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A license to pop (up)

 

There’s no need for a sea of red tape when you’re looking at a license to pop (up)

Businesses looking for temporary premises to pop up shouldn’t have to enter onerous legal agreements… in fact the less complicated, the better (but that doesn’t mean a hand-shake will do, either !)

The temporary nature of pop ups means that the “legal relationship between (a) landlord and the pop-up tenant can more easily be secured through a licensing agreement instead of a detailed lease” says a new article posted on the Canadian Lawyer Magazine website*.

Author of the Canadian article (Pop-up legalities) Marg. Bruineman, says that “despite the increasing popularity of online sales, the continued need for a tactile, hands-on shopping experience has led to the increasing popularity of pop-up shops in both malls and street-front spaces” The temporary nature of pop ups has also meant that traditional paperwork (ie. a hefty legal lease…) isn’t necessarily appropriate, a license agreement should suffice – “they’re really personal agreements between two parties, and when you have a short-term situation you typically want that – (a) licensing agreement can be kept short and sweet” says Susan Rosen, partner in Gowling WLG (Toronto).

Another Canadian (Jake Ruddy, of real estate development practice Nelligan O’Brien Payne LLP, Ottawa) was quoted as saying there are “pros and cons for both the landlord and the tenant in the negotiation of temporary use of spaces” The author suggested that “a commercial lease typically reflects a long-term agreement between a retailer and a landlord and anticipates a variety of eventualities as the tenant seeks property and land rights and a right of exclusive occupation. Many aspects of a lease – incentives for leasehold improvements, exclusive use and lease renewal or termination – may not all apply to short-term arrangements.”

The article goes on to say “while the licence agreement is designed as a simple way to formalize a short-term relationship, the landlord must ensure it doesn’t conflict with pre-existing tenants who have exclusive-use clauses… It quotes Mr Ruddy again – “the landlord has to be very, very careful about the exclusive use clauses and how you word them. Typically (he adds) landlords want to be as specific as possible to limit eventualities, while the opposite is true for the tenants, who want as much flexibility as possible.”

“A use-clause for the temporary tenant, therefore, can be important to restrict what the pop-up does and what they can sell in the space. And if it’s more of an experiential pop-up, (says another commercial leasing associate) they need to ensure that the applicable zoning and municipal regulations permit what they want to do, which may include applying for a liquor licence or an event licence.”

Back here in Australia, I recently chatted with a local commercial real estate agent about a standard license template – and suggested it might include :

  • licensor and licensee details (and is there an assigned agent for the licensor ?)
  • property address
  • intended use and licensee’s statutory obligations (council permits etc)
  • any limitations on fit out / alterations by licensee (licensor approvals required ?)
  • rental period/s and rates (inclusive / exclusive of GST, utilities, security etc ?)
  • commencement, payment and renewal dates
  • notice to vacate
  • licensee to provide proof of PL insurance (and take their own stock / fittings insurance ?)
  • licensee to maintain property facilities, and remove / make good all fittings / improvements at end of Licence
  • licensor may continue to market the property and has right of access to show potential tenants (if still being offered for long-term lease)
  • dated and witnessed etc
  • that’s just a couple of pages at the most (short and sweet !)

So what are the other considerations, apart from signing the license to pop ? Previous posts here at popUPshops have discussed the integrity of pop up (handling customer complaints and offering product returns, paying suppliers etc… after the pop up closes) and consider the legal issues before you pop up (permits and registrations, heath and safety obligations, insurances…)

But, as I’ve said before (here it comes, the disclaimer !)… I’m no expert in Australian law or commercial real estate. I’d recommend you seek your own independent and qualified advice before entering into the contracts and obligations of a pop up store !

 

* source :    CanadianLawyerMag.com / pop-up legalities

 

 

 

image :    red tape – csa.edu.au

 

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