Rent Valuations by Pub Co’s, BDM’s at Rent Reviews and some other questionable activities.
Having studied the so called method of rent assessment used by the Pub Co’s for Rent Reviews.
Firstly all rents are supposedly worked out by Valuers and BDM’s on the future sustainable earnings potential by a competent operator/reasonably efficient operator (REO) or an alternative method of operation??? Valuers, at least qualified valuers in the main have never run a pub and would have virtually no idea how to expand a business without personally running it, understanding the local problems, features, advantages and disadvantages, BDM’s the majority have very little hands on experience, certainly neither are capable of being called a competent operator, yet these people dictate rental levels that are totally unsustainable in the majority of pubs, causing extreme hardship and lack of profitability to the majority of lessees.
Competent Operator has largely been Replaced Reasonably Efficient Operator (REO).
They are reluctant to define a competent operator, in the words of one of the BII Vice Chairman, when the BII was a well respected body, someone with at least three years profitable experience and some of the advanced qualifications available or five years profitable experience with basic qualifications, he should know and I agree with him.
Yet these companies across the board put all new lessees through a basic five day course with the APLH, and maybe food hygiene or cellar management if they are lucky.
This at the greatest stretch of the imagination does not make a competent operator or REO.
They are then put into pubs with rent levels based on this goofy method, it is totally obscene and the fall out factor is enormous and dire, most people lasting 12 to 18 months before their money runs out.
As an experienced operator I would not touch the majority of them without accurate up to date accounts that prove the rent is payable with a profit, not some “will o the wisp” calculation ignoring the existing business turnover.
Bringing any Rent Review seriously into question.
A small brewer was taken over by one of the major Pub Co’s who sold on all the pubs that they did not want, to a number of smaller Pub Co’s.
I received a call from a lessee who had been there for about seven years, he had been invalided out of the Navy and had taken this village pub by himself and ran it as a village boozer with a reasonable trade.
Just before the pubs were first sold his BDM came in and said that they had made a mistake, they should have charged him about £5 for every barrel of local real ale that he had bought, everything had been declared but the brewery had omitted to charge him, consequently he owed them several thousand pounds.
The BDM said that he would have words with the Director and get it written off which he did and was agreed but not confirmed in writing.
The pub changed ownership and the new company sent him a bill for several thousand pounds, he told them what had been agreed and the pub was sold to a minor Pub Co, who immediately tried to claim the money, threatening bakruptcy, court action etc.
The lessee was terrified and called me I got someone to advise him the Pub Co backed off and then made him an offer to vacate the pub, which he accepted, thinking he was going to retire happily, in the last week they slapped him with a dilapidations bill that wiped out all the compensation for vacating the pub.
They wanted the pub for redevelopment, the dilapidations should have been substantially reduced or removed, because of the development. Link
Another pub with the same company took over a very successful pub with a good landlord who had been there twelve years, he said he wasn’t worried about the change of ownership.
He phoned me nine months later in tears saying that they had bankrupted him, again they wanted the pub for redevelopment, they induced him to sign a new lease without professional advice and hung him out to dry, how they did it I have no idea. But someone runs a successful pub for twelve years does not go bust without something untoward occurring???
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Barrel-Dregs has been run for many years, we change all the identifiable details, but give you an insight as to many of the sharp or bad practices by a number of companies, they are mostly just legal but morally unacceptable.
We have a number of Pub owning companies that we will not recommend, their actions have featured in Barrel-Dregs too many times, we did hope that by highlighting their antics they might change, but in Barrel-Dregs terms “Leopards do not change their spots, they cover them with more Mud.”
Questions and Answers before you consider a Tied Lease LINK
Please Note:- We are not trying to discourage buying and selling of leases, we just want to discourage the legal Rip-Offs that go on, we firmly believe that those taking up a fair Market Rent Option, as it stands at present, could have leases worth serious money, though a number of Pub Co’s will fight tooth and nail to stop this improvement.
The views expressed are not necessarily the editors and www.buyingapub.com accepts no responsibility for them, we do try to avoid offensive or litigious statements being made. They are written by concerned professionals in the industry who feel that these issues should be raised to ensure that all licensees are made fully aware of many hidden pitfalls.