Pub Co takes back your Lease for it’s own use, what happens? Barrel-Dregs

By | June 8, 2015

Pub Co takes back your Lease for it’s own use, what happens?

Supposing your faithful Pub Co BDM comes waltzing in grinning from ear to ear, saying that your lease renewal will only be for five years, because the Pub Co want the property for their own use, to turn it into a Managed House.

Immediate panic, you assume that you will be cast out on to the streets with a massive hole in your finances, even bigger than the one incurred having a Pub Co Lease.

The statutory compensation is either a multiplier of one or two. Times one is where the tenant has been in occupation for at least seven years. Times two is for the same criteria, but for 14 years or more. /span

The compensation will be made available where the identity of the tenant has changed, but (and here is the legal twist), the tenant and its predecessors have been in occupation for the qualifying period.

To avail themselves of the compensation, the same business must be there, linking through the predecessors in title by the transfer of goodwill between the different parties.

The 14 year period is very specific and time critical, with the guiding case law being: “Department of Employment v Royal Insurance [1987] 1 EGLR 83”.

In that instance, the period of 13 years 363 days was held as being not sufficient to qualify for the 14 year rule and higher multiplier.

The other stand-out case is “Bacchiocchi v Academic Agency Ltd [1998] 3 EGLR 157

Compensation is based on the rateable value. Thus with the example of the Kings Arms, the RV is an exceptionally high £42000 and the lease is for 20 years. So at the end of the lease, if a new lease is denied (‘cos it is going to be a managed house) and the term was in excess of 14 years,2 x £42000,ie £84000 compensation.

However our dear old friendly Pub Co, will for surely try to mitigate the sum concerned by serving an eye wateringly high terminal schedule of dilapidations.

Sure as night follows day !

BUT and it is a big BUT…. if the place is to be a managed house, and say EI are going to knock seven bells out of it (claims about spending mega money on each Managed House), then by and large, the dilaps schedule could well be knocked aside due to those works.

You’ll need professional advice, unless the ineffectual so called bodies that claim to control the industry get their act together, which our experiences over the last few weeks were totally useless for what needed to be done, Toothless Ageing Tiger comes to mind.

Potboy West

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.

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