Avoid the pitfalls of the new planning classes by checking how they affect your future business.
By Keith Miller of thePublican.com's team of legal experts at London solicitors Joelson Wilson.
As explained in last week's article, planning regulations came into force on April 21 which will have a considerable effect on the licensed trade during the next few years. The planning use class known as A3 has been split into three new classes:
- Restaurants and cafés - A3
- Drinking establishments - A4
- Hot food takeaways - A5.
A5 can be changed into A4 or A3 without planning consent; A4 can be changed into A3; and any of them can, as before, be changed into A2 (financial and professional services) or A1 (shops and internet cafés). Changes the other way would amount to development, requiring the consent of the local planning authority.
The "old" A3, comprising all food and drink premises, was defined in the Town & Country Planning (Use Classes) Order 1987. The 2005 amendment order defines the new sub-classes.
How some property documents are affected by the changes will depend on how expressions were defined in them.
In a contract to buy part of a development to be used as licensed premises, the sale will be conditional upon planning and licensing consents being granted. When the contract was exchanged prior to April 21, it was a condition that planning permission for A3 use would be obtained by the builder.
What does this mean now? If the planning application was lodged before the 2005 order was introduced, the old A3 definition would still apply. The permission as actually implemented could be a new A3, A4 or A5 use.
However, if the application is submitted subsequently, should it refer to the new A3 or A4? The builder, on getting permission for an A3 restaurant may say the contract is unconditional, but the buyer will say he was expecting to be able to operate a pub, so the condition is not satisfied.
There is no easy answer, as much will depend on the facts. Hopefully the contract will either have been more specific, or will contain evidence of the specification of the building to be constructed, or type of licence to be obtained.
This illustrates a transitional problem, but of a more lasting nature are questions of interpreting leases.
Use covenants. If a lease of a public house contains a covenant that the premises will only be used for a purpose within use class A3, such a clause will then usually refer to the 1987 order. The trend nowadays is to add words such as "as now defined", so there should be no assumption that a variation in the law will result in either a widening or narrowing of the expression as understood at the date of the lease.
Most modern legal documents include a definitions clause to interpret expressions used in them. One common provision is that references to a specific Act of Parliament include any modification or re-enactment of that Act. So how does that affect a pub, which would now be included in the new A4?
The 2005 order is a modification of the 1987 order, so there should be no doubt that a pre-2005 A3 definition includes a post-2005 A4 use.
The wider the use permitted by the lease, the higher the rental value is taken to be. If the premises are to be used for a purpose within the former A3 definition, and are in fact a public house, they could, on review, be valued as though they were also useable as a restaurant.
If, alternatively, they are used as a restaurant or café, they could be valued as if they were a pub, even though it would now need planning permission to convert to that use.
The tenant might argue that the lease is now more restrictive - and less valuable - as it requires him to get the landlord's permission before making a planning application.
If a new lease specifies only the new A4 use, that is more restrictive than the old A3. No change can be made without the landlord's consent, even though a change to a restaurant can be implemented without planning permission.
If the lease is an old one and the use is specified as a public house, without mentioning the use classes, there is no implication that you can change to a restaurant use. Planning law and leasehold law are quite separate.
If the permitted use in your lease is the former A3 and you operate a mixed use at present, you may want to sub-let part, but beware of creating a new separate planning unit.
So if one section of your premises becomes a restaurant and the other a separately-owned drinking establishment, sub-letting either part to a different person means that new A3 and A4 uses are being created. The A4 pub or bar will need planning permission. Again, the planning application may need the landlord's approval and so, probably, will sub-letting part of it.
Change may require the consent of the landlord
Beware of trying to take advantage of a wide user clause to change from a pub to a restaurant and then back (that is, a change for a substantial period, not just for a few hours in a day).
The second change may be permitted under the lease, but would need planning consent - and applying for that consent may also require the landlord's approval.