Supplementary evidence submitted by Karl
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 2008this 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 PractiseThe 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