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Premises licences – additional protection for landlords

The recent High Court case of Extreme Oyster & Anor v Guildford Borough Council [2013] EWHC 2174 (Admin) provides an interesting development which will be of particular interest to landlords of licensed premises.

Premises selling alcohol and carrying out other licensable activities, such as the provision of public entertainment, need to be licensed under the Licensing Act 2003 (the LA 2003). Applications are made to the Local Authority and anyone who is “a person who carries on, or proposes to carry on, a business which involves the use of the premises for licensable activities” may apply (Section 16(1)(a) of the LA 2003). The applicant must demonstrate a sufficient link between its business and the relevant licensable activities.

It has long been a problem for landlords that a premises licence can lapse on its surrender or the insolvency of a tenant licence holder. There are a number of steps a landlord may wish to take to protect the value of its interest. For example, ensuring the lease contains specific tenant covenants to maintain a premises licence and to consent to its transfer to the landlord at the end of the term. These covenants have no impact on the licensing process itself, but afford the landlord contractual remedies if they are breached, including potentially a right of forfeiture. In addition, a landlord can notify the licensing authority of its interest in licensed premises – this must be done annually and, during that period, the licensing authority will inform the landlord of any changes to the statutory register which relate to the relevant premises.

In the Extreme Oyster case, the second claimant, Star Oyster, was the freehold owner of two separate licensed nightclub premises. The first claimant, Extreme Oyster, was the trading company of Star Oyster and ran one of the nightclubs prior to the tenant, Luminar, taking them over in 2012. The claimants wanted to have the benefit of premises licences operating in parallel to those held by Luminar in the event of, amongst other things, Luminar’s insolvency. They submitted applications for “'shadow licences” i.e. a premise licence in respect of premises where a premises licence has already been granted to someone else. The Local Authority refused the applications on the grounds the claimants did not fall within Section 16(1) of the LA 2003. However, the High Court disagreed and, in his decision, Mr Justice Turner decided that it was quite lawful for a landlord in this instance to apply for a shadow licence, so long as the extent of the shadow licence application only covered the same activities as the existing premises licence.

This case has provided welcome clarity on the issue of shadow licenses and another option for a landlord to consider when putting in place measures to protect its interests. A shadow licence is likely to be the most expensive, but arguably the most effective, method of ensuring that licensable activities can continue at the premises in the event that the tenant loses its premises licence for any reason.

For more information please contact Annie Scrimshaw.