Protecting a premises licence against tenant's bankruptcy
Richard Taylor, 19th May, 2020
Head of Licensing, Richard Taylor, provides an insight into the options available to you.
Since Covid 19 enveloped our lives, I have been approached on a number of occasions by both corporate and individual landlords to advise on the licensing implications of a tenant going bankrupt and what can be done to protect the licence.
A premises licence lapses immediately on the insolvency of the premises licence holder. Where the holder is an individual, the term “insolvency” is defined as that individual being made bankrupt, having his/her estate sequestrated, entering into a trust deed for his creditors or having a voluntary arrangement proposed by him approved. A company holding a premises licence becomes “insolvent” for the purposes of the Licensing Act 2003 on the approval of a voluntary arrangement proposed by its directors, the appointment of an administrator in respect of the company, the appointment of an administrative receiver in respect of the company, or going into liquidation.
Where a landlord, or indeed anyone with a prescribed interest in the property knows that any of these “trigger” events have taken place then the licence can be reinstated as long as an appropriate application is submitted within 28 days of the trigger event occurring.
If you don’t find out that the licence has lapsed due to the insolvency of the premises licence holder until after that 28 day window has closed then the licence cannot be reinstated and a new premises licence must be applied for if the premises is to operate licensable activities moving forward. There is no guarantee that any new licence would be granted and it may be around 2 months before any new licence application is considered by the licensing committee.
So what should you do?
If you know that a tenant is in financial difficulties and find out of the insolvency in time, then the reinstatement applications are quick and cheap.
Many landlords, however, are not party to their tenant’s finances and will not find out that a tenant has become insolvent until it is too late. In these circumstances, there is another option. This is is to apply for a “shadow” licence.
A shadow licence is a separate premises licence which simply sits behind the existing one (in the shadows) but is in a different name. If a shadow licence exists and the tenant goes bankrupt etc and the original licence is lost then the shadow licence can be utilised.
A shadow licence is an insurance policy and may well be worth the money.
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Richard Taylor is the head of our nationally renowend Licensing team. One of the most experienced Licensing lawyers in the country, Richard has dealt with everything imaginable throughout his career and counts major supermarket chains, national retailers, hotel operators, cinema operators, betting companies and pub companies amongst his clients.