'Shadow licences' can be 'win, win' for landlords and licensing authorities, says expert

Christopher Rees-Gay of Pinsent Masons, the law firm behind Out-Law.com, said shadow licenses can help protect landlords' interests in property they lease.

Rees-Gay was commenting after Nottingham City Council's licensing panel recently granted a business a shadow licence (7-page / 293KB PDF) regarding the sale of alcohol at premises for which its tenant already held a premises licence.

The premises are located at 11 Forman Street in Nottingham city centre, which is within the city's main area for bars and nightlife. This is reflected in the council's licensing policies as the premises fall within the 'City Centre Saturation Zone' in Nottingham. This means that applicants for new licences to sell alcohol inside that area must overcome the presumption against their application being granted.

The licensing panel heard a number of objections to Urbanfirst's application for a shadow licence, including from Nottinghamshire Police. The police force claimed, amongst other things, that granting the shadow licence would "undermine the prevention of crime and disorder objective" set out by the local authority.

Nottinghamshire Police also questioned whether the terms of the licence could ever be enforced against Urbanfirst given that it would be open to the company to claim that it was not the operator of the premises at the time any issues overseen by its tenant arise.

However, the licensing panel rejected the arguments against the granting of the shadow licence to Urbanfirst.

The Licensing Act does not make specific provision for 'shadow licences', but it does allow two or more licences, including identical licences, to be granted, and apply concurrently, for a single premises.

The concept of 'shadow licences' came to prominence in a 2013 case ruled on by the High Court in London. In that case - the first of its kind in England - the landlord of two night club premises in Guildford, operated by another company, won the right to shadow licences at those premises, despite objections from Guildford Borough Council.

In its decision, the panel said: "On the evidence presented in the police’s bundle, there was nothing to show that the impact of the grant of this licence would be any greater than what is already there or would undermine the reasons for the [Saturation] policy (especially since the application had now been amended to be on identical terms to the primary licence)."

"The difficulties of enforcement were addressed in the Extreme Oyster case, with the judge there finding whilst the difficulties of enforcing multiple licences and the burden of dealing with them was not without some weight, it was not sufficient to prevent the grant of multiple licences which were expressly permitted under the Act, which itself provided other checks and balances and was not intended to support a regime based on a narrow and restrictive approach to licensing," it said.

The panel also concluded that the fact that a Saturation Zone exists in Nottingham and is underpinned by a live saturation policy was "not sufficient to override the right to hold multiple licences per se". It said their existence is instead "a factor to be applied in determining those applications".

"In the absence of any evidence that the grant of a licence will create a greater impact on the Saturation Zone or undermine the reasons for the [saturation] policy, the application may be granted and the panel determined that in this case it should do so," it said.

Rees-Gay of Pinsent Masons said: "Shadow licences are a very useful tool for landlords to protect assets that they hold. For example, a premises licence in a Cumulative Impact Zone (CIZ) will be worth a great deal, due to there being a rebuttable presumption that no new premises licences will be granted in these areas."

"It should be a win, win situation for both landlords and licensing authorities. Landlords will have the comfort of knowing that if they have a problematic tenant who has their licence reviewed or revoked, or a tenant who becomes insolvent, they will still be protected and be able to transfer their shadow premises licence to a new tenant. Licensing authorities should see it as a positive as they will receive fees for, usually, just copying a licence already in existence," he said.