Examination of Witness (Question Numbers
40-54)
RICS
8 DECEMBER 2009
Q40 Mr Clapham: You referred earlier
to enforceability. Do you expect the RICS code to be enforceable
on anybody who values the rent aspect of a public house? For example,
pub companies have development managers. Are we likely to see
the RICS code being enforceable on them?
Mr Rusholme: The strict answer
is that we can develop only a code by which our members abide.
We would certainly call for everyone else in the industry to use
that code and abide by it.
Q41 Mr Clapham: What kind of response
have you had from the industry? Does the industry see the importance
of a code that is enforceable across it and therefore are you
encouraged?
Mr Rusholme: I am optimistic and
encouraged that that can happen.
Q42 Mr Clapham: Where there is a
code that is not adhered to normally there are sanctions. What
kind of sanctions do you envisage being imposed if people deviate
from the code or refuse to accept it?
Mr Rusholme: There are a great
many sanctions within the armoury of the RICS as a professional
organisation from arm's length regulation to a full range of disciplinary
powers.
Q43 Mr Clapham: Has it been made
plain to the pubcos that this is something you are looking at
and there will be sanctions if people do not adhere to the codes?
Mr Rusholme: The sanctions will
apply to chartered surveyors operating in this area.
Q44 Chairman: But not to businesses?
Mr Rusholme: Unfortunately, I
do not have the power to make that happen.
Q45 Mr Hoyle: You have summed it
up, have you not? You can put some meat on the bone only as far
as your own organisation is concerned and that is the weakness
of it. We come back to enforceability. The truth of the matter
is that you can enforce it only against chartered surveyors and
without that it is a toothless tiger. Are you not asking that
this be mandatory across the whole industry?
Mr Rusholme: There is great merit
in taking that route if others can make that happen.
Q46 Mr Hoyle: The only way it can
make a difference and make things happen is if everybody signs
up to it.
Mr Rusholme: Certainly, the stick
of making that happen is an attractive one and perhaps the carrot
is to come up with well thought-out advice in the code which has
the industry behind it. If we can carry those involved along with
us in preparing the code there must be a greater chance that people
will stick to it once it is published.
Q47 Mr Hoyle: Who do you believe
will be the fly in the ointment in coming up with a mandatory
code?
Mr Rusholme: I would not single
out any particular organisation.
Q48 Mr Hoyle: Is it your belief that
this morning everybody will be happy; it will all be done and
dusted and they will be with you all the way and will sign up
to it?
Mr Rusholme: If we can carry everyone
along in the process there is a good chance of people adhering
to it.
Q49 Mr Hoyle: I think they are in
danger of falling out of bed, waking up and facing reality. Is
the truth of the matter that there are certain people from whom
we will be hearing evidence who will not be quite as enthusiastic
as yourself?
Mr Rusholme: I agree that it must
be a combination of the two. If there are some mandatory ways
to make this happen we would very much welcome it, as we would
any support in achieving that.
Mr Hoyle: That is very fair of you; at
least you are honest enough to say that a mandatory code is the
way forward in reaching a solution. Let us hope everybody listens
to you.
Q50 Mr Wright: If we turn back to
the question of valuation, is there any element of it that takes
into account the wage or salary of the publican?
Mr Rusholme: As I understand the
profits method at the moment there is no specific allowance for
the salary of the lessee himself. You make allowances for those
you employ. Where that is reflected in the calculation is in the
split of the balance that is apportioned at the end of the process.
There is no one line in the calculation that deals with a wage
to the lessee.
Q51 Mr Wright: Do you not think that
should be included? We have heard all sorts of stories from various
publicans who have significant incomes but the salaries and wages
they draw are not commensurate with sales of £400,000 or
£500,000 and salaries of perhaps £15,000 or £16,000.
Do you not think there should be a standard within the valuation
which says one should not go below a certain wage level?
Mr Rusholme: I agree that it is
a very important element and it would be ridiculous to set rents
that did not make an allowance in the split of profit for making
a living or profit out of the business. As to where it is reflected
in the calculation is something on which we would like the new
guidance to focus specifically. At the moment it is to do with
how one apportions the balance of profit at the end. Of course
there must be a commonsense check that it provides a decent living
and return to anyone operating the business.
Q52 Mr Wright: The figures indicate
that 65% receive less than £15,000 a year. For the hours
put in that does not appear to be commensurate with an attractive
option for those who want to come into the industry.
Mr Rusholme: It is only right
that our rent guidance reflects a fair reward at the end of the
day for the operator. It comes back to what people are prepared
to pay in the market. If potential lessees are making high bids
for rents in the first place it is very difficult to argue that
rent levels should not follow those levels. A lot of things are
changing now; for very obvious reasons rents are falling and rents
at review should also fall. You also have to counterbalance that
in the equation.
Q53 Chairman: Those are all the questions
we want to ask you. Is there anything you particularly want to
say that we have not covered?
Mr Rusholme: I do not believe
so.
Q54 Chairman: The message of this
Committee is: stick to your guns. We are encouraged by the progress
RICS is making but it needs to stick to that and not slip back.
Mr Rusholme: That is recognised.
Chairman: Thank you very much.
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