Memorandum submitted by Borough Arms
Following are my experiences relating to the
Licensing Act 2004 recommendations when dealing with a rent review
with Admiral Taverns one of the biggest of the tenanted pub operators.
MY BACKGROUND
Despite best efforts our small wet led community
pub situated on the outskirts of a medium sized semi rural town
had suffered from decreasing turnover of £17K and 20K respectively
over the two years preceding the rent review.
Our lease is a 20 year fully repairing and insuring
issued by Whitbread in 1992. With no upward only clause in the
lease—and no minimum annual cost of living increase based
on RPI.
We are tied for beer and bottled beer only—with
a discount of £25 per brewers barrel on purchases from the
pubco.
At our rent review last tear (June 2007) our
pubco proposed a rent increase of 8.2% for next three years.
Admiral Taverns stated that it was the minimum
they could impose and merely represented a cost of living increase.
We refused to agree rent proposal—but have still been billed
and have paid it since.
My BDM's response to our refusal to sign rent
agreement was an blatant verbal threat to withdraw the rent offer
and take us to arbitration where he stated I could expect to have
an increased figure imposed on me and payment of that increase
backdated.
I requested and was given a copy of figures
used to set rent increase—based on our actual trading figures
obtained from pubco figures and information supplied by myself.
A letter was written to the Chief Operating
Officer stating that we wouldn't agree to the increase based on
some of the factors noted here—no reply was ever received.
From experience of other pubs we have invested
a higher than average amount of personal capital in the pub to
improve its appearance and comfort for customers and to install
a commercial catering kitchen and outside patio are/smoking area.
Based on my experiences with rent review I would
make following notes:
(a) our turnover had decreased despite our best
efforts to maximise trade—and therefore our ability to pay
rent had decreased and hence I requested a reduction in rent.
(b) we had no annual cost of living increase
written into our lease.
(c) we had no upward only rent review clause.
(d) rent increase was being based on our actual
trading figures and not a hypothetical tenant.
(e) personal investment in the premises that
had resulted in increased trade for myself and the pubco had not
been taken into account when rent set.
(f) the rent calculations took no account of
an increased income from sales of tied beer products.
SUMMARY
In my opinion the Licensing Act has resulted
in maintaining an uncompetitive position for tied pubs such as
my own and consumers alike.
REASONS
We are stopped from buying products at free
trade prices and passing those lower prices on to customers.
We are forced to pay a market rent and pay higher
prices for tied products (despite the £25 discount per brewers
barrel).
Some of the codes of practice laid down in the
act are being paid lip service to by the pubco—ie making
rent calculation available—but then the ban on UORR has
been ignored as has right to arbitration between tenant and pubco
also been ignored.
Competition has been stifled by forcing pub
tenants to pay grossly inflated prices for beer—and full
market rents too—resulting in much higher retail prices
for products that free of tie and managed outlets are able to
charge.
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