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28 Apr 2017

Renting out property in movie shoots: Considerations

Granting film crews access to your property, bringing lorry loads of equipment and high-maintenance celebrities may, at first, seem far from a Hollywood dream.

However, as a flexible source of income, the financial rewards of hiring out properties for photoshoots and filming can be considerable and may also help raise the profile of featured locations. As with any occupation or use of a property, allowing access to third parties carries risks and potential liabilities. What should be considered before the cameras start to roll?

Do the paperwork

A location agreement should always be entered into and will govern the use of the property. Property owners should be comfortable they can meet its terms and that they are adequately protected by the agreement. A key point will be whether the production company requires sole and exclusive rights to enter the property and film during specified dates and times. This is often the case and crews will expect to work in the property uninterrupted, free from other third-party use. In a multi-let building, consideration needs to be given to possible breaches of other occupiers’ rights. Public access rights and potential nuisance or disturbance claims, if interference is substantial enough, should also be considered. Additionally, the nature of other occupiers or users can affect filming, particularly where there is an increased security element (government buildings, banks, schools).

Production companies will often need the right to significantly alter a property. It is vital, for both parties, that the location agreement clearly documents what alterations will and will not be permitted. The agreement must address reinstatement, including specified timings for reinstatement and possibly an escrow arrangement, particularly where alterations will be significant, to deal with any failure to comply with reinstatement. Eileen Gartside, a director at production company Just Shoots, specifically advises property owners to agree a photographic schedule of condition clearly documenting the state of the property prior to access.

Ensuring that the agreement is clear on liability for any damage is of course key. Whilst production companies will accept the general principle they are responsible for any damage caused, standard form location agreements should be checked as they will not always include this protection. Certain types of property (high-value fit-out, period, and un-replaceable items) may require greater protection such as payment of a security deposit or liquidated damages.

Parties should be clear on what the agreed location fee includes, particularly as the production may lead to an increase in the use of utilities. It is essential that the parties have considered how they are going to deal with these costs (i.e. inclusive location fee or separately reimbursed to the owner).

Receipt of a location fee is generally chargeable to income tax (or, for UK companies, corporation tax) as income from a property business, in much the same way as rental income is taxed. Expenses (which are not of a capital nature) incurred by the owner wholly and exclusively for the purposes of the use for filming should be deductible in the normal way. If the property is a private residence care needs to be taken to ensure the valuable CGT relief is not affected.

Other considerations

The requirement for any third party consents or notifications should also be considered. Check the buildings insurance, including whether the premium payable will increase. Depending on the wording of any legal charge consent may also be required from a mortgagee. Tenants should review their lease (and any restrictions) carefully before entering into a location agreement. Crucially reviewing user restrictions, alienation, restrictions on sharing, alterations and reinstatement, limitation of rights granted (particularly use of services and access). Landlord consent may likely be required.

Filming or photographing brands, logos and products is subject to complex intellectual property rules and legislation. Given this, and that large corporations will aggressively pursue infringement action, production companies will generally avoid or edit out intellectual property. From a landowners perspective, however, whilst production companies will be aware of the constraints, location agreements often grant rights to film logos, trademarks, or other branding, along with a warranty that no third-party consents are required. Again consideration needs to be given to other third-party users and occupiers, particularly where heavily branded organisations use or occupy the property or the owners’ adjoining property (shopping centres, retail premises, leisure). From both a legal and a tenant relationship point this could clearly otherwise prove contentious.

Whilst a production can help to raise the profile of a building or location, thought should also be given to any possible adverse impacts on value including understanding the “nature” of the filming or shooting generally (avoiding inappropriate productions) and, if the property is being used for a commercial if the product is one that the owner is happy to be seen to endorse (by association).

The types of production a property may be used for vary significantly from a one-day photoshoot to a series running for many years. Whilst a one-day photoshoot may be completed within the intended timeframe, productions rarely complete within a traditional eight-hour working day and can go days and weeks over schedule. Location agreements also often include provisions allowing the production company to come back and film at the property in the future. This level of flexibility is understandable from a production company perspective. However, property owners need to consider again whether they can actually accommodate this and negotiations should take account of future plans for the property (letting opportunities, any intended disposals, or development plans).

On the flip side, location agreements also often include rights for the production company to rescind the agreement, due to unforeseen circumstances before filming commences with no fee becoming payable and thereafter on a pro-rata basis. This is particularly important for production companies working with high profile actors or personalities whose limited availability can mean the production simply does not go ahead if there are delays. If a property owner has foregone other opportunities due to the existence of the location agreement this may be an unacceptable position and it should be carefully considered as part of the negotiations. Consider whether you can agree a cancellation penalty to cover your expenses and inconvenience.

A star turn

In some cases, the property is as much a lead character as the main cast. Highclere Castle in Berkshire, for example, having been a recent and prominent example propelled to fame as “Downton Abbey”. For this size and value of production obtaining security for future use will underpin the form of location agreement a production company will seek. Production companies will also want to include controls on the fee payable going forward to ensure the production is not ransomed by the property owner in subsequent series.

Any property owner should carefully consider these points before production commences to ensure the terms of the location agreement are more blockbuster than Hollywood flop!

This article, originally titled ‘Silver Screen Dreams?’ first appeared in the Estates Gazette.