“Use” means the use to which tenants can put their property – in other words, the business they can transact there. There will be a lot of restrictions on their freedom. These restrictions come in various forms.
Planning “use”
Planning law saws what types of business are permitted by law to be carried on in each individual property. If you stray outside the permitted use for your property, the council will close you down.
There are probably thousands of different types of businesses out there. For planning law purposes, they are all divided up into classes – called “use classes”.
These classes are important because property owners can normally switch freely between any businesses in the same class. But, for the most part, a property in one class cannot switch to having a business in another class.
Your first step should be to discover what is the “permitted use” of the property you are seeking to occupy. Then you need to work out which of the use classes it falls into. “Class E – commercial, business and service” is the class to which a high proportion of properties will belong. If you take a lease of premises within Class E, you have a huge range of alternative business uses you can undertake at the property.
I am not going to try to tell you in detail which businesses fall into which classes, because they can change. You should check the Government Planning Portal for the complete and up-to-date list of uses. The types of business which fall into each class are not always what you would expect. You need to carefully check what use class applies to your property and intended business.
You will find that some businesses do not fall within any of the use classes. If you are taking over premises which have previously been used as a hot food takeaway shop, then that is the permitted use. It is not in a class with other types of business you can change to. If you want to change to a different use, you have to apply for planning permission to do so. When a business type like hot food takeaway is in a class of one, so to speak, it is said to be “sui generis”, which is Latin for “one type only”.
Normally, the change from one business in Class E to another business within Class E does not require planning permission. But to change from a business use within one class to a business within another class, or a change from a “sui generis” use to any other use, requires that you first obtain planning permission. (You should bear in mind that your lease probably prohibits you from applying for planning permission.)
The “use” clause in the lease
The lease will contain restrictions which the landlord wishes to impose on what you can do with the property.
One fundamental restriction every landlord will wish to impose is that your use of the premises should not stray outside what is permitted by planning law.
For example, the lease might say that you can use the premises “for any purpose within class E” of the current Use Classes Order. This would give you the right to use the premises for most business uses, because so many businesses are included in that wide-ranging use class.
Usually, the landlords will want to impose a narrower use on you. The narrowest use clause would be one which simply permits you to carry on the particular business you intend to carry on, and that alone – e.g. “greengrocers” or “bookshop”. You definitely don’t want that. Imagine if you were the current owner of a lease which was granted 20 years ago for “video rentals”!
The same would apply to a list of approved businesses. Shopping and business trends change. Businesses set out in a list may become outdated and irrelevant.
If the draft lease contains a use clause with the specific use you require, do not be satisfied with that. Remember that you may need to sell the shop to someone with a different business in the future. Remember also that you yourself might need to expand your business into a different trading area as trends and markets change.
If the landlords are going with a list, you should make sure that there is also added “… or such other use as the landlord may approve, such consent not to be unreasonably withheld or delayed.”
The safety features that this kind of wording adds to the situation is that you can potentially switch to many other uses. Although the landlords’ consent is required, it cannot be unreasonably withheld . (If the landlord has a parade of shops and there is a butchers shop next to your shop, the landlord would be reasonable in refusing a change of use for your shop to another butcher’s.)
Another possible approach is that the landlords will say in the lease that the premises can be used for any used within class E save for any industrial process”.
Ultimately, it’s up to you to conjunction with your solicitors, to carefully assess the use restrictions which are being imposed, and decide how to change them, to give you flexibility.
One bit of flexibility you should be aware of is already provided by the law. If you are permitted to carry on a particular named business, you are also automatically entitled to carry on a business activity which is reasonably incidental or ancillary to it. That’s a matter of judgement in each case. It provides some latitude, but it shouldn’t be relied on instead of negotiating a more relaxed use clause in the lease.
It might seem as if it’s always best from the tenant’s point of view to have as wide a permitted use as possible. After all, what’s the downside? The downside is the effect on any rent review. If you have a lease of more than a few years, there will probably be a rent review. At the rent review the two sides can argue about the current market rent. If they can’t agree, it will ultimately be decided by an expert or arbitrator. The battle will be around what is the market rent for the premises. A lease with a narrow permitted use depresses the potential market rent for the premises. It would be harder to find tenants for a narrow use – greengrocers, for example – than it would be for a wider use – any shop or office. If it is harder to let, then the market rent would be less because the landlord would have to lower the rent to find a tenant. So a narrow use is better than a wider use for a tenant purely for rent review purposes. Whether the dampening effect on rent of a narrow use clause is enough to offset the danger of being caught without alternative business options when you need them s something you would have to discuss with a surveyor, who could advise you on how much rent might be saved.
Apart from that, you should always be seeking maximum flexibility in the lease for the business uses to which you can put your premises.
Whatever the use at the start of the lease, you may want to change it later. The law says that, if there is provision in the lease saying that the landlord’s consent is needed for a change of use, the landlord is not allowed to charge you a premium for giving its consent. In other words, you can’t be held to ransom in that way. However, that does not apply if your change of use requires you to carry out any structural alterations – then the landlord can charge you. Some changes may indeed require some structural change, in order to comply with health and safety or disabled access issues.
Behaviour issues
The lease will almost certainly contain the covenant be given by the tenant “not to do, permit or suffer any act likely to cause a nuisance, annoyance or disturbance to the landlord or to adjoining occupiers”.
The effect is that, even if the business being carried on is permitted by the use clause, it can still be prevented if it is adversely affecting the neighbours. – E.g. it’s too noisy, the business causes vibration, or customers congregate outside on the pavement late at night.
There will usually be a prohibition against using the premises for any dangerous or offensive trade. And there will also be a clause prohibiting immoral or illegal uses.
Normal business hours
Landlords may seek to include in the lease a prohibition against using the premises outside “normal business hours”. This may be genuinely required if you are taking premises in a multi-occupational building which has to be locked up at night. But, even if that seems workable in theory, you need to bear in mind that there will be times when it could create a problem for you.
You should certainly have the hours of use clarified in the lease and not rely on “normal business hours” which means different things to different people. Some provision should be added to cover emergency work situations. A compromise might be that you can use the premises outside the agreed hours, but the landlord does not have to provide services outside the agreed hours.
You also need to bear in mind that you will need to have access to the premises at times when you are not actually doing business. Supplies to a coffee shop or café’s are usually delivered early in the morning. You may regularly need access before the business opens (e.g. for staff training, or to display goods in the shop window), or after hours for cleaning.