RICS to examine rent calculation

by Ewan Turney

The co-founder of the Freedom for Pubs Association (FFPA) is hopeful that significant progress can now be made in calculating fairer rents after the arrival of a new chairman at the Royal Institution of Chartered Surveyors (RICS).

Accountant Brian Jacobs believes the appointment of Steve Williams at the helm of RICS could be the breakthrough the association has been looking for since the Trade & Industry Select Committee (TISC) inquiry. Williams has asked Jacobs to submit suggestions as to how the rent review and valuation process could be made more transparent.

Jacobs is adamant that the current RICS guidance for valuers is 'fundamentally flawed as it does not follow the TISC recommendation that tied tenants should be financially no worse off than free-of-tie tenants.

The guidance dates back prior to the TISC inquiry, but the institution is in the process of revising it to include specific clauses on the valuation of tied leases.

'The TISC recommendations were a coup, but the sad part is that RICS is working in a different direction, said Jacobs. 'The problem is it never recognises the wet rent when calculating the dry rent. The new president has a strong view that everything should be above board and there should be ethical practice. He wants everything professionally done and completely transparent.

Jacobs will submit his suggestions to the valuation panel by 1 September. They will include plans for a detailed profit assessment to be undertaken by landlord and tenant, which will assist in providing clear and concise data for rent calculation. This detail would then form an addendum to the lease and appear on an RICS register to allow comparisons between similar venues.

The accountant claimed that the average rent is overcharged by £10,000 and that error is not only lining the pockets of pubcos, but exaggerating share prices and forcing consumers to pay more for a pint.

'The whole thing rests on a basic, prime error that no-one wants to acknowledge because it would cause massive problems, Jacobs said. 'It would have serious consequences.