premises licence.

It's been a tough 18 months for most bar and restaurant operators, and some may be considering options to transform, evolve or adapt their business rather than simply resume pre-pandemic trading models. While planning for such, it is important to recognise the license value you are sitting on and understand that there can be significant risks in varying or losing a license if license issues are overlooked.

While a licence is of obvious value to an operator as it enables it to operate the business as they wish, there is also a substantial benefit and value to a landlord or property owner. It is not just the business that is being licensed - technically, a premises licence attaches to the building for which it is granted. So, it makes absolute sense to cooperate with your landlord or the freeholder to ensure that you are both getting maximum value from the licence and it is benefitting both the business and the building.

The reason that licenses create a significant value for landlords or property owners is because many licensing authorities have adopted restrictive policies in certain areas and are extremely reluctant to grant new licenses. In central London, for example, Westminster Council's licensing policy starting point is that they will no longer grant new licences in Soho or Covent Garden save in exceptional circumstances. So, where licences already exist in these types of areas, they immediately attract a rarity/monopoly value and are precious.

Here are three things to consider in relation to preserving the value of a licence.

Protect it from insolvency

If a premises licence holder becomes insolvent (including through a CVA) the licence lapses immediately and is lost. Hence it is absolutely imperative to protect a licence before the act of insolvency by transferring it to another entity that will remain solvent. After insolvency it is only possible to resurrect a licence by transferring it to a new entity if the transfer is applied for within 28 days of the original insolvency. Otherwise, it is necessary to apply for a whole new licence, with all the uncertainties that process brings. Those thinking of a CVA to help their business through difficult times should make sure the licence is in the name of a solvent entity or there won’t be any business left. Landlords can also apply for a shadow license to preserve the current license terms in the event an operator business is struggling.

Keep abreast of licensing policy

Councils are required to reconsider their licensing policies on a regular basis and any changes could have an impact on your licence. It is therefore always wise to check the policy before making any application to vary a licence such as an application to take away restrictions on a licence or extend hours. You might find loopholes or areas where there is less concern about extended activities. If the council indicates it is considering consulting on changes to its policy, make an application before the new policy bites. And don’t be afraid of making your views known about policy changes. In my experience councils welcome the views of responsible operators and will often not seek to impose restrictions if the general view is that trade will fall off and premises will close. After Covid, no council wants to see rows of empty shop frontages on the high street. Not good for their reputation or for business rate income.

Check your lease

Very often a lease will have restrictions on opening hours, trading hours, style of trade, layout or areas where trading is permitted. It’s pointless wasting money on a licence application which, even if granted, you won’t be able to use. It’s always useful to work with a landlord in advance if the lease has restrictions, maybe by pointing out the potential benefits and increase in value of the property if the application is granted. In some cases a landlord might contribute to the costs of the application for mutual benefits.

Craig Baylis is a partner at law firm Kingsley Napley LLP, which specialises in advice to hospitality businesses on licensing issues.

Related topics: Business & Legislation, Advice

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