Dodging Liability? by Jonathan Owen

From Market Matters July 09

Can you do it? In a word – No, but you can avoid getting unfairly lumbered with someone else’s liabilities.

I’m inclined to support anyone building up their own business so last year I was very pleased when an old friend decided to take the leap from standing as a casual to trading from an empty shop behind her usual pitch on the Market Square. She’d had her eye on the shop for the previous 12 months and knew the pitch was right, plus on non–Market days the Square was being used as a shoppers’ car park. It might have been an old building but it had just been renovated and the letting agent was offering it at a very low rent. Her popularity and loyal customer base meant she was generally sold-out by lunchtime so it was a no-brainer that she needed shop space to grow her business. What better location could there be than next to her existing stall? So far, so good.

Her accounts showed her turnover and margins would cover the overheads, but everything sounded so good it was too good. She smelt a rat and called in a couple of favours from a local solicitor and myself to give the deal the once-over. The building certainly seemed to be in good repair but the rent was too low, even allowing for the current economic climate.

The smell of rat got stronger when we dug through the proposed lease and found she was expected to assume full structural repairing liability without any confirmation that the renovation works had building regulations approval from the Council. The agent was hoping she’d take the low- rent bait before the lease dumped onto her the prospect of the Building Inspector, Conservation Officer or English Heritage, requiring her to prove the repairs met the required standards. That could have meant opening-up the renovation works, ‘alterations to comply’ and obtaining formal approval. Not nice.

Lesson 1: If your business has outgrown your market stall and you need to rent a shop to expand, then good for you – butget some decent legal advice about your obligations under the new lease. You might complain about the Council Market Management but they’re a bunch of pussycats compared to private landlords. A good solicitor and surveyor will help you dodge unnecessary liabilities.

Lesson 2: Worry less about the cost of the rent than the cost of your liabilities. My valuation lecturer at college used to say, “The rent you can see, but not the liabilities – not until they bite you in the bum, that is”.

Of course, one way to avoid much of this is to either (a) keep trading as a casual, or (b) rent a lock-up kiosk inside a Market Hall. In either case you won’t be lumbered with structural repairing liabilities, but don’t forget to keep your Public and Employer’s Liability insurance up to date. It’s notunreasonable that you are obliged to maintain this under the terms of your licence in case something non-structural falls off your stall and brains a shopper. Without insurance you’ll find it difficult to pay-off your personal liability when ‘Accident Claims-R-Us’ come after you.

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