Contract vigilance is order of the day

By Simon Clarke

- Last updated on GMT

Related tags: Rent review, Lease, Enterprise

Simon Clarke: "All tenants, regardless of their pub owning company, need to be re-reading and contemplating their contracts"
Simon Clarke: "All tenants, regardless of their pub owning company, need to be re-reading and contemplating their contracts"
All tenants need to make sure they read and re-read their contracts, to ensure their company is doing right by them, says Simon Clarke.

We fought a long and drawn out rent review at London’s Eagle Ale House and managed to secure a rent reduction from Enterprise Inns of about 36% (a drop of almost £20,000 a year).

While, the improvement was in part down to my fairly unique circumstances, being a publican and a director of Morgan and Clarke Chartered Surveyors, much hinged on the interpretation of the lease.

The exercise of repeatedly re-reading the lease highlighted a number of issues not linked to the rent review, one of which related to the deposit.

Deed of variation

The deposit, that should be held in accordance with the lease, is defined as one month’s rent equivalent (around £4,350 at the time). It follows that if the rent went up, or down, the deposit should be altered to maintain the same ratio.

In October 2013, we outlined to Enterprise that as the rent had gone down so too should the deposit. To our surprise, Enterprise almost immediately conceded that our understanding was correct and agreed to reimburse us a proportion of our deposit and issue a deed of variation recording the event.

Enterprise then forwarded us a bulky deed for us to sign and return. Despite no discussion on any other issues, this deed contained several additional amendments to our original lease, which we politely declined.

Weirdly, the deed contained an amendment to vary our lease allowing Enterprise to hold a deposit of three months rent not one. We queried the point, outlining that the purpose of the exercise was to get some deposit back, not pay more. Enterprise then confirmed they were holding three months
rent already, not one, as provided for in the lease.

'Rogue provisions'

As our rent had dropped to £34,000, the deposit should have been around £2,833. Enterprise sought to ‘mop up’ the excess deposit wrongly held by altering the lease terms in exchange for a £5,600 reimbursement where in fact they needed to reimburse over £11,000 to comply with the lease.

While it took almost four months to finally agree the wording of the deed of variation, shortened from nine pages to one, Enterprise did settle the entire amount outstanding.

The issues raised on variations is extremely poignant now, with the perception that Punch tenants’ deposits may be in jeopardy and with allegations of Enterprise seeking to apparently ‘slip in’ rogue provisions to deeds of variation.

All tenants, regardless of their pub owning company, need to be re-reading and contemplating their contracts and particularly any variation to it.

Simon Clarke is a licensee and member of the Fair Pint campaign

Related topics: Licensing law

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