Pub tenants 'set for better rent deals'

Pub tenants could expect a better deal at rent review under new draft guidance for surveyors, it has been claimed.

Long-awaited draft guidance from the Royal Institution of Chartered Surveyors (RICS) offers some hope to tenants who feel they pay too much rent, although concerns have been raised about some sections.

The new document, drafted by a cross-industry panel, says there is nothing in the guidance that should result in rents in one sector "being set at an advantage or disadvantage to another".

This has been interpreted as supporting the principle that tied tenants should be no worse off than those free of tie.

And the draft guidance says tenants should not suffer an increase in rent directly as a result of carrying out improvements at the pub.

One source close to RICS said the guidance is aimed more specifically at pubs than the previous document, and would not be easy to "abuse or misinterpret" by valuers during rent reviews.

However, there are concerns that pubcos could get to rentalise the services they provide to tenants.

For the first time, the guidance says valuers will need to consider "reflecting" the perceived countervailing benefits, known as Special Commercial or Financial Advantage (SCORFA), of being a tied tenant.

This includes areas such as management and marketing support from the pubco, accountancy and ratings services and gaming machine management.

"It's like giving with one hand and taking with another," said another well-placed source.

The source suggested the EU may have concerns about the clause. This is because pubcos highlighted the countervailing benefits when they lobbied the EU to renew the Block Exemptions that permit the tie. If the benefits are rentalised, they then cease to be countervailing, the source argues, and may nullify the exemption.

Meanwhile, trade consultant Phil Dixon — who labelled the guidance "woolly" — said it would not stop landlords "moving the goalposts" at review by, for example, re-defining the fair maintainable trade to increase rent.

Critics also say it's unlikely to benefit those on the new pubco agreements that include annual RPI rent increases as an alternative to cyclical rent reviews — effectively side-stepping the RICS guidance.

Tenanted pub operators have committed to abide by the guidance in their updated codes of practice.

The draft document has been put out to consultation with the trade until 20 October.