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Dealing with the impact insolvency has on a premises licences

By David Inzani, solicitor at Poppleston Allen

- Last updated on GMT

Information given: Poppleston Allen solicitor David Inzani outlines how insolvency impacts a premises licence
Information given: Poppleston Allen solicitor David Inzani outlines how insolvency impacts a premises licence

Related tags: Licensing, Legislation, Finance, Property

The plight of the hospitality industry in the pandemic has been well documented and, sadly, stories of insolvency and premises closures are currently all too common. It has, therefore, never been more important for licensees to safeguard their premises licences and for buyers and landlords to be aware of the potential pitfalls of lapsed licences. Below are a few helpful hints and reminders.

A premises licence automatically lapses at the onset of any form of insolvency of the premises licence holder, but can be “resurrected” as outlined below.

If a licence holder is about to be made insolvent or bankrupt, they should ensure the premises licence is transferred to a solvent company or individual prior to the insolvency event. If a premises licence lapses, it is, of course, an offence to carry on any licensable activities at the premises.

Two options for ‘resurrection’

If it is not possible to find another company or individual to transfer the premises licence to, there are two options available to “resurrect” the premises licence after it lapses.

Firstly, an insolvency practitioner can submit an interim authority notice (after the insolvency event), which allows them to hold the premises licence for a maximum period of three months within which period an application to transfer the licence to a company or individual must be made, otherwise the licence lapses permanently. Alternatively, within 28 days of the onset of insolvency, the premises licence can be transferred, which would again have the effect of “resurrecting” the licence. However, if this deadline is missed then the licence will be lost and cannot be “resurrected”. In that case, a new premises licence application would be required and there is no guarantee that a new licence will be granted with the same permissions as the lapsed licence.

A premises licence is a valuable asset and can add significant value to a property, especially within cumulative impact areas where councils are extremely reluctant to grant new licences. We, therefore, advise landlords whose licensed premises are operated by a tenant to consider applying for ‘shadow premises licences’ to protect their assets in case a tenant licence holder becomes insolvent or bankrupt.

Shadow licences usually have same terms

The term ‘shadow premises licence’ describes a situation where a premises licence is granted to one party in respect of a premises where another party already holds a separate licence. Shadow licences are typically granted on the same terms as the existing licence being operated by the tenant.

It is imperative that any buyers looking to acquire licensed premises make appropriate licensing due diligence enquiries before entering into an agreement. Although a seller may present a copy of a premises licence, the buyer should ensure that the licence is up to date and is, and previously has been, held in the name of an active company or individual.

The effect of insolvency on premises licences is complex and these comments are only a summary so we strongly advise any affected parties seek legal advice as soon as possible.

Related topics: Licensing law

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