Legal advice: The cost of conversion

New act throws up a problem for provisional licences.

by David Clifton of thePublican.com's legal team of experts.​

Under what is now the Licensing Act 2003, there is no specific process for "conversion" of existing provisional grants of justices' licences to premises licences prior to completion of works.

As such, provisional justices' licences will not benefit from the same "grandfather rights" enjoyed by other licences spelled out in the bill. The same is true for provisional special hours certificates.

What's the problem?​

If you get a provisional justice's licence, provisional public entertainment licence and provisional special hours certificate before the new act comes into full force and you are able to apply for all of these to be made final before the end of the first part of the transitional period, it will be possible to apply for conversion to a premises licence as part of the transitional process. At the moment the transitional period is set to end by New Year's Day 2005.

If your works are completed after the first part of the transitional period has ended, but before the second part of the transitional period has ended, which means the provisional licences etc are not made final, you will be applying for them to be made final under our existing legislation.

However, you will have missed the boat for them to be converted to a premises licence as part of the transitional process.

Does the government really expect all businesses in this position to close on January 1 2005 (if that turns out to be the date that the new act comes into full force and effect) awaiting the grant of a premises licence at some stage in the future?

In the event that provisional licences etc are granted while our existing legislation remains in force (either before or during the transitional period) but the works are not going to be completed until after the new legislation has come into full force and effect, you will have to apply afresh for a premises licence. The logical time to do this will be once the works have been completed.

What's the difference under the new legislation?​

The new act places the holder of a provisional licence in a much less certain position than he is currently under the 1964 act.

As matters stand, there are only two conditions on the failure of which licensing justices can refuse to declare final a provisional grant, namely:

• completion of the works in accordance with the deposited plans (incorporating, if applicable, any modifications that are approved)
• the holder of the provisional licence is not disqualified and is in all other respects "fit and proper".

By way of contrast, the new act states merely that "the licensing authority must have regard to the provisional grant". What is that intended to mean?

Nothing is said in the act at all about provisional special hours certificates. The explanatory notes (at least in their present form) provide no help whatsoever.

The "rough early draft" guidance issued on February 13 2003 contains no reference to provisional licences. By the time you read this, we may have had publication of the next draft. Let's hope that this helps.

What effect will this have?​

In view of the uncertainty created by the wording of the new act, both developers selling and operators purchasing property for future leisure developments are facing difficulties in negotiating the terms of contracts and agreements for leases, particularly in relation to conditions determining when completion of the contract will occur.

Currently many such contracts are conditional upon, among other things, the granting of a satisfactory provisional licence and, if appropriate, a provisional special hours certificate.

Due to the current very limited circumstances in which an application to declare a provisional licence (or a provisional special hours certificate) final might be refused, such a condition is commercially acceptable.

However, in light of the wording of the new act, it seems that the only comparable level of certainty that can be achieved now is for contracts to provide that completion is conditional upon the grant of a satisfactory premises licence.

The consequential effect of this is that:

• unless works in relation to new leisure developments are definitely capable of completion prior to the new legislation coming into full force and effect (ie before the end of the transitional period), it will be commercially unacceptable for operators to agree that contracts should be conditional on provisional grants under the 1964 Act.
• contracts conditional upon the grant of a satisfactory premises licence will stifle development of the leisure industry, in that both developers and operators will be discouraged from even commencing works until the new legislation is in full force and effect (only then enabling application to be made for a premises licence). This wholly unsatisfactory position is made even worse by the fact that it is not yet definitely known when this will occur.

This is a problem that will not only occur in the future if not adequately resolved before then. It is a problem that is rearing its head now. I have written about this to Andrew Cunningham at the Department for Culture, Media and Sport. I will let you know what reply I receive.