Top Tips from Morton Fraser - Hiring out your Property
Hiring out your property can be an effective way to secure a revenue stream from what is often the largest asset on your estate. While venue hire can generate substantial income for castles, stately homes, halls, and churches, other popular locations include barns, gardens, and derliect buildings.
Historic properties prove popular venues for a wide range of events and activities and, depending on the sort of accommodation available, uses range from corporate events and film locations through to weddings, rock concerts and festivals. For the proprietors of historic properties, hire of all, or part of, the property as an event venue can be a valuable source of income. Even if this is not carried out on a wholly commercial scale, the income generated can represent a useful contribution to maintenance and running costs of these properties.
A business approach is required to maximise the retrun on invetsment from venure hire, as well as ensuring your asset is fully protected. There are a number of legal issues to consider, and often the scale of the activity, or the sums involved, make a formal written contract the most appropriate option.
Follow our top tips to protect your asset:
- Keep it confidential - Often, even before a contract for use of a property is entered into, confidentiality is an issue – Corporate hire also includes event professionals securing venues for high profile clients. The proprietors may therefore be asked to sign confidentiality agreements prior to contract negotiations and this may be a necessary precursor to any hiring. Most proprietors are happy to enter into such agreements. Such undertakings are likely to extend to your staff, so making them aware of the importance of compliance is vital. The fact that you have long serving staff and or are family run, can prove an advantage for you over hotels.
- Structure fees - How will payment be structured? You will need to make provisions for what will happen in the event of a cancellation, particularly if yours is a popular venue. Structure payments so that the hirer has paid in advance and include in the contract an obligation to pay the full fee if the event is cancelled so late that there is no opportunity to obtain a replacement hire. It may make sense to require hirers to obtain event cancellation insurance so that they are able to pay you even if they cancel their event (and indeed, it is probably sensible for them to do so anyway).
- Be specific - The contract should specify exactly how much of the property the hirer will have access to – which rooms or areas of grounds – and perhaps more importantly where they may not go. The contract should also spell out which routes may be used to access the property. Additionally, if large numbers of people are expected, access arrangements from the main road should be discussed beforehand with the police.
- Calculate the risk - Inevitably, anyone making a building available for use as a business needs to consider the health & safety of those using it, and indeed that of their own employees. Risk assessments should be carried out and appropriate steps should be taken to minimise any potential dangers. The proprietor should, so far as possible, use the contract to shift the risk of holding the event on to the hirer. Certain limited risks (death or personal injury caused by the proprietor’s negligence) cannot be transferred, but all others should be passed on, and the hirer should be obliged to carry out the necessary risk assessment and to insure against risks to those attending or working at the event. Proprietors are well advised to ask to see copies of the hirer’s insurance policies.
- Get the licensing right - If you are hiring out your property for use as a place of public entertainment, you must hold a public entertainment licence. Likewise, if you or the hirer proposes to sell alcohol at the event, a liquor licence may be required. As proprietor you may well want to shift the responsibility for obtaining these licences to the hirer, but you should ensure that they obtain them and exhibit them to you on request. You should also impose on the hirer an obligation to comply with the licences – you do not want the property to gain a bad reputation, thus rending it more difficult to obtain licences for it on future occasions and limiting its marketability.
- Think ahead - The use to which the property may be put should be specified. If the event is a wedding, spell out that use is for a wedding only. If any major changes are going to be required to the grounds or property, for example for a music festival, ensure that the contract covers returning layouts to their original states.
- Explore Third Party Rights - It is not unusual these days for there to be parties other than just the proprietor and the hirer involved in an event, for example third party rights to photography from the event. The proprietor should be aware of this and, if they want to attract events of this nature, probably have to be prepared to accept that their property will be photographed and that they will not receive direct benefit from this. Where photographic rights are being sold separately proprietors should factor it into the charge made to the hirer. Seeking control over the use of such photographs is a possibility and if there are particular sensitivities around, for example, the exposure of valuable works of art to the public eye. This should be contracted for and dealt with.
- Decide what’s personal - Consider room dressing. While you may be happy to make your space available you may not be happy to make all of your possessions available at the venue. Bear in mind though that it is likely to be the whole ambience of the property that appeals to prospective hirers, so you should perhaps consider allowing the use of some items. Lastly, clearing rooms can be expensive, so care should be taken to ensure that the cost of removal and storage is recovered from the hirer.
- Calculate the costs - VAT. If you are providing services it may be that VAT becomes a consideration. Property VAT and the interaction of VAT with charitable status (for example when a heritage property is held in a public trust) are complicated areas, and specialist advice should always be sought.
As with all commercial relationships, if the ground rules are clearly understood at the outset there is unlikely to be any need to actually revert to the contract – everybody understands their responsibilities. Clarifying the ground rules helps to ensure that events run smoothly, memories remain unsullied by bad feelings, and that your venue’s reputation and popularity only grow and grow. And, if it all does go wrong, you may be very glad indeed to have gotten things in writing.