Memorandum submitted by Nigel Wakefield
I act as a Consultant for the BII inspecting
pubs, recruiting members and in addition I run a website www.buyingapub.com
which is an information site with links to the BII on books that
I have written and other useful information from all aspects of
In my opinion there has been very little change
in the approach by the major Pub Co's and some of the others following
the results of your last inquiry.
A certain amount of window dressing has taken
place, where reductions in rent have taken place and discounts
given, but only for specific limited periods in exchange for a
Full Tie to all products, where no time limit has been declared
the Pub Co has refused to grant a Deed of Variation, which means
that in the event of a sale the normal lease conditions will be
enforced, so effectively nothing has changed apart from the Full
In addition the lessee is often bound to a confidentiality
agreement any comments and the agreement is breached and the existing
lease conditions enforced again.
I was invited to the first discussion with the
RICS on their investigation into the abuses and misuse of their
Valuation System, I took Neil Robertson, CEO of the BII, with
me and between us we raised the following points.
Firstly the term Competent Operator which relates
to all rental valuations. We quoted the same classification of
three years profitable trading with BII Advanced qualifications
or five years profitable trading with minimal qualifications,
that I quoted in my submission to your Committee, which has been
defined as equating to full membership of the BII.
The training by the majority of Pub Cos consists
of the basic one day course or at the maximum of ten days in exceptional
circumstances, in no way does it meet the Criteria of Competent
Operator. The BII are now committed to ensuring that far more
information is made available to newcomers before commencing work
in the industry and getting Pub Cos to provide extended training
whilst the lessees are running their pubs. The Pub Cos are not
happy about the additional cost, but it should be part of any
business development in a reputable company.
Secondly business is not infinite, but finite
any rental assessment made assumes that there is an immediate
growth, this is pure fantasy and opportunism to raise a rent,
any growth is at the expense of a neighboring business or businesses
and they should actually have a corresponding rent reduction.
The use of Cherry Picking Comparables without
consideration of the existing turnover, which is the pubs exact
market share at the time, results in ratcheting rents higher and
higher with no consideration of viability.
The failure to include any share of the Pub
Co discount received from the suppliers into the divisible profit
distorts the rental level.
The discount achieved varies roughly between
61p-87p per pint at this moment of time depending on the suppliers.
The non brewers purely operate a paper exercise, the suppliers
deal with all the individual deliveries.
The Pub Co gives the lessee fourteen days credit
or insist on cash with order, yet receives in excess of three
months credit in some cases, this is purely a ploy to generate
cash flow and credit and could be disastrous if a major company
fails, bringing down a vast number of other companies.
With the preliminary findings of the RICS being
published there has been a lot of activity with Pub Cos trying
to force through a vast number of rent increases, it would appear,
to pre-empt any changes in the valuation system in the short term,
any decision by the RICS may well come into effect at the next
I have had several phone calls and a number
of emails. The levels of rent increase are around 20%, yet business
has been static or falling over the last two years.
One lady last week, the company refused to budge
on 18.5%, yet they had a dozens of closed, boarded up pubs, going
for next to nothing.
This lady's business had fallen with the effect
of the Smoking Legislation and was now static, being a community
There have been some very inventive attempts
by one of your companies that appeared at the inquiry to claim
that the divisible profit split should be on the investment level
between the company and the lessee, which is outrageous.
Another issue has come to light the valuers
refuse to allow a basic wage for the lessee and his wife in the
so called 50/50 divisible split, which effectively means
that the Pub Co is entitled to half of a lessees and his wife's
very basic earnings, yet they fail to factor in the discounts
that they get for a paper transaction.
The 50/50 divisible split has been thrown
into confusion following the Brooker Case and certain information
regarding the original divisible split being described as 30-35%
to the landlord when these guidelines first came into being, prior
to the Pub Cos emergence.
If the Pub Cos had really made any progress
in taking note of the BEC and RICS comments, then we would not
be putting this information together.
The abuses of the individual companies Codes
of Practice accredited to the BII continue and the people seeking
my advice or ringing the BII Advice Line does not stop.
The BII will pursue all of these abuses and
will in future be publishing summary outcomes.
Nothing will be done in the long term without
effective legislation, these companies view themselves to be to
big to have to be bound by voluntary codes, because they are not
legally enforceable, the RICS Valuation Guidelines could be considered
by certain companies to be not legally enforceable, unless stated
clearly in the leases.
My views are not, of course, the BII's formal
position but a significant number of members concur with my comments.
I trust that these comments will be of assistance
in your Committee's deliberations.
Many thanks to the Committee for their hard
work, it is appreciated.
4 November 2009