A warning to people giving up leases/tenancies (Barrel-Dregs 279)

By | May 27, 2015

A warning to people giving up leases/tenancies (Barrel-Dregs 279)

A tale of woe and frustration for a departing Marstons Tenant

We have been contacted by a lady licensee who ran a very good pub for Marston’s for 5½ years. She decided to hand the tenancy back, for personal reasons.

She came to us for advice and we suggested that she should use both a solicitor and valuer of her choice to ensure everything was squeaky clean. The cost would have been collectively around £2K or less, by shopping around it could come to around £1.25K.

Marston’s Retail Field Staff, BDM Julian Mobbs, Area Manager Sarah Adams said they would handle everything, it was only the hand back of the lease. Their retained valuers (Platts) fees would be split, possibly £500 total cost.

The tenant was told that she really didn’t need the services of a solicitor or valuer, it was saving a reasonable amount of money and a lot of inconvenience.

Sounds ideal, she gets a letter confirming that payment of the final settlement monies would be in 28 days after completion with a comment about VAT registration.

The new tenant took over, 28 days came and went – no money. We consulted a solicitor and he said Marston’s are not under any obligation to pay at 28 days, it not being a legally enforceable contract, only ‘an understanding’ to pay.

Two weeks after the 28 days, still no money. We lodged a complaint with the Pub Governing Body (PGB), that this was unacceptable practice, though officially legal and within the letter of the law – just!

It then transpires this is almost standard procedure with a number of major Pub Co’s. You may have been a good slave to the Pub Co during your time, but you have no value now and are totally expendable

The Pub Co has sold on your tenancy/lease, received all the monies and still retains (in the case of this lady) possibly £45K of her money. It’s better in their bank than hers.

The bank is giving this ex tenant a hard time. This is because the promised money has not appeared and she is paying 18.4% interest (Standard Rate for Joe Public), the VAT has not been paid and she can do nothing.

After, we and the lessee lodged a complaint with the PGB, some payment eventually arrives, she bends the BDM’s ear and achieves nothing, tries again with the Area Manager, who offers a take it or leave it deal to waive their share of the Valuers fees a sum of £500.00, a derisory offer for the inconvenience and costs involved.

“Half the valuer’s fees £500.00”. They had a quote for £750.00 in total. We fail to understand why Marston’s are purported to be paying their tame valuer £1K for every valuation. Pub Co’s are well known for getting the best discount for any form of contract. It is thought that the Valuer’s fee is more likely to be £500 in total.

I get a phone call from the CEO of the BII (Tim Hulme) on behalf of the Pub Governing Body, which we assume he is a key member. (Tuesday 29th May)

He agrees with me, that it is unacceptable practice and they have had a number of complaints about similar activities by a number of Pub Co’s.

I agreed that taking this sort of complaint to PICAS, should not be necessary, a well placed word in the ear of a senior member of the offending Pub Co, should produce a mutually acceptable solution.

With the obvious alternative of taking the Pub Co to PICAS and all the resulting costs and compensation. The larger Pub Co’s are supposedly avoiding PICAS like the plague, the decisions have been somewhat costly for them.

The CEO of the BII told me that the Chairman of PICAS, RICS member Rodger Vickers would handle this and sort it out – I naively assumed on the basis that we had discussed, being a robust phone call to Marston’s.

I get a phone call from the ex tenant (29th May) saying that Rodger Vickers FRICS, has sent an email explaining that they could go to PICAS at a cost of £200 and take the consequencies, regarding the £500 offered it was strictly down to her, whether she took it or not. Basically, ‘take it or leave it’. It would appear that no personal telephone contact was made, probably to ensure Rodger Vickers’ independence of process.

The email below from Rodger Vickers is in italics and what he said is strictly correct. The ex tenant is totally fed up, hoping as we did that some degree of practical sense would prevail and an amicable solution could be found. Not a sledge hammer to crack a nut, that could take six months and more money, to resolve a bit of dubious practice against a wealthy Pub Co with a battery of high class legal advice.

“From what you say the delay in payment if made after the deadline stated in the Code of Practice is a matter for PICA-Service. The issue as to whether you should accept the £500 compensation on offer is one for you though I’m afraid. If the PICA-Service panel find for you in a Hearing you would recover the £200 PICA-Service registration fee. You would also be asked whether you wish to place before the PICA-Service panel a claim for the costs you incurred in making the complaint (e.g. preparation time, transport costs etc). The PICA-Service panel have the power to make monetary Awards to cover their perception of the landlord Company’s wrongdoing where appropriate and this may include, should they believe these to be relevant, loss of earnings, the tenant’s reasonable and relevant costs, the costs of PICA-Service and, again where regarded by them as being relevant, interest, but shall not include what the Panel consider to be consequential losses of an indirect nature or any element of legal costs. The word ‘penalty’ does not appear in the PICA-Service procedure paper but is a matter the panel may discuss under the heading of the ‘landlord Company’s wrongdoing.’ The matter as to whether you would be best advised to progress a claim is therefore dependent firstly on what the breach has cost you in financial terms and secondly on the strength of your feelings that the Pub Co/Brewery should be taken to task”.

Having read the above, it is not the practical, no nonsense solution that the CEO of the BII and I discussed. I was given, the distinct impression that Rodger Vickers would ring Marston’s and achieve something – not to be!

Some of us want to clean up the industry as amicably as possible, not incur vastly expensive costs in litigation, when someone is obviously the injured party.

Marston’s clearly owed a genuine duty of care, both during and after the departure of their lessee. This did not happen in the payment of monies owed. This is contrary to the spirit – if not the letter of the law – contained in their Code of Practice and the Industry Framework Code – both of which have been quietly ignored. Not good enough!

Possible Solutions? Not easy as, in a practical sense, a binding letter should be signed by the Brewer/Pubco specifying the maximum time for payment of monies owed, i.e. 7 days and no more. This letter or email would then form a binding understanding, actionable in law if not honoured, or specific penalties for breaches.

The second option, which rests with the Pub Governing Body and PICAS.

If a Pub Co or Licensee (It has to apply to both landlord and tenant) breach the Code of Practice within the Industry Framework Code on a range of issues, that taking them to PICAS or PIRRS is a time consuming costly exercise for something such as the above.

There should be people across the country with the authority of the PGB or PICAS to contact the offending party and discuss the abuse and arrive at a practical solution, rather than waste a number of peoples time in going to PICAS etc., if they do not agree, the option is to take it to PICAS.

In this case a number of Pub Co’s are guilty of this same abuse and from the CEO of the BII, relatively common practice.

Should the offender have been guilty of two similar recorded abuses a fine of £5K should be made, £1K should go to the PGB/PICAS to fund the costs of investigating and resolving this and other issues. The remainder plus any agreed financial loss to the offended party, the chances of a licensee doing the same thing twice are remote, but large companies exploit situations where small people cannot afford the time or money to contest an issue.

I would suggest that the PGB or possibly PICAS have a contact list of senior people in Pub Co’s, with the authority to take immediate remedial action to rectify the abuse.

In the case above, Marstons know that they can do the same again with no come back, a departing tenant is not going to go to PICAS, they just want to get out of their tenancy or lease.

If you agree with our thoughts, please send a copy of this article to PICAS at info@picaservice.com, if we all do it, they might implement a system blocking this and other loopholes.

Everyone with a lease or tenancy could, be put in this situation at the conclusion or even assigning a lease to a greater or lesser degree.

Potboy South

The views expressed are not necessarily the editors and 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.

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