Fleurets warns of 'lack of transparency' in rental market

By Ruth Williams, M&C Report

- Last updated on GMT

Related tags: Renting

'A new letting may look like a very soft rent but the tenant may have committed to undertake major investment'
'A new letting may look like a very soft rent but the tenant may have committed to undertake major investment'
New lettings can often lack transparency and are not representative of the “true market” Fleurets, the leisure property specialist has warned lessees.

In its annual rent review survey the group urges businesses to consider the terms of a new letting or rental review settlement and outlined a number of concerns for the people taking properties in the sector.

“A tied lease may look like having a high rent when compared to a FOT lease down the road. However, incumbent in the deal is a trade discount and marketing and business support, some of which is unquantifiable,” the company said.

“A new letting may look like a very soft rent. However, the tenant may have committed to undertake major investment at its own expense thus saving the landlord from spending its own money.”

The company said it has seen many new lettings lacking a degree of transparency where the tenant’s enjoy a reverse premium with rent-free periods or landlords contributing to fit-out costs in exchange for paying a higher rent.

In the tied pub sector the selling off of sites by pubcos over the last five years has decreased which has resulted in a slowdown in supply of freeholds for sale.

“With an improving economy it is anticipated that there will be an increase in demand for people wanting to enter the pub market via the leasehold route. This may have the longer term impact of pushing rents upwards or increasing premiums. Though in reality, in the short term this demand is likely to take up the short fall in the number of pubs that are currently available to rent.”

Free of tie market

While in the free of tie pub market, it has seen higher rents than for tied pubs reflecting better quality outlets and the enhanced buying power of lessees.

“Most free of tie landlords are property investors and have a hands-off approach to dealing with the tenants. Tenants hold the premises on commercial leases and are normally required to take full responsibility for the repairs of the building.

“Landlords and their surveyors also have to be mindful of the difficulty in dealing with rent reviews where it is normally the case that no trading or barrelage information is available. The assessment of turnover and profit is therefore more subjective. It is thus more important to have access to comparable evidence.”

Late-night levy

The survey shows nightclubs have been impacted by the threat of the late-night levy and the introduction of cumulative impact zones, which if introduced are likely to result in increased overheads and reduced profitability resulting in “an inevitable depressing effect upon rental values”.

Overall the report shows an improvement in economic conditions across the country that is, fuelled by the London market for all leisure sectors. “Once people start to have more disposable income, trading performances should start to improve. With improved market confidence and trading performance, rental values will improve.”

Related topics: Property law

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7 comments

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Query solved

Posted by david,

It's OK, TWF. I've worked out what a negative net worth means. The company I'm looking at has tangible assets of £1,160 (!) cash at bank of £3,677 and trade debtors of £6,685 = assets of £11,522. Creditors are £124,023 leaving an excess of liabilities over assets of £112,501.

Cash is 3% of creditors. Looks like a lot of suppliers are going to be disappointed. These are figures from companies house and in the public domain. More details if you need them.

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There is always a price

Posted by Freeholder,

to be bullied, lied to, treated like dirt, exploited, conned, defrauded.

So pleased I got out and managed to raise the funds to go it alone.

I'm so lonely, really miss my old Business Distruction Manager.

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Accounts

Posted by david,

Without you naming the company, that's hardly proof of anything is it?

But on the question of real accounts, what does NEGATIVE net worth mean? I'm looking at a set of accounts showing a net worth of £112,501 negative.

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