The best way to tie the licensed trade knot

By Graham Allman

- Last updated on GMT

Related tags: Lease, Leasehold estate, Bdm

The best way to tie the licensed trade knot
As in any sound marriage, the relationship between host and BDM has to be built on trust. Graham Allman, MD at GA Select, provides the matrimonial guidance

From my experience entering the trade via the leasehold route can be similar to that other rite of passage “marriage”.

The first meeting and flirtatious interest is followed by the early courtship period when all is a bed of roses and high expectations from both sides. The only person who has doubts about the relationship is probably the mother in law, aka the pubco bemoaners.

The marriage takes place (contracts to lease are signed) and all is well for a period. Then one party considers the other party to be taking advantage which leads to “buying out”, well that’s one way to put it, followed by a breakdown of the relationship, then a messy divorce.

What you never hear about are those individuals who enjoy many years in happy relationships, living in harmony with each other, making a good living out of their leased business and enjoying the high quality of life that goes with it.

'Talk things through'

For those who have just taken on a pub lease or are about to, my advice is, like in any good marriage, talk things through — ie, maintain good communications and don’t bury your head in the sand. Get grievances out into the open and amicably settled. Like with any good relationship, honesty is the best policy. As with a marriage breakdown, the only winners tend to be those in the legal profession!

Your goal and mission is to provide a good secure living for your marital partner and family based on a long term relationship between you and your partner (pubco BDM) which should be one of the highest integrity and have trust on both sides. However, the relationship has to be worked upon.

'Show respect'

One of your goals will be smooth negotiations leading up to a rent review (a bit like a wedding anniversary) or around a tricky supply issue. I’m not saying send your BDM a bouquet of flowers but you are more likely to get a satisfactory result if respect is shown from both sides and your life will be less stressful and your business more profitable.

Running a good pubco tied business can be extremely rewarding for both parties and a lot of fun but it does take two.

You can make immense profit from selling on your leased business at a premium, but that premium will be determined by your levels of profits and the desirability of your busi-ness, which again is re-flected and influenced by the relationship that you have with your BDM.

Remember, like a high profile divorce, you only hear about it when things go irrevocably  wrong.

Related topics: Property law

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"What problem?"

Posted by david,

Mr Nason; every single one of your presumptions is incorrect - which serve only to indicate how easily you can be manipulated. As the agent’s ‘associate’ (as profiled on the GA-Select website) you’re hardly likely to have an independent or credible view on the matter.

ANY agent inducing prospective purchasers to pay substantial NON-REFUNDABLE deposits would attract my criticism, but to my knowledge the practice is confined to just one agent – one where the financial status is perilous. Co-incidence? I can’t imagine that in advertising this scheme on their website and taking these substantial NON-REFUNDABLE deposits the directors of GA-Select are unaware of the company’s financial status.

You ask ‘what problem do I have with it?’ Well, a pertinent answer is to ask what’s wrong with the prospective purchaser being given chance to consult his solicitor and take advice - which will always be NOT to pay a substantial NON-REFUNDABLE deposit unless it is integral to the exchange of contracts.

I would hope you and your associate understand the agent is meant always to act in the best interests of his vendor client. It is not in the vendor client’s best interest to be ‘locked-out’ from being able to accept improved offers. And there is no incentive for the agent to work proactively to hold a sale together when he is remunerated handsomely for a sale which doesn’t take place.

One final thought; if this NON-REFUNDABLE deposit scheme is so beneficial and attractive to both vendors and purchasers, it rather begs the question why the reputable and successful commercial agents across the piece do not employ it, and why the accounts of the lone agent employing the scheme are such a sorry sight? Hardly likely to generate green-eyed envy from anyone!

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david...10 points. Opposition....lets wait and see

Posted by Anti-Pub Self Regulation,

David - your last post is extremely logical to me. I am looking forward to reading OO's rebuttal of what you posted.

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Why the need for a unique approach?

Posted by david,

Mr Feal-Martinez. It is the agent's job to assess you as a bona fide purchaser, advise the vendor accordingly, and ensure the respective solicitors are briefed as to a reasonable timescale in which exchange of contracts can be achieved to the satisfaction of both parties. It does NOT need you as a prospective purchaser to lodge a NON-REFUNDABLE deposit to achieve that.

What matters here is whether prospective purchasers are at risk of losing substantial money in the form of NON-REFUNDABLE deposits before a solicitor has the opportunity to advise against it. This is absolutely NOT accepted practice amongst commercial property sales agents. It is thoroughly disingenuous to suggest otherwise or to invent reasons as to why any prospective purchaser should commit to such financial risk in order to 'buy time' to undertake all pre-contract enquiries and legalities.

These NON-REFUNDABLE deposits are not trivial amounts but are several thousands of pounds. The arrangement is hopelessly flawed for both the seller and prospective buyer in any event – but especially so when an agent’s financial status appears to be so parlous. It raises the question of whether it is even lawful to administer such an arrangement whereby the agent is given a significant portion of the monies needed to complete the transaction but, at any time prior to the completion date, the agent might have ceased trading.

It seems to be far more to do with propping up the agent’s cash-flow than anything else. If a sale falls through (possibly through no fault whatsoever of the intending purchaser) then the agent still gets paid - without achieving a sale for his vendor client! There’s nothing to prevent