Pub Companies - Business and Enterprise Committee Contents

Memorandum submitted by Sarah Ferdinand

  1.  I am a solicitor and the senior partner in Ferdinand Kelly, an independent firm of commercial solicitors which has specialist knowledge of the pub industry.

  2.  We have frequently been instructed to act for publicans in their purchases as tenants of pub leases, and in related matters such as rent reviews and lease renewals of public houses.

  3.  I can therefore say that I am familiar with issues currently before this Committee.

  4.  The purpose of this letter is to draw the Committee's attention to some facts, which are relevant to the Trade and Industry Select Committee (TISC) recommendation of 2004 to the effect that pub leases should not contain upwards only rent reviews.

  5.  I was involved in a transaction earlier this year, acting for the purchaser of a 15 year lease from the freeholder of a public house in Devon. The following are the particular relevant matters:

    (a) The vendor landlord was a private individual, not a pubco or a brewery. But the solicitor instructed by him told me that she dealt with public house leases as a specialism, and that her cases covered a wide area in the Southwest of England.

    (b) She prepared the draft 15 year lease. This contained an upwards only rent review clause and also a clause providing for annual rent increases in line with the retail price index ("the Upward Rent Review Terms").

    (c) I tried to persuade her to remove these provisions. I pointed out to her the TISC recommendation of 2004.

    (d) However, she and her client were both quite firm in their refusal to depart from their Upward Rent Review Terms.

    (e) The solicitor based her firm refusal on the many examples of pub leases with which she said she dealt with currently. These included leases prepared by pubcos such as Punch Taverns and Enterprise Inns. She said that all drafts she had seen contained terms identical to those she was insisting on in the Upward Rent Review Terms. As far as she was concerned, such terms were the current industry standard.

  6.  In short, it was clear to me from the above experience that in Devon and surrounding parts of the Southwest the Industry was not behaving in accordance with the TISC recommendations, but was continuing to sign tenants up to leases containing upwards only rent review provisions and clauses providing for annual rent increases in line with the Retail Price Index.

  7.  I am happy to assist the Committee as they think fit, with further detail on the above.

29 September 2008

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