The rise of the pop-up: creating flexibility on the high street

This article is provided by BRC Associate Member, Foot Anstey.

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To combat the convenience of online retail, landlords and retailers alike continue to seek mechanisms to ensure that the high street remains an enticing experience for consumers. With income from pop-up retail contributing around £2.3 billion to the UK economy, these temporary solutions offer hope of such an experience.

Pop-up shops have been utilised by retailers across the country to capitalise on short term opportunities, create buzz around emerging new brands and test locations – and always within a flexible setting. On the flip side, landlords can use them to temporarily fill vacant space, liven footfall and, equally, to test tenant covenant strength and brand fit.

As either a temporary solution or the beginnings of a long-term relationship, they provide a unique opportunity for the parties involved, provided that proper consideration is given to the relevant legal and commercial factors.

A suitable space?

Part of the success of pop-ups has been their evolution to offer more than a casual browse. These shops often provide retail 'experiences' by engaging customers through samples, tasters and interaction – something that remains lacking from an online shop. That experience, however, must be created quickly and with ease.

Use

Planning or title restrictions on use could result in a potential space being unusable. Both landlord and retailer will need to know early on whether there are any restrictions preventing them from using the property as intended.

The revised, wider "E" use class, introduced in 2020, has provided improved flexibility, allowing a change of use from one subclass to another without the need for new planning consent and, of course, 'popping-up' in an already established retail scheme has its benefits.

Alterations and signage

Retailers will need to consider whether the space must be tailored for use. With an expectation for fast and high footfall, alterations to frontages are often key to attract customers and create the desired 'buzz'. Fit-out and signage costs, however, need to remain low for the pop-up to remain an attractive proposition and this could be influenced (again) by planning restrictions and also restrictions within a landlord's leasehold interest.

For the landlord, keeping alterations to a minimum will limit time and money spent on considering the environmental impact on the property and ensure that the space can be readily let to a future occupier. It may need to operate a degree of flexibility to ensure 'pop-up' success, and it could be in its interests to allow refresh works where a property is already tired.

One requirement retailers should not overlook is telecoms; though in a developed retail scheme (where most pop-ups will set up) this will likely already be in place.

To lease or not to lease?

The short-term, flexible nature of a pop-up will mean that both parties will want certainty around obligations. Retailers will want clear limits on their liability, given that their interest in the space occupied will be short lived, and landlords will need to prioritise maintaining control and repair.

The most common method for documenting the occupation is by way of a lease or licence. Either can be suitable and the choice will depend on the parties' main drivers.

A lease will offer the retailer more substantial legal rights and exclusivity of occupation. A lease is, however, likely to be contracted out of any security of tenure under the Landlord and Tenant Act 1954, to ensure that the occupational term is fixed, and vacancy of the unit at the end of the term is certain to allow future letting or development by the landlord.

In the alternative, a licence will merely grant the retailer a personal permission. The rights of the licensor (landlord) to enter the space would be protected and, potentially, it would reserve the ability to move the location of, or determine, the pop-up with little to no notice. From the licensor's position, this protects its potential to quickly let to a longer term, attractive tenant without delay but requires the retailer to accept a greater degree of risk.

A true licence will be exempt from SDLT liability for the retailer, but specific legal advice should be sought.

Within either a lease or a licence, consideration will need to be given to:

• Rent/licence fee – Retailers often expect lower rents given the short term, controlled nature of the interest being taken and the associated benefits to the landlord;
• Associated costs – Often rent is inclusive of additional costs, such as insurance and service charge, giving a transparent understanding of liability for the retailer to forecast profit but ensuring that the landlord is relieved from vacant unit expense;
• Term – Retailers should anticipate the length of term they require for success, and landlords should forecast for future occupancy. The agreed term is commonly  subject to early rights of termination on either side;
• Repair – Retailers are often only required to maintain the property in its state of repair on the date it commences occupation, perhaps by reference to a schedule of condition; and
• General rights and responsibilities – including rights to alter and to deal with the interest, which may often be prohibitions. Leases may be more appropriate if the parties agree greater control and creative freedom should pass to the retailer. For retailers and landlords alike, the fast timeframes and lower costs demanded by pop-ups will benefit from a clear understanding of the parties' needs from the outset, to avoid protracted negotiation.

How can we help you?

At Foot Anstey, our commercial property team play an active role in the retail marketplace, flexibly supporting a range of high-profile retail clients with tailored legal advice. We actively support businesses in securing retail property agreements that align with short to long-term growth strategies and are well equipped to support any plans to enter the pop-up or concession retail space. We look forward to hearing how we can support you.