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Tis the season...to pop up!


The festive season is upon us, which means that seasonal stores and stalls selling festive goods will be popping up everywhere. These short term festive stores and stalls are good for both the landlord and the tenant. From the landlord's perspective, they can encourage footfall to a retail area, generating more custom and income for the landlord and other tenants. They can also offer a short term solution to the problem of a vacant unit (at least covering the costs of that unit). For seasonal tenants, a short term let allows the tenant to take advantage of the seasonal shoppers without the risk of a long term let. Other advantages are testing the waters of a new location or trialling new products or services on consumers in a low risk setting.

Given the advantages of the pop up, there is no wonder that they are becoming ever more popular with landlords and tenants. However, just because they are temporary does not mean that they are low risk and some thought should be given to the legal arrangements in advance to ensure things run smoothly.

A pop up can be for a very short period of time but no matter how short the arrangement, it is better for both parties that the nature of the relationship is documented. This is to ensure both that a landlord will get its property back when, and in the condition in which, it expected, and that a tenant will get the term and services it requires.

The nature of the pop up business often means that the tenant getting into occupation is time-sensitive and given the short term nature of the arrangement, the parties will often not want to incur the time and costs involved in dealing with the legal arrangements. However, it is always better to give some thought to this in advance.

A landlord will want to ensure that it can get its property back at the end of the term in the condition it expects. Therefore, the arrangement must be documented.

What are the options? The parties need to consider whether a licence or lease would be the best option to document their relationship. A licence does not confer any legal interest in the space to the retailer but instead gives permission to use the space for an agreed purpose. Therefore, the retailer does not have exclusive possession. This would be appropriate if a retailer was letting another use some of its space to operate a pop up.

If the retailer requires exclusive possession of the property then a tenancy arrangement would be better. It is possible for the parties to enter into a tenancy at will, which is simple to document and has the advantage of being short and straightforward. However, a true tenancy at will allows either party to terminate at any time. This will not offer the retailer any certainty at all, even for the short period anticipated, which is unlikely to be satisfactory.

The alternative is a short term lease. If the tenant's occupation is to be for less than six months then the tenant will not obtain security of tenure under the Landlord and Tenant Act 1954. The advantage of a short term lease is that it sets out the agreed responsibilities and liabilities on both sides. A tenant is likely to want as much flexibility as possible so it is possible that they will require a break clause even in a very short lease.

Tenants are likely to want to take the premises ready to use without having to incur any fitting out costs. They are going to want all of the necessary services and utilities to already be in place. They will not want to have to pay for the installation of any services and will want the landlord to be responsible for them. A landlord may be reluctant to do this but may consider charging a higher all inclusive rent. This is advantageous to a tenant in a short term let.

The parties will also need to consider issues of repair and alterations. The landlord will want to ensure that it is in a position to re-let the premises to a long term tenant at the end of the short term let. At the very least it will want the premises to be returned in the same condition as it was let. Whereas the tenant will want to ensure that it is not responsible for carrying out alterations or improvements to the property, given the short term nature of their occupation. They certainly will not want to be left with repairs. There is therefore a balance to be struck between the parties and to a large extent, it may depend on the negotiating position of the parties. A middle ground would be for photographic evidence of condition to be taken, with the tenant agreeing to return it in the same condition. The tenant will not want to agree to return it in any better condition than it was in.

If the landlord is a tenant itself, allowing a pop up into occupation of its space, it should ensure that it is allowed to do that under the terms of its lease. Otherwise it will be in breach of the term of its lease. It will also need to ensure that the sub-tenant does not breach any of the terms of the head lease during its occupation. Given the short term nature of a pop up, the landlord may want to take a deposit up front to cover the costs of any potential damage or breaches.

In short, pop ups benefit both the landlord and tenant and are particularly popular at Christmas but it is in both parties' interests to give some thought to documenting their relationship properly at the outset.

This article originally appeared on the Thomson Reuters Practical Law Property Litigation Blog.

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