Rent concessions are the industry's sticking plaster

- Last updated on GMT

Related tags: Landlord, Renting, Brewers

"A further review of the licensed trade is proposed from the Business, Innovation & Skills Committee (BISC, the successor to the Trade and...

"A further review of the licensed trade is proposed from the Business, Innovation & Skills Committee (BISC, the successor to the Trade and Industry Select Committee hearings in 2004) in 2011. Many believe that there may be some restrictions on numbers that brewers and pub companies can operate under tied arrangements. This could lead to further wholesale disposals - or possibly break-ups into smaller pubcos.

"Few believe the tie will go in its entirety, especially for the family brewers, but many are of the opinion that the recent changes do not go far enough in redressing the imbalance in the division of the profits of a public house between the landlord and the tenant. The offer of bigger discounts or free of tie options seem to be offset by the transfer of the benefit to the tenant back to the landlord in rent.

"Pubcos need to recruit good lessees but in the same way, good lessees want viable pubs, of which the brewers and pubcos still own the greatest share. As more and more pubs are sold and the percentage of freehouses increases, competition will be such that good lessees will be able to command a fairer "slice of the cake". Some pubcos have been offering tenants temporary concessions, but this is only a 'sticking plaster'. A longer term solution needs to be found.

"There are many who believe the financial model of the major pubcos has created a straight jacket that they cannot escape from. They need virtually all the income that the pubs were producing two years ago to service loan repayments and interest. They cannot afford to take less. With a generally declining pattern of beer consumption, discounts from brewers have been squeezed to the last drop. Very little of this has been passed on to the tenants to assist them through this recession.

"Instead, pubcos have been trying to link rent to Retail Price Index which has become a "double whammy" to the hard-pressed tenant.

"We can expect to see more tenants pressing for rent reductions now that codes of practice make it clear that they can be obtained and with cheaper ways of pursuing disputes via the Pubs Independent Rent Review Scheme."

• The author, a leading property specialist, asked to remain anonymous

Related topics: Professional Services & Utilities

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