Will the pub industry code work? I won’t hold my breath

By Gerry Price

- Last updated on GMT

Related tags: Luke johnson, Renting

Price: "Many of the tenant/pubco relationships are the nearest thing we have in this modern age to the feudal system of centuries ago"
Price: "Many of the tenant/pubco relationships are the nearest thing we have in this modern age to the feudal system of centuries ago"
Having bought the freehold of our property from Enterprise Inns last October, we have had to adjust to a slightly different scenario in our business. Times remain very challenging but brewers are so supportive of freeholders it makes life seem better.

However, I remain very much in touch with the tenanted and leased sector, with friends who are tenants and others who wish to become them.

Industry investor Luke Johnson warns of overestimating the value of freeholds, and that leaseholds could be a better way forward for operators. However, as
an experienced and very competent businessman, he has the benefit of good legal advice and a strong covenant in his negotiations with property owners.

The ones who still have to be careful are those individuals who have a bit of money to use for a tenanted or leasehold pub but not the experience of dealing with negotiations at this level. There is a danger that they sign a financially one-sided agreement for the property and then suffer the same issues with energy suppliers, banks etc and end up with an unsustainable cost base from which to start to try to earn a living.

The first issue that causes the most grief is rent and its negotiations. You can argue about fair maintainable trade and divisible balances but the true value is what a willing buyer is prepared to pay.

Here the large pubcos take full advantage of prospective tenants’ naivety by giving a tenancy at will on a low rent, letting the tenant spend serious money while in that situation and then having them over the proverbial barrel in the talks that follow. The tenant is emotionally tied to the property and is in a weak bargaining position in ensuing negotiations.

I would wager a beer or two that Luke Johnson didn’t have this scenario in mind when he said that leases could be better value than freeholds.

So will this situation be resolved by the consultation on the statutory code of conduct  into the pubco/tenant relationship? There should be no harm in a full discussion about individuals’ experiences in their relationship with the pub property owners but don’t be under any illusion about the vested interests of surveyors, area managers, property agents and consultants in the current system.

Don’t expect existing tenants to freely discuss their situation for fear of reprisals. Will small brewers willingly speak their mind about firms with which they have a working relationship? Many of the tenant/pubco relationships are the nearest thing we have in this modern age to the feudal system of centuries ago.

Will regulation change all that? I’m not holding my breath.

Related topics: Legislation

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