Dancing in the Street: What will 2021 bring to the hospitality sector?

The hospitality sector is having to adapt to an ever-evolving regulatory regime in light of the Covid-19 pandemic.  Jennifer Ayris and Claire Petricca-Riding highlight some of the issues that arise. 

Going into 2020 few could have predicted the fundamental shift in our lives that has taken place. Covid-19 has resulted in the curtailment of our freedom, our desire to socialise and interact with friends and family, our ability to go travelling and even visit the local high street for the traditional Saturday browse, shopping, and lunch trip.

We have all had to alter our way of living to meet the challenges of containing the virus.  There is hope life might return to some level of normality in due course, but there is caution in that this may not look like the “old normal” of 2019 but make way for a “new normal.”

Hands. Face. Space.  Irrespective of the hope a vaccine brings, this three-word slogan will remain with us throughout 2021 and into 2022.  This means that when shops, restaurants, pubs and theatres open after the current UK Lockdown, they can expect similar requirements to ensure their premises are Covid -19 safe.

What does this all mean for those businesses?  What measures need to be put in place for safe socialising, compliance with government guidelines and regulations? How will they adapt if the situation changes to keep up with any evolution of the virus or scientific thinking?  Below are some of the pertinent issues which should be considered when reviewing the use of outdoor space in the coming months to enable adherence with all legal obligations.

Outdoor Space and Property Considerations

With requirements for social distancing and better ventilated indoor spaces, many businesses are reviewing their existing outdoor space and/or considering how to access additional outdoor space to obtain valuable covers for alfresco dining and drinking. Leisure operators taking new leases for 2021 are now much more likely to be considering their outdoor space requirements at the outset of their lease negotiations.

Hospitality businesses operating from existing leasehold premises situated within privately owned plazas will need to approach their landlord for a seating licence or an additional lease of the outdoor space.

Private Spaces

Landlords who receive requests from tenants to use privately owned outdoor space for hospitality purposes will consider:

• if they wish to allow the use of the outdoor space for this purpose
• if they can authorise the use of outdoor space for a leisure purpose without breaching any of their statutory obligations
• whether it would be sensible to impose any limitations
• how to best document the agreed arrangements.

Considerations to be taken into account include:

Landlords who own other property nearby will want to ensure noise levels for their other tenants in their development are acceptable, particularly if there are residential apartments above. The landlord’s leases of other premises in the development will contain quiet enjoyment clauses which should not be breached.

Landlords will need to ensure the use of any outdoor areas do not create an unacceptable obstruction, particularly taking into consideration the needs of disabled people and their obligations under the Equality Act 2010 and the Disability Discrimination Act 1995. They will also need to ensure that social distancing can be maintained in the other common parts of the plaza to allow the safe passing of users.

Landlords will seek to maintain their development standards. Rights to approve the type of outdoor furniture and/or demarcations should be considered, as should restrictions on the permitted number of covers. Tables should be cleared promptly so the outdoor area is kept clean and tidy. For many landlords, outside space creates first impressions for other prospective tenants and investors, which ultimately impact on the landlord’s property value.

Charging an appropriate rent or licence fee. Of course, landlords should seek to capitalise on the value attached to an operator’s use of an outdoor space but, in mixed used schemes, a value should also be attributed to the leisure operator’s ability to increase footfall and drive sales for the landlord’s retail tenants. Consideration should also be given to the viability of the existing business - allowing a tenant to use outdoor space could be the difference between the tenant’s success and failure. In the event of failure, the landlord risks a void unit with all the costs associated with an unoccupied property.

How the arrangement should be documented - a lease or licence to occupy? A lease would give the hospitality operator exclusive possession of the outdoor area and is suitable if the tenant will erect a new permanent structure to provide shelter for their customers and/or incur any other significant expense in setting up the outdoor space. A licence to occupy is simply a personal right to use the area during specified trading hours and would require all tables and chairs to be removed at the end of each day. A licence is terminable on immediate notice, so offers no degree of permanence. This would be beneficial for landlords and operators who do not know if the space will still be required beyond the end of the pandemic.

The lease or licence may contain both ‘compliance with laws’ covenants and indemnities to landlords protecting them against any costs for breaches of any legislative requirements.  It is important therefore, that you are aware of what is required to be done, what conditions there are for controlling any nuisance issues (for example, an hours restriction) and what permissions are required if you want to operate outside of these controls.

 Public Spaces

Not every business, however, has the benefit to use a privately owned plaza. Many will look to use public footpaths and highways as a way to increase capacity. There have been numerous instances of road closures to allow for pedestrianised areas and street cafes.  This use however comes at a cost.  To use pavements and highways, leisure operators need to approach the Local Authority for a pavement licence. These were previously not universally required and only seen in certain urban areas such as Manchester City Centre. They were charged pSqM and were costly.

Now a new streamlined process has been introduced in response to Covid-19 as part of the governments’ measures to help the struggling hospitality industry.  It is now quicker and cheaper to obtain a pavement licence. The fee is capped at £100 and consultation period is 5 working days. This system is set to remain until 30 September 2021, but the outcome of a buoyant summer of alfresco hospitality might change the mindset over of such measures.

