5 traps for the unwary when taking a leisure lease

Faye Astin, Solicitor

When taking a lease of a premises that is to be used for serving drinks and/or food, there are certain lease provisions that need to be considered carefully to avoid agreeing to terms that are detrimental.

Kitchen Use/Equipment

• Reinstatement – if expensive kitchen equipment will be installed, you need to ensure that the lease allows you to take that equipment with you at the end of the lease term (as opposed to the landlord being able to require that such equipment is left at the premises).
• Additional obligations – the lease may include specific obligations regarding kitchen extract ducts, kitchen extract fans and grease traps, including that these items must be installed and managed correctly. You will also likely be required to ensure that no odours emanate from the premises and to prevent pests or vermin from entering into the premises or drains at the building. It is important to fully understand your specific obligations and put measures in place to ensure that they are complied with.

Trade Licence Obligations

If the premises requires a trade licence or licences to operate, it is likely that the lease will contain several obligations regarding such licences, including that you must:

• Ensure that all trade licences required for the permitted use of the property are obtained and remain in force during the term of the lease;
• Comply with any conditions contained in the trade licences;
• Give noting to the landlord of any conditions, notices, or complaints related to any trade licences;
• Not do anything on the premises that would have an adverse effect on the trade licences;
• Not apply for the variation or renewal of a trade licence without the consent of the landlord;
• At the end of the lease term, transfer any or all trade licences to the landlord or its nominee.

Rent

• Turnover rent – such provisions are relatively common in leisure leases and mean that an agreed percentage of turnover will be paid to the landlord as additional rent. Turnover rent provisions need to be reviewed carefully to ensure that they are fair and that certain items (such as items sold that are subsequently refunded and tips/gratuities) are excluded from turnover figures. You should also try and negotiate a cap on turnover rent if possible.
• Reduction in rent – consider negotiating provisions that state that rent will be reduced to nil or by 50% if the government imposes another lockdown that prevents trade from the premises.

Tenant’s Rights

• You must ensure that the rights granted to you (such as to use any building or estate common parts) specifically extend to use by your customers and staff.
• Seating area – if there is an outside seating area that is not included in the premises that is to be leased to you then the lease should include specific rights for you, your customers and staff to use the seating area.

General

• Keep-open provisions – if the landlord requires that the premises are kept open during certain hours and days, then you must ensure that you are not liable for periods when you are unable to open due to circumstances that are outside of your control, such as adverse weather conditions or government imposed restrictions on trading from the premises.
• Permitted use – ensure that the permitted use refers to an ancillary take-away function if you are going to be selling on delivery platforms.
• Insurance – it will likely be your responsibility to repair the shop front and fascia of the premises and any plate glass at the premises so necessary insurance should be taken out to cover any damage to such parts of the premises.

If you would like any more information, contact our team on 0161 832 3434.