The use of retail premises.

United Kingdom

Nick Brown and Alex Poole-Wilson consider a recent court decision
All retailers in occupation of premises will be familiar with the constraints imposed on their use of premises by both the user provisions in their occupational leases and the need for planning permission.

However, if the approach adopted in a recent planning case is to be followed generally, then retailers may find themselves having more flexibility than they previously envisaged.

The particular decision (R -v- Maldon District Council Ex Parte Pattani, The Times, 7.11.1997) related to a food supermarket where the planning permission and associated planning agreement limited the use of the premises to a supermarket and prohibited the sale of any goods other than "food and associated household consumables".
When the retailer at the premises decided to provide pharmaceutical services from the supermarket premises, the courts were faced with the question of whether the planning conditions and/or agreement had been breached. It was held they had not.

The court believed that permission to develop and use the site as a "supermarket" included permission to trade in anything "which could ordinarily and properly be regarded as obtainable in a supermarket whose primary function was to sell food". Pharmaceuticals were "associated household consumables" because they were commonly and normally found in supermarkets and so had an association with food in terms of shopping.

The implications

The full planning implications of this approach remain to be seen. However, in a climate where supermarkets and other retailers are responding to the growing demand for the range of facilities available in their stores to include items such as banking and coffee shops (and, according to recent press reports, doctor's surgeries), it is possible that the user provisions in leases of supermarket premises may be interpreted more widely in the future. It is nowadays far from rare to find a supermarket selling children's clothing, cd discs and tapes and books and the further this trend develops the more likely it is that widely drafted permitted users in leases providing for a general supermarket or similar use will be interpreted to include these and other items commonly being sold in supermarkets. This could also have rent review implications.

This approach could, potentially, have implications for a number of different types of retailers. We are now seeing book retailers expanding into providing coffee shops as part of their facilities. If this becomes the norm then could a permitted use of "bookshop" be extended to generally include this type of use.

If this approach is adopted more widely then landlords will no doubt look more closely at the wording of user clauses and may not agree to general uses along the lines of "supermarket" or "bookshop".

This is an area which has great potential for development and only time will tell the extent to which the courts are prepared to take this flexible approach to the interpretation of user clauses.
Capital allowances on sales and purchases of secondhand buildings
Richard Croker reports on the current rules relating to textures
It is not only property investors who should be interested in capital allowances. Retailers who are owner-occupiers or who incur capital expenditure on fitting out leased property will, generally, have the opportunity to claim capital allowances. Last year's Finance Act changed the rules governing capital allowances on plant and machinery fixed to property - in particular on sales and purchases and all should be aware of the degree of flexibility these rules now offer.

25% of total expenditure on plant and machinery is available as tax relief, in the first year. A further 25% of the written down expenditure is available in the next year, and so on. With corporation tax rates at 31%, a net saving of 7.75% of the expenditure can be made in the first year.