Smoked out?

Speculation over the impact of a smoking ban on the leisure industry is increasing, as companies consider how to overcome the proposed changes, says Greig Thewlis, real estate associate at law firm Halliwells.

Under the current proposals contained in the government's White Paper on Public Health, the smoking ban will not apply to the following:

• Pubs and bars which do not prepare and serve food l External spaces which are not enclosed
• Private clubs where members may vote whether to allow smoking.

Whether the proposals become law remains to be seen - but in the meantime pubs must start planning for some form of smoking restrictions.

In Scotland, Belhaven announced its intention to examine ways of creating outside space to cope with the country's total ban, which begins next March. This may be by way of beer gardens, pavement seating or the reconfiguration of the premises to create balconies or patios. Initial reports from Ireland, where a smoking ban is already in place, indicate that while it has had a negative impact on pubs and restaurants generally, those with outside space have benefited from increased trade.

Licensing Act 2003​

New applications for a premises licence will require a plan clearly identifying the external space. The operating schedule, which forms part of the application, should include the intended activities and hours of use in the various parts of the premises. Licensees must show regard to the surrounding areas, particularly residential areas, consider opening times for the external areas, and state any intent to broadcast live or recorded music or screen sporting events. The increased sensitivity surrounding extended licensing hours means that the application should fully address the steps that the licensee intends to take to promote public safety and to prevent crime, disorder or public nuisance.

For pubs with an existing premises licence, applications can be made to vary the premises licence to reflect the change in the premises. However, if the nature of the variation is such that the premises are substantially altered, then it will be necessary to follow the more involved process of making a fresh application for a premises licence.

Planning​ The creation of outside space may require planning permission, either because it amounts to a change from the existing use, for example if the external space is being created by pavement seating or making new use of an external storage area, or because the nature of the works in reconfiguring the premises will require planning permission. Enquiries should be made to the local planning authority at an early stage to anticipate the planning process.

It is likely that the process will take at least three months from the date of the application to the grant of planning permission. Applications that are likely to draw objection may well take longer. The planning application should address considerations similar to those in the licensing application to forestall potential objections.

Leasehold premises​

Where the premises are leasehold, licensees must also consider the constraints contained in the lease.

Generally, a tenant will need to obtain the landlord's prior consent before changing the use of any part of the premises, submit any planning application or carry out any alterations to the premises.

Where structural or external alterations are involved, a landlord will tend to have an absolute discretion and may refuse consent no matter how unreasonable that refusal seems.

Generally, licensees should allow at least one month before the landlord's consent is formally granted. However, it is not unusual for such applications to take upwards of three months depending upon the complexity of the application and its priority for the landlord.

There may also be implications on rent levels. Where secondary areas such as storage or toilet facilities are reconfigured to create outside space, the value of such areas increases as they become income producing. This may prompt a landlord to demand a higher rent for such areas as a pre-condition to the landlord's consent to the works.

The difference in trading fortunes between those pubs with outside space and those without, as highlighted in Ireland, has the potential, if sustained long term, to increase the demand and consequently the market value of licensed premises with external space. This in turn would lead to increased rents for such premises, creating effectively a two-tier market. Whether this market distinction materialises will depend upon the social reaction following the ban.

Other legal considerations​

These include the effect of any changes to the premises which may impact upon the health and safety requirements, the fire certificate and disability discrimination legislation. These should be borne in mind at the outset, both for licensing purposes and to satisfy licensees' covenants under the terms of the lease.

Private clubs​

The White Paper also proposes exemptions for private members' clubs whose members have voted on a smoking policy. It remains to be seen what will constitute a private members' club. The Licensing Act 2003 recognises that volunteer and social clubs give rise to different issues for licensing than commercially run premises selling direct to the public. If the White Paper is intended to cast its net wider to include commercially run members' clubs, then this could offer an alternative to creating outside space. For example, licensees could create private members' clubs within a distinct part of their premises, be it a separate room or separate floor, with its membership drawn from smokers. It has the added advantage that in itself it should not require planning permission nor landlord's consent for change of use or alterations. Even where works are required, these should not be as extensive, increasing the likelihood that the landlord must act reasonably.

Conclusion​

Based upon the early evidence in Ireland, those licensees offering outside space have fared much better following the introduction a smoking ban, than those that do not. For those licensees looking to create outside space the following steps are recommended to stay on the right side of the law:

• Check with the local authority whether planning permission will be required
• Draw up the plans and if the premises are leasehold submit these to the landlord at an early stage
• Be prepared for a three to six month wait for the grant of landlord's consent and planning permission
• Be aware that a change to licensing hours brings binge-drinking and anti-social behaviour to the fore, so objections should be anticipated and measures taken to address them should be considered
• Only time will tell how widely the exception for private members' clubs will be construed, but this may offer a more viable alternative for some licensees where outside space isn't feasible.