What are the specific issues to consider when taking a lease of railway arch space?
In the last few years’ railway arch spaces across London have gone from being undesirable spaces to being the new trendy bar, the latest food sensation or the quirky venue of choice.
But, renting arch space beneath a working railway is not for the inexperienced. In addition, to the normal challenges faced when letting space, there are a myriad of specific issues to consider:
How are you intending to fit out the arch?
Is your proposed fit-out compatible with the area being demised to you? The landlord will typically demise the airspace within the arch and not its structure. Consequentially any fit-out would need to be free standing and not bolted to the arch. It also means that you cannot paint the inside of the arch.
You may also need to enter into an asset protection agreement if you carrying out major works in the vicinity of the railway. These agreements are usually fairly draconian.
How do you access the arch?
Does it front an adopted road? Or (and more commonly for railway arches), is access via a private land? Is the existing access route key to maximising footfall to the arch? Or, necessary for stock deliveries? In addition to ensuring you having rights of access over any private land between the arch and the adopted road, you may also want to limit the landlord’s ability to change the route of access.
What is the proposed use of the arch?
Does the arch need planning consent for your proposed use? This may be particularly relevant if the arch is currently dead space. Does your lease permit you applying for planning permission and using the arch for the intended purpose? It is worth discussing your plans with the landlord at the outset.
Will the railway noise be an issue for your proposed use?
Are you intending to carry out a licensable activity?
Similarly, do you need to obtain a new premises licence? This is relevant if you are planning on using the arch for a licensable activity (e.g. sale of alcohol, takeaways, gambling, entertainment) and the arch is not currently being used for that purpose. We would recommend discussing this with the local authority at the outset.
Are you aware of the landlord’s termination rights?
Is your lease terminable at any time by the landlord? Such rights are usually included to enable Network Rail to carry out serious repair works to its railway. Whilst, Network Rail has sold off its non-operational space to a third party, this was on terms which enable it to continue exerting control. If you are carrying out substantial fit-out works, where the cost of these works needs to be depreciated over the length of the term, you should give some consideration to this risk.
Have you thought about what insurance you might need?
Does your insurance cover you against the risks specific to letting a railway arch?
In addition to the landlord’s termination rights, the landlord and/or Network Rail are likely to have extensive rights of access to carry out inspections, works and repairs to the arch. In doing so they might need to remove some or part of the fit out works.
Does your insurance cover the costs of making good any damage caused by these works and any losses your business suffers whilst such works take place; any losses arising should the lease is terminated; and any costs of moving premises on short notice?
Does your insurance also cover any losses from disrepair of the arch / damage caused by water / dirt entering the arch? Typically, the landlord will not have an obligation to repair the arch and the lease will exclude any liability for damage caused by water / dirt entering into the premises. It is worth noting, though, that it is not in Network Rail’s interest to let an operational railway fall into disrepair.
As you will have seen there are a number of specific issues when renting arch space and it is worth considering each of them before you commit to letting arch space.
This article first appeared in CoStar on 15 May 2020.