There are two topics which never seem to go away as far as the forecourt retailing industry is concerned: fuel prices and hand car washes; and certainly both receive regular coverage within Forecourt Trader in general and within this column in particular. With hand car washes, the problem relates to what might be termed ’sub-letting’ of all or part of a forecourt (and that includes any related premises, be they adjacent or across the road) to apparently independent traders for their own business activities. In the short term it may seem like the answer to site profitability, but for the site and brand owner it really can spell potential trouble.

At this point let’s make it clear that we’re not suggesting that all or even many of these businesses are engaged in deliberate illegality of any sort. Undoubtedly there are many people working hard struggling to earn a living with little or no start-up capital, and trying as best they can to comply with all the rules and regulations that modern society imposes. However, if you happen to be their ’landlord’ the big questions you have to face are: "Do I know that with any reasonable certainty"? And "Have I taken reasonable steps to find out"? Nor is this the place to discuss heavy legislation like The UK Modern Slavery Act 2015 or the Money Laundering Regulations 2017. But you should at least be aware of these because they could affect you if your tenants happen to be breaking any of them on your premises.

Assuming that your site isn’t being used for deliberate, overtly-criminal enterprise, you should still look at your tenant’s activities and how they might affect you and your own business. Take for example the rent paid by the tenant. Many site owners choose not to put VAT on their rent invoice to the tenant (assuming that there is actually an invoice) often because the tenant isn’t a VAT-registered business and so can’t reclaim it. That’s fine as far as it goes, but it does potentially raise a problem with the landlord’s ability to reclaim some of their own input VAT if the rent is substantial relative to their own turnover. At the very least HMRC may want to see a formal partial-exemption calculation performed from time to time to establish whether there should be a restriction on the site-owner’s input VAT.

money trail

While we’re looking at rent: how exactly is it being paid? If you’re receiving cash, you should be concerned. Money laundering isn’t a trivial issue and if you’re accepting material amounts of cash from anyone over the course of a year you may fall within the scope of the legislation. At the very least that requires you to take reasonable steps to ascertain that the cash isn’t related in any way to illegal activity. If your tenants can’t or won’t use a bank account to pay you, the only sensible advice is to stop dealing with them altogether.

You should also look carefully at your insurance policies. The chances are that they won’t cover someone conducting ’their business’ on your premises. So what happens if your tenant injures a customer on your premises, or wrecks the paint on their new Maserati?

Whose customer is it any way say they bought fuel from you and then decided to have their car washed in your wash bay? If your tenant doesn’t have public or product liability insurance, the customer will naturally seek redress from you but your insurance company’s claims department may highlight some of the fine-print in your policy that could end up costing you a lot of time and money.

The problem of separating your business from their business is of fundamental importance when you have tenants operating from your premises. If they trade as a limited company at least you have some clear daylight between you and them although that doesn’t absolve you from responsibility to still be aware of the nature of their activities. But where they’re operating as sole traders or some form of unofficial partnership, it could be much less clear cut. Think of employment legislation, minimum wage rates, employer’s pension requirements, PAYE and National Insurance for starters. Then you have Health & Safety requirements, environmental protection issues and so on.

If your tenants are operating in breach of any of these, they’re likely to do a runner as soon as any of the relevant authorities come to look around.

That’ll leave you trying to explain that their activities were unrelated to yours.

Unfortunately that’ll take some doing, and if nothing else will leave you open to a very long and expensive discussion with the authorities trying to prove the point, and make any rent you’ve received look like peanuts.