Restrictive covenants rarely used, claim property agents

By Ellie Bothwell

- Last updated on GMT

Related tags Restrictive covenants Restrictive covenant Contract law

Fleurets director Simon Hall: Last year 'restrictive covenants were used in little more than a handful of cases'
Fleurets director Simon Hall: Last year 'restrictive covenants were used in little more than a handful of cases'
Pub property agents have defended the practices of large pub companies and claimed that restrictive covenants are rarely used, after the Local Government Association (LGA) last week called for a ban on the measure, which forces pubs to change use after sale.

The LGA said that restrictive covenants are a “legal loophole” that force hundreds of community pubs to close each year, stifling competition and undermining the Government’s own ‘Right to Bid’ policy.

It cited recent figures from the Office of Fair Trading, which show that almost 600 pubs owned by large pub companies were permanently lost in just five years through being sold with restrictive covenants.

Rarely used

However, Kevin Marsh, head of licensed leisure at Savills, said pub companies have been conscious of the criticism in respect of their use, and this has had an effect on selling policies.

“In my experience, very few pubcos are asking for restrictive covenants. Certainly we have not been asked to impose them on buyers by Enterprise or Punch,” he said.

“It may be true to say that, in areas where one pub owner has a number of pubs, they would prefer to sell to a buyer who is planning to redevelop. However, I have not seen recently an occasion where redevelopment has been forced.”

Understand the damage

Mike Hughes, regional branch manager at Sidney Phillips, said restrictive covenants “are not an issue for us” and their clients “understand the damage they can do to the sale of a property”.

Fleurets director Simon Hall also said restrictive covenants are “very rarely used and haven’t been for several years”.

“At Fleurets last year we sold several hundred pubs and 44% of them were sold for non-pub use.

“Restrictive covenants were used in little more than a handful of cases,” he said.

Market forces

However, Stephen Taylor, managing director at Guy Simmonds, said he supported the call for a restrictive covenants ban.

“One could question why a restrictive covenant should have ever been allowed to be applied by a property owner. Without a covenant, market forces will always dictate anyway,” he said.

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