Licensing reform to bring rising pub prices
Prices of existing pubs could skyrocket if government proposals to give local authorities control of licensing are given the thumbs up in Parliament.
The reform will see local authorities take control of licensing in 2004. Each pub will be granted a premises licence and will have to fill out an operating plan detailing how the premises will be used and run.
The concern is that decisions on granting licences will become politically biased, costly and time-consuming under local authority control. This could mean that existing properties could become more valuable because it will be harder to obtain a licence for new premises.
David Egan, associate at lawyers Eversheds, told delegates at a property conference run by licensed property agent Fleurets that he believes the costs of existing properties will go up under the new proposals.
"It will push up the price of new premises as people will know that it will take an extra six months to get a licence.
"Decisions will become political and all types of deals will be going on behind closed doors," he said.
He also said the industry would be faced with increased costs, as the extra bureaucracy would in turn push up the costs attached to buying a property.
He also questioned the objectivity of local authorities claiming that many have interests in freehold public houses, which may lead to a conflict of interest. For example, Bradford City Council owns the freehold of The Woolpack Inn, the pub that is famous for being in the TV soap Emmerdale.
Paul Newby, director of Fleurets in Birmingham, agrees that the new legislation will lead to an increase in bureaucracy but thinks this could have a negative impact on the property values. He said: "Increased regulation may reduce turnover levels and hence rental and capital values."
He also argues that licensing reform will blur the distinctions between pub, bar and restaurants which will lead to a new, hybrid market emerging where units with a bar, restaurant and nightclub under one roof will become more common.
But Colin Wellstead, director of Christie & Co, believes the biggest influence on property will be the extra value that longer opening hours could bring.
He said: "The biggest impact is where it improves the level of business, profitability and value."
He thinks that conflicts of interest are unlikely to happen in local authorities as both the estates and licensing departments will act as separate entities.
While Andrew Watt, head of licensed property at Colliers CRE, says any impact will be in the medium to long term. He said: "The key factors will be increased competition and additional operating costs against the potential volume of trade."
Colliers CRE's predictions on the impact of licensing reform
- City centre bars
Likely to be winners in the reform. Longer trading hours will be the norm and they will be able to compete with nightclubs. But the distinction between nightclub and bars is already a grey area.
There are already staggered opening hours in cities across the UK, therefore in most major towns and cities the situation may not be substantially different.
Demand will dictate opening hours and some operators may find it uneconomical to open too late into the night.
City centre clubs
On the face of it, potential losers in the process as the monopoly position of post-drinking after 11pm will be lost.
But most city centre operators have already learnt to live with the competition from late-night bars by creating a more flexible pattern of operation with entertainment or dancing.
Urban/village pubs
The new licensing legislation is likely to require an "operation statement" to be produced by each licensed premises, which will be submitted to the local authority. Concern has been raised about the ability of these pubs to move to longer licensing hours due to the potential threat of local objectors.
