Protecting Premises Licences against Tenant Insolvency

Most of us are looking forward to the time when our pubs and restaurants are up and running once more. However, sadly some businesses will not open their doors again when lockdown is released as they won’t survive the enforced closure of recent months. In addition to the obvious concerns for a landlord of lack of rental income, the insolvency of a tenant also affects the premises licence which might have been in place.

Landlords of licensed premises should be aware that insolvency of the licence holder causes the premises licence to lapse immediately. If a new licence application has to be made, once the business is back up and running (presumably with new operators), there is no guarantee that the new licence will be granted, or if it is granted it will be granted on the same terms e.g. as to hours and other conditions. This might be just the opportunity neighbours and other interested parties have been seeking to stop or limit the grant of a premises license by objecting to an application.

Once the licence has lapsed because of insolvency there is a limited window of 28 days in which the premises licence can be transferred, or an interim authority notice lodged, to reinstate it. If these steps are not taken the licence will be lost and a new premises licence application will be required. The landlord will not necessarily find out about the tenant’s insolvency within the 28 day period, particularly if they have already given their tenant a rent holiday or deferment, so the opportunity to organise a transfer or interim authority may be lost.

However, there is an important protective step which can be taken now by landlords who may be concerned that they might find themselves in this position. Landlords can apply for what is known as a “shadow licence”. This is held in the landlord’s name and sits in the background, only to be used if the existing licence lapses and cannot be reinstated. If the tenant survives the lockdown period and comes out the other side, intact, the usual premises licence continues to operate. Shadow licences have legal status as long as the terms of the licence are the same as those for the existing premises licence.

If you are interested in making a shadow premises licence application then our Premises Licence Team can assist you. For further information, please contact Sue Scott or Jessica Quigley on 01228 552222. Please note that both telephone and video appointments can be arranged during this period of self-isolation.