Pop-up shops and short-term leasing: The legal realities behind a modern retail trend

In recent years, many of the UK’s high streets have taken on a new kind of energy. Empty premises that once stood dormant for long periods are increasingly being occupied by temporary retailers, concept stores and experimental brands. These “pop-ups” are now a familiar feature of the retail landscape, offering businesses a flexible route into physical trading and landlords a way to bring life back into vacant space. 

For fledgling businesses, pop-ups offer a low-commitment way to trial a physical presence and build a following. For landlords, they provide a route to animate voids, generate income, and maintain footfall. Yet behind the appeal lies a complex web of legal and commercial considerations. Far from being a casual arrangement, a pop-up requires careful structuring if the benefits are to outweigh the risks.

A high street under pressure

The backdrop for the rise of pop-ups is compelling. Vacancy levels across GB retail remain significantly elevated. According to the Local Data Company, overall vacancy was 14.0% in Q4 2023, shopping centres faring worse at 17.7% and retail parks performing best at 7.6%. Regions like the North East recorded the highest vacancy rates, contrasting with much stronger occupancy in Greater London.

Empty units depress footfall, undermine the vibrancy of retail environments, and erode landlords’ income. In this climate, the ability to secure occupation on any terms, however short, takes on real significance.

For retailers, the attraction of a pop-up lies in its agility. Short-term commitments allow entrepreneurs to test a new product or brand, to gauge customer demand in a specific location, and to build direct engagement without the financial burden of a long lease. Many online brands use pop-ups as a stepping stone, moving from digital-only sales into physical retail in a measured way.

For landlords, meanwhile, temporary occupation provides not only a source of rent but also a way of sustaining momentum in a retail scheme, keeping service charge contributions flowing, and avoiding the reputational drag of visible voids. The relationship can, at its best, be mutually beneficial.

Lease or licence?

Behind every pop-up, no matter how temporary or experimental it may seem, sits a legal agreement. Landlords do not hand over the keys to valuable retail space without terms in place, and tenants need clarity on their rights and obligations. These agreements usually take one of two forms: a lease or a licence. Both can be used to structure a short-term letting, but they are very different in effect. Understanding which applies is essential, because the consequences of getting it wrong can be severe.

What appears on paper to be a simple arrangement can, in practice, become complex very quickly. Many landlords assume that by labelling an agreement a “licence to occupy,” they can avoid granting the rights associated with a lease. The law does not permit such shortcuts. If an occupier enjoys exclusive possession of premises for a defined period in return for payment, the arrangement is likely to be treated as a lease, regardless of how the document is described.

The consequences of mischaracterisation are profound. A landlord who grants what they believe to be a short, informal licence may later find that the arrangement is treated as a lease protected by the Landlord and Tenant Act 1954. In that situation, the occupier could acquire rights to renew at the end of the term, frustrating the landlord’s ability to regain possession. If the landlord has plans to redevelop, re-let to a stronger covenant, or even sell the property with vacant possession, those plans can be delayed or derailed.

Regaining control might require contested proceedings, the payment of statutory compensation, or protracted negotiation, all of which come at a cost. What was intended as a few weeks of seasonal trading can, in the worst case, turn into a lengthy dispute that undermines asset value and strategy and unsettles other tenants.

The safest route, where exclusive possession is being granted, is usually to put in place a short, fixed-term lease that is formally contracted out of the 1954 Act. This preserves clarity and enforceability while ensuring the occupier has no right to remain once the agreed term ends. Licences still have their place, particularly for shared spaces or concessions where there is no genuine exclusivity, but they are not a cure-all. The distinction may appear technical, but it is fundamental, and the cost of getting it wrong is very real.

While the lease or licence distinction is often the landlord’s greatest concern, tenants too face pitfalls when entering short-term arrangements. The very features that make a pop-up attractive (the speed, the flexibility, the sense of informality, etc) can disguise a set of commitments every bit as onerous as those found in a long-term lease. Understanding these obligations is essential if the commercial promise of a pop-up is to outweigh its risks.

The tenant’s hidden commitments

For tenants, the promise of low-cost flexibility can disguise a series of obligations that are far from trivial. The fit-out of a space, even for a few weeks, can require significant investment in branding and layout. Unless carefully negotiated, tenants are usually required to strip out all alterations and reinstate the premises at the end of the term, which can mean incurring costs that dwarf the rent itself. Insurance is another frequent stumbling block.

While landlords will typically insure the building, responsibility for insuring stock, fittings and public liability rests with the occupier. Businesses that assume they are covered by the landlord’s policy may find themselves dangerously exposed if an incident occurs.

Service charges and utilities also create complications. A tenant in place for only a short period may nevertheless be asked to contribute to common services or maintenance costs. Unless capped or waived, these liabilities can erode the very advantage of a temporary letting.

Regulatory compliance brings its own hurdles. Food retailers must meet hygiene standards, those selling alcohol require the appropriate licence, and even background music in a store demands a licence from rights organisations. These rules apply as rigorously to pop-ups as to permanent shops, and the penalties for neglecting them can be serious. What begins as an exciting opportunity can, without proper preparation, quickly become a costly distraction.

The landlord’s calculation

Landlords, too, must weigh their interests carefully. There is no doubt that filling empty units with short-term occupiers offers clear benefits: rental income is recovered, vacant property rates may be reduced, and the broader environment feels more vibrant. Pop-up tenants can even act as a pipeline for the future, with some progressing into full-term occupiers. Pop-up tenants are often start-ups without a trading history, raising questions about covenant strength and reliability. Upfront rent or security deposits can help mitigate the risk of default but demanding too much at the outset risks deterring the very businesses that make the concept viable.

Short-term lets also mean more active management. Each arrangement requires its own negotiation and legal documentation, and units may need to be handed over, inspected and reinstated multiple times a year.

The mix of tenants within a scheme also matters. An ill-suited pop-up can conflict with existing occupiers or dilute the centre’s positioning. For landlords, the challenge is not simply to fill space, but to do so in a way that enhances long-term strategy.

A structural shift, not a passing phase

While pop-ups are often associated with busy retail periods, their significance is broader. They reflect a structural change in the way retail property is used and valued. Local authorities are actively encouraging “meanwhile use” as a tool for regeneration, recognising that flexibility can sustain footfall and community engagement in struggling centres. For both landlords and tenants, short-term leasing has become an accepted part of the commercial property landscape.

Yet the temporary nature of these arrangements must not be mistaken for informality. The legal framework is as real and binding as any conventional lease. Missteps over the lease/licence distinction, overlooked reinstatement obligations, or inadequate insurance provisions can transform what appears to be a straightforward opportunity into a protracted dispute.

Opportunities

For both landlords and occupiers, the appeal of the pop-up lies in its promise of agility and opportunity. But agility does not mean informality, and opportunity is best realised when supported by careful legal structuring.

At Newmanor Law, we view pop-ups not as novelties but as strategic tools, capable of supporting the commercial aims of both sides when managed with precision. Short-term need must never lead to short-sighted arrangements. When handled properly, a pop-up can achieve more than simply filling a gap, it can create value, vitality and the potential for lasting success.