Landlords – Protecting licences during lockdown

Given the devastating impact of lockdown, at present the primary concern of landlords of licensed premises is when the next rent payment will be made. However, it is important they do not overlook the value attached to the premises licence and the need to ensure such value is preserved if the tenant becomes insolvent.

If the holder of a premises licence becomes insolvent (e.g. agrees a CVA, enters administration or liquidation), the premises licence will lapse immediately. After lapsing, there is only a 28-day window in which the premises licence can be transferred, or an interim authority notice lodged, to reinstate the licence, failing which the licence will be lost and a new premises licence application will be required. There is no guarantee that it will be possible to reinstate a new licence on the same terms as the lapsed one, particularly in the case of late-night bars and nightclubs.

Whilst landlords can reinstate licences where they know the licence has lapsed, this is not always the case and, by the time the landlord finds out, it’s often too late to save the licence. As a result, a better way to protect the licence would be for the landlord to apply for what is known as a “shadow licence” for the premises. 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 without going through an insolvency procedure, the premises will simply operate under the existing licence and the shadow licence will remain in place as a backup.

The High Court has confirmed the lawfulness of shadow licence approach where the terms match the licensable activities and hours of the tenant’s licence. An application for a shadow licence should be less problematic as, in theory, all the issues and objections will have already been addressed when the existing licence application was considered.

If you are a landlord and would like to discuss applying for a shadow licence, please contact Niall McCann or Richard Williams.