Licensed premises
The Valuation Office Agency`s technical manual covering all aspects of compulsory purchase and compensation.
12.1 Scope of Section
This Section is concerned with the compensation payable in respect of the compulsory acquisition of interests in licensed premises.
12.2 Licensing provisions
A brief summary of the special statutory provisions relating to Justices Licences is set out in Practice Note 12/1.
12.3 Town and country planning in relation to licenced premises
A brief summary of the special planning provisions relating to licenced premises is set out in Practice Note 12/2.
12.4 Compensation provisions generally
Subject to the following paragraphs, compensation for the compulsory acquisition of an interest in licensed premises, or for a purchase by agreement with compulsory powers in the background, should be assessed in accordance with the statutory compensation code as set out in the remainder of this Manual. In cases where further advice is sought full particulars should be submitted to the PS Professional Guidance team.
12.5 Licensing provisions
The Licensing Act 2003 (LA 2003) which came fully into force on 24 November 2005 replaced the Licensing Act 1964. The Home Office has responsibility for the 2003 Act. However, the Department for Culture, Media and Sport (DCMS) is responsible for regulated entertainment, for which there is provision in Schedule 1 to the 2003 Act.
The legislation provides a clear focus on the promotion of four statutory objectives which must be addressed when licensing functions are undertaken. These are:
- the prevention of crime and disorder
- public safety
- the prevention of public nuisance; and
- the protection of children from harm
Each objective is of equal importance. There are no other statutory licensing objectives, so that the promotion of the four objectives is a paramount consideration at all times although the legislation also supports a number of other key aims and purposes (see Practice Note 12/1). Premises serving alcohol are required to hold a Premises Licence issued by the Local Authority under the above act. It is also necessary for the proprietor of the property to hold a Personal Licence. The details of the Premises Licence held will be displayed at the property.
12.6 Licences and Notice to Treat
Notwithstanding that the Licensing Act 2003 provides that a liquor licence shall not be granted in respect of, or transferred to, premises unless those premises are, in the opinion of the Justices, suitable for the class of licence required, a liquor licence is held by the licensee personally, and is not an interest in land. It follows that the licence cannot be included in a Notice to Treat.
12.7 Purchase of licence by agreement
As the licence is not an interest in land, the acquiring authority cannot be compelled to take a transfer of it, nor can they compel the licensee or owner to waive their statutory rights in the licence even if adequate compensation were offered.
Where a request is received from a claimant having an interest in the property to negotiate a settlement on the footing that the licence will be transferred to the acquiring authority, the valuer should refer the request to the acquiring authority for a decision. In forwarding the request the valuer should give an estimate of the increase, if any, in the compensation payable if a settlement were made on that basis. If the acquiring authority accedes to the request, the valuer should proceed accordingly.
12.8 Valuation where licence is excluded from the acquisition
In assessing the value of an interest in licensed premises where the licence is not being acquired, the suitability of the premises for carrying on the licensed trade should be considered. Any value attributable to the actual licence must be excluded. Regard should be had to the prospects of a purchaser’s obtaining a licence for the premises in a ‘no-scheme world’.
12.9 Disturbance where licence is excluded from the acquisition
Compensation for disturbance should be assessed having regard to the general principles set in section 4 of this Manual. Compensation for depreciation in the value of the licence, which is part of the compensation for ‘disturbance’ should be assessed as the difference, at the relevant valuation date, between the value of the licence as attached to the premises and its value for removal or in suspense. In as much as the value of the interest in the premises reflects the prospect of obtaining a licence, care has to be exercised to avoid duplication of compensation.
12.10 Edgbaston case
Notwithstanding paras 12.7 and 12.8 above, there is no objection in practice to the assessment of compensation on the basis of the decision of the Lands Tribunal in Mitchell and Butlers Ltd v Birmingham Corporation (1958) 9 P&CR 490 (the ‘Edgbaston’ case) provided a settlement can be reached and the valuer is satisfied that the ‘Edgbaston’ approach does not result in the payment of compensation in excess of that amount assessed in accordance with Paragraphs 12.8 and 12.9. If, exceptionally, the valuer considers that the compensation payable on the ‘Edgbaston’ approach would be higher than on the basis of paragraphs 12.8 and 12.9 the case should be referred with full details to the PS Professional Guidance team before negotiations proceed.
The approach in the ‘Edgbaston’ case translated to present circumstances, is to assess the open market value of the interest in the property on the basis that the licence will be transferred to the hypothetical purchaser, and deduct therefrom the value of the licence for removal or in suspense.
A copy of the law report in the ‘Edgbaston’ case could be supplied by the PS Professional Guidance team.
12.11 General
The Landlord and Tenant (Licensed Premises) Act 1990 brought new tenancies of premises licensed for the sale of intoxicating liquor for consumption on the premises within the provisions of Part II of the Landlord and Tenant Act 1954, with effect from 11 July 1989 and existing tenancies from 11 July 1992.
Before this time it had been the custom for tenancy agreements of licensed premises to include a number of clauses by which the landlords (brewers) could obtain earlier possession. One typical clause is:
‘Immediately upon the service of a notice to treat, whether actual or deemed, in respect of the said premises with a view to the compulsory acquisition of the interest of the landlords therein, the tenant will continue to trade in and upon the said premises only with the consent of the landlords and will on receipt of a notice in writing to that effect cease to trade at such time as the landlords shall in their absolute discretion think fit and in so ceasing to trade this Agreement shall be forthwith determined’.
Where the tenancy agreement includes the above or similarly worded clause, and the provisions of Part II of the Landlord and Tenant Act 1954 do not apply, if a notice to treat is served or deemed to be served in respect of the landlord’s interest, the interest of the tenant is converted into a form of tenancy at will which can be terminated at any time by service by the landlord of a notice to cease trading.
The compensation payable to the tenant will be assessed having regard to the effect of such a clause.
12.12 Entitlement
The entitlement of the tenant to compensation will depend upon the circumstance as follows:
a) if the tenant is required by the acquiring authority to give up possession before the expiration of his interest, a tenant for a short term (including a tenancy at will) is entitled to compensation under section 20 CPA 1956 (see section 7 of this Manual);
b) if the tenant vacates the premises following a notice to quit or a notice to cease trading, served by the landlord subsequent to the date of the notice to treat relating to the landlord’s interest, the presumption should be, unless there is clear positive evidence to the contrary, that the tenant has been displaced in consequence of the acquisition and is entitled to a disturbance payment under section 37 LCA 1973 provided the tenant otherwise qualifies for a payment (see section 4 of this Manual).
c) If after the acquiring authority has declared an intention to acquire the premises, they are vacated voluntarily, that is the acquiring authority or the landlord has not served any notices requiring the tenant to vacate, and a claim is received from the tenant for a disturbance payment under section 37 LCA 1973 or compensation under section 20 CPA 1965, the case with full particulars should be submitted to the PS Professional Guidance team.
12.13 Disturbance payments
The amount of a disturbance payment should be assessed having regard to the period for which the premises might otherwise reasonably have been expected to be available to the claimant for the purpose of the trade or business and to the availability of other premises suitable for that purpose (section 38(2) LCA 1973). In considering this aspect it should be expected that the landlord would act in a normal commercial manner. Within this context it should be considered whether or not the premises would continue to be available, if no part were to be acquired, as should the terms on which they would be made available. It should not be assumed that the claimant would always be offered a new tenancy.
12.14 Determination of tenancy by landlord
A tied tenant, on determination of his interest, is usually entitled to sell the tenant’s fixtures and trade chattels to an incoming tenant. Subject to any express condition in the tenancy agreement to the contrary, where the tenancy is determined by the landlord, whether by service of notice to quit or to cease trading following a notice to treat, and the tenant is prevent from exercising this customary right, the tenant should look to the landlord for compensation. In such circumstances a loss of tenant’s fixtures and trade chattels would not normally form part of the disturbance payment under section 37 LCA 1973.
On the principle of equivalence, the landlord is entitled to be reimbursed for any loss suffered as a consequence of this customary right, as part of the compensation payable for this interest.
12.15 Tenant dispossessed by acquiring authority
Where the tenant is dispossessed by the acquiring authority in circumstances that give entitlement to compensation under section 20 CPA 1965, the acquiring authority is not required to purchase the tenant’s fixtures and trade chattels, but any loss or expense suffered in respect of these items, as a direct consequence of the dispossession, forms part of the compensation payable and should be assessed in the usual way.
12.16 Reference to Tribunal
In the event of a reference to the UT(LC) the presentation of valuations to the Tribunal will need careful consideration. In all such cases particulars should be submitted to the PS Professional Guidance team at the earliest opportunity.