Pub Companies - Business and Enterprise Committee Contents

Supplementary evidence submitted by Karl Harrison

  This information is submitted further to my main evidence to the Committee submitted previously.

  This matter is, I believe, highly relevant to the considerations of the Committee in relation to the conduct of "pubcos" in connection with rent reviews and the supposed application of a Code of Practise.

  In addition to other pubs I am the tenant of a pub in Ashtead, Surrey, known as The Leg of Mutton and Cauliflower. This pub has been in operation in the town of Ashtead since the 18th century. The freeholder and "pubco" in this instance is Mitchells and Butler.

  I have a 10 year lease at the premises from 21 November 2003. There is provision in the lease for a rent review on the 29 of October 2008—this year. My passing rent is £48,000 per annum plus a further sum equivalent to 3% of my net sales.

  Mitchells and Butler, I understand, are members of the BBPA and I further understand that they have subscribed to the so-called Code of Practise—The Letting and Operating of Leased and Tenanted Pubs.

  In or around 29 of September I was contact by Mitchells and Butler and asked to attend a meeting to discuss the rent review. A meeting was arranged for 10am on 7 of October and I duly attended the meeting which was with an area manager employed by Mitchells and Butler.

  The area manager explained to me that sales were down on the previous year and that Mitchells and Butler were not making enough money out of me and they wanted to get a much better rent at rent review. He explained that his property department had told him try to "get a figure in the high sixties". By this I took him to mean a sum in excess of £65,000 per annum on the basis rent plus the 3% of turnover. This would imply an increase of around 40% over the current rent. An increase of 7% per annum compounded. Over three times the rate of inflation for the period concerned.

  I asked the area manager to show me the basis for such an increase given that the pub on the other side of the street, managed by Mitchells and Butler had all but closed down.

  He said he would be using other comparables. I said I thought that they carried out rent reviews by reference to a profit and loss account and a divisible balance. He told me that such an approach wouldn't work for them in this case so they would have an agent look for comparables. I said I thought the Code of Practise tried to provide for downward movement as well as upward and surely the current climate ought to be reflected. I was told it was an upward rent review only and that they didn't want to mess around talking about it but wanted to just get it off straight away to a third party to decide if I didn't agree with what they wanted.

  The area manager conceded that Mitchells and Butler applied the Code of Practise to rent reviews but he had not sent me a copy and did not have a copy with him. No evidence whatsoever was presented to support the level of rent that was being claimed or, indeed any evidence at all about rents.

  Does this really look like a "pubco" acting in good faith in relation to the Code of Practise and rent review procedure that they claim to apply?

8 October 2008

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2009
Prepared 13 May 2009