Pharmacies are much more than just dispensers of medicine and provide a variety of other services. Michelle Rowe looks at what impact different services will otentially have on the terms of a pharmacist’s property lease.

Many pharmacies now sell a large range of retail products as well as providing services in addition to their dispensing pharmacy. Services can include photo processing, blood testing, diet management and the availability of practitioners such as chiropractors, chiropodists or alternative therapists. It is also now common to be able to purchase cosmetics, toiletries and food. Whether or not a pharmacist is able to sell such items and provide such services will depend upon the terms of their lease.

Lease Use Clauses
Leases of commercial property, such as retail premises, usually include restrictions on the use of the property. Landlords do this to retain control, to comply with planning consents and to protect their interest in the property. Although rare, if a lease is silent on what a property can be used for, it can be used for any lawful purpose, subject to planning legislation restrictions.

The permitted use within a lease may be broad, such as ‘retail shop’, or by reference to the business, for example ‘dispensing pharmacy’.

Pharmacy leases usually have a specified use (often ‘dispensing pharmacy’) and then a wider permitted use with landlord’s consent (often ‘other retail use’). If the lease does not state that landlord’s consent to this wider use must not be unreasonably withheld or does not permit a change of use, the landlord may decline a request to change the use for any
reason or alternatively consent to it but demand a premium from the pharmacist for doing so.

Ideally, pharmacists should negotiate a wide use clause to cover all contemplated uses of their property. A pharmacist with a lease which only permits use as a ‘dispensing pharmacy’ and which provides the products and services above could be in breach of its lease.

Rent
A narrow definition of a property’s use may affect a pharmacists ability to transfer or sublet the property as it will not be as attractive to potential buyers. A widely drafted clause will give more options to the pharmacist in the future, particularly if the pharmacist is unsure as to how long the property will be used as a pharmacy However, a wide use clause can increase the
rental value of the property at rent review - consequently a pharmacist would pay for the flexibility! This should therefore be a consideration for a pharmacist when first agreeing the lease terms with the landlord.

Other Considerations
Before changing the use of a property, a pharmacist must consider whether there are any restrictions other than those contained within the use clause of the lease which may prevent the change. There may be other clauses within the lease, for example restricting alterations and planning applications to the local authority. In addition, outside the lease there may be
restrictive covenants affecting the landlord’s title and planning legislation restrictions which may require separate consent.

Breaching the Lease
If the pharmacist breaches the use clause of the lease the landlord has a number of remedies. These include taking steps to terminate the lease, although the court may allow the lease to continue if the prohibited use ceases. The landlord may alternatively seek a court order to stop the tenant’s unauthorised use or seek compensation in the form of ‘damages’ for any loss it has suffered. As well as sanctions under the lease breaches of planning legislation can lead to criminal penalties.

If any planning permission imposes restrictions on the use of the property, the planning authority may also take enforcement action in the event of a breach. Such actions will be costly and disruptive to the pharmacist.

Conclusion
When taking a new lease, a pharmacist should ensure that the user clause is wide enough to encompass all of the products and services that it is envisaged will be sold or provided at the property. It is not advisable to restrict the property’s use to ‘dispensing pharmacy’ but the definition instead should include ‘retail chemist’, ‘treatment rooms for health practitioners’
and any other elements the pharmacist foresees the property being used for. Further, other ‘retail use’ should be allowed with the landlord’s consent, not to be unreasonably withheld. This wider use clause will have the benefit of making the property more marketable in the future.

Before agreeing heads of terms for the purchase of a new property with a landlord pharmacists should discuss their ‘wants and
needs’ for the property and their business with their legal advisor.