Martin slams 'artificial' pub rents
JD Wetherspoon boss Tim Martin has called for action to make the pub property market more transparent and counter the "huge" potential for "artificially high" rents on the high street.
In a strongly-worded article in this week's Morning Advertiser, he alleges that these high rents played a part in the collapse of several pub and restaurant companies in recent years.
His attack comes after Wetherspoon successfully sued its former property agent Van de Berg (VdB), which was found to have perpetrated a fraud by helping third parties profit at JDW's expense.
"In my opinion, much of the comparable evidence used in pub and restaurant lettings needs to be treated with enormous scepticism, since it has been tainted by dishonesty and fraud, as the VdB case proves," said Martin.
The Wetherspoon chairman wants all agents who are acting as principals to disclose their interests and for a publicly visible property register to be established for agents.
He said the level of disclosure and compliance currently required in the property market is "derisory in comparison to the stock market".
Martin said the fraudulent diversion of freeholds to third parties had "huge" potential to lead to artificially high rents.
"This is because even one high-profile letting can be used as a comparable for a considerable number of other properties in similar locations, sometimes in other towns and cities."
He gave the example of a pub known as "Canterbury 2" from the Van de Berg trial. It was bought by a third party for £500,000 then let to Wetherspoon for the "extremely high" rent of £75,000 per year.
"This rent in a high-profile location in a prosperous city would undoubtedly have been used as evidence for other rent reviews in Canterbury and possibly for reviews in other towns and cities in the region.
"These high-profile lettings to a relatively high-profile tenant will, in my opinion, have had a profound and distorting effect on property prices in the sector."
Martin linked "the role of fraud in the property industry" with the number of operators that have gone into administration or run into financial difficulties.
And he said Wetherspoon "has refused point blank for a number of years to agree to open-market rent reviews, since we do not trust or believe the integrity of the comparable rental evidence used in the market".
"All the main players have had their fingers burnt in the so-called high-street pub sector, where leasehold shops and banks have been converted into pubs.
"None will now touch these leases with a barge pole, because of the toxic effect of rent reviews in the past 15 years."
• Reads the full article: The high price of dishonest property deals.