Pavement licences have been around for a long time, they have been a part of the Highways Act 1980.  It allows cafes, bars, restaurants to use the area in front of their premises to place temporary furniture on the pavement – these cannot be permanent structures and must be removed at the end of each day.  It always looks like a thankless task seeing waiters stack chairs.

Shops can also benefit, but this use must be ancillary to the use of the shop.  In this instance there could be a vending machine inside the shop dispensing hot beverages and a few tables could be placed outside to allow for customers to sit down whilst drinking their takeaway coffee.

It important to note however, that whilst it may be desirable to use the pavement outside a property where a pavement licence is granted, clear access routes on the highway will need to be maintained, taking into account the needs of all users, including disabled people.

In addition, this application does not convey a right to serve alcohol alone.  If the operator has a premises licence and the street use is ancillary to that, then through the temporary amendments to the Licencing Act 2003 made by the Business and Planning Act 2020, businesses are allowed to sell alcohol for consumption off the premises without needing to apply for a variation of their licence (the difference being that you cannot simply set up a street café without either a specific licence for that area or this being attached to a fixed property.)

If the use of the pavement or road requires a closure this may lead to a lengthy application for a Traffic Regulation Order or a Temporary Stopping Up Order to be made.  This may cause some delay in the use of public highways as street cafes and restaurants.

It is hoped that the increase use of the High Street Futures Fund may see more local authorities being flexible in the use of public highway space.  This together with the reduction in carbon emissions from road closures may mean these temporary solutions become a more permanent fixture in the future.

Other outdoor spaces include the use of patios and verandas.  The beer garden is now seeing something of a renaissance.  The use of all these areas requires consideration of broader issues which operators may not have thought about when deciding to utilise additional spaces.

Planning, Environmental and Licensing Considerations

 There are numerous issues which can lead to complaints from local residents such as delivery vehicles, anti-social behaviour, odour from a kitchen extract or a poorly-orientated security lights. These together with the attitude of licensing, planning and environmental Council enforcement teams, and residents becoming more sensitive to issues such as a period of low background noise levels, mean many venues are likely to face complaints.  Operators should very carefully consider the impact of introducing a new outdoor use in an area which has not previously been used as such.

Other issues to consider are:

• Is the existing Premises Licence sufficient to cover this additional area? To operate an outdoor bar, the area must be included in the ‘red line’ of the Premises Licence (the red line boundary being that noted in the premises licence or planning permission.) Even if the outdoor area is already included in the red line, if the bar is newly constructed, a full variation must still be submitted to the Council, which will need to be done by a licensing specialist. A temporary amendment to the Licencing Act allows the sale of alcohol for consumption off the premises without needing to apply for a variation of the licence.

• Businesses serving food outdoors will need to comply with all the regulatory requirements for food service and create no smoking areas to comply with clean air legislation.

• Restrictions on the hours of use which may be included in the planning permission or the premises licence may be too restrictive and prevent later outdoor operating hours.  In the main, hours restrictions are usually not too onerous, (usually around 11pm); however, there are sometimes earlier restrictions such as 9pm, which could be very limiting for summer trading. Sometimes there are discrepancies with the hours of operation set out in a planning permission and those contained in the premises licence- whichever is the earlier time will need to be complied with. If a variation is required which differs from either the premises licence or planning permission, then the other will need to correspond with that amendment. However, caution is advised when doing so, as amending one will not alter the other without a specific application to do so. Onerous restrictions are usually placed on those operations which are in residential areas, and it these operations which will face the most nuisance complaints.

• Any planning permissions that may be required for any new structures intended to provide shelter from harsh British weather. Although wooden huts, transparent tents, domes and igloos are popping up all over, the potential requirement to obtain planning permission should not be overlooked.
• Does the use of the outdoor space fall within the planning use?  If not then an application for a change of use might be required.
• The impact of the outdoor operation on neighbours- not only the impact of noise but also bright lights now that winter has drawn in need to be considered. Operators should carefully balance their obligation to keep outside areas safe and will lit against the nuisance caused to neighbours. Bad smells are also often cited as issues by local residents, but almost exclusively due to kitchen extraction from the main premises rather than the outdoor area, save where additional mobile catering is brought in. These are all statutory nuisance issues which can be enforced against by the local authority.  Solutions could be easily found to the problems, these could be screening, acoustic barriers, limiting the amount of people in a space, redirection of lighting or dealing with cooking smells from the ventilation systems. By putting these measures in place earlier on, unnecessary stress, time, money and negative relationships with residents could be avoided.

Next steps

Although the future may look bleak, businesses that plan ahead now are likely to reap the benefits going forward as the industry emerges from the impact of Covid-19.

Jennifer Ayris is a Real Estate Senior Associate and Claire Petricca-Riding is Head of Planning and Environment at law Irwin Mitchell

This article was first published in Property Law Journal 384 (February 2021).