Many retailers are aware of the need to create an integrated offering, both expanding online and staying relevant on the high street by keeping their premises in line with the needs of their customers. Rather than neglecting their bricks-and-mortar offerings, retailers with destination flagships that create a seamless shopping experience are likely to have the competitive edge as brands.
You may have found the perfect location to open your new flagship. Perhaps an innovative renovation of your existing stores is in the pipeline. What key property law considerations should you consider while you are measuring up?
Rights to renovate
If you own the freehold interest in your store, it may be relatively easy to make changes to the building, subject to any restrictions on the title and any planning permission required.
More often retailers rent premises, and rights to alter are far more restricted. Any rights to make alterations will be governed by the terms agreed between you and your landlord.
The lease may entirely prohibit alterations. It may allow alterations, with your landlord’s consent to be obtained in advance. It may allow certain alterations without consent, such as rights to put up signage of specified dimensions. Certain works may be considered as “improvements” and allowed by law, even if your landlord objects. A well advised retailer will want their lease to state that its landlord’s consent to alterations should not be unreasonably withheld or delayed.
Before incurring costs on expensive works that your landlord may challenge, it is advisable to confirm what may be permitted or prohibited, and build this consideration into the design stage. It’s no good commissioning a cutting-edge sound and lighting system if you have no right to run sufficient cabling through the building.
What about your landlord’s rights?
Landlords may also have rights under the lease to make changes to their buildings, and this may lead to particular problems where you rent part of a building or a unit within a shopping centre, if your landlord has its eye on development.
However, just because a landlord has reserved the right to alter its building it doesn’t mean that the retailer will be at the mercy of unrestricted building works.
In a recent case, involving a gallery in Mayfair, the landlord was carrying out significant works to the floors above the gallery to create flats, and erected scaffolding across the front of the building, as the lease permitted it to do. The way the scaffolding was erected made it look as though the premises were closed – a nightmare scenario for any business reliant on footfall.
The court made it clear that, where a landlord intends to carry out works, it must do so with regard, so far as reasonably possible, to its tenant’s right to trade with as little disturbance as possible to customers and employees. In this case it also awarded the tenant damages.
Alterations without altercations
Whether planning a new store or an update to existing premises, early engagement with your landlord is likely to circumvent any dispute in most cases. Where the terms of an existing lease are restrictive, or substantial works are intended, if your landlord is brought on board and buys into your vision for your brand, the necessary consent is more likely to be forthcoming.
The right to carry out any alterations can be built into a new lease and documented by licences for alterations.
However, if a landlord’s intentions for its building may involve works, it will be important to be aware of the safeguards your lease offers.
Ian Whitehead is a property dispute resolution solicitor at Pinsent Masons