This is a brief legal update relating to the recent trend of owners of licensed premises attempting to protect Premises Licences when the purchase, sale, closure, merger or administration of businesses to which licensed premises are attached occurs.

The alcohol licence in question may add considerably to the value of the transaction, especially if the premises are located within a cumulative impact zone where Councils can be reluctant to grant new licences.

It is possible for the landlord to protect the Premises Licence by creating a "shadow licence". The concept of shadow licences was approved in Extreme Oyster & Star Oyster Ltd. v Guildford Borough Council (2013).

Where a landlord’s licensed premises is operated by a tenant and the licence is held in the name of the tenant (as with Extreme Oyster) there are several ways in which the tenant’s actions could have a negative impact on the licence: these include where the tenant might become insolvent or bankrupt (which will cause the Premises Licence to be automatically revoked), or the licence could be reviewed due to poor management of the premises resulting in restrictive conditions being added, hours cut back, or even revocation.

Whilst landlords frequently try to protect themselves by making provisions in the lease, which may give the landlord a right of action against the tenant, they cannot prevent a licence from being reviewed or even lapsing. A shadow licence prevents this problem for the landlord.

Shadow licences are usually granted on the same terms as the existing Premises Licence. However, this is not a straight-forward process. Local Authorities may insist on conditions relating to the operation of the Licence or seek to impose a cooling-off period before trading can begin again. Some Councils will even review the shadow licence whenever the original licence is under review.

Licence reviews are themselves complicated (and potentially expensive) processes that will initially involve negotiation; if the objectors cannot be appeased then a full hearing of the local Licensing Sub-Committee will be called. Appeals against decisions are then made to the Magistrates' Court.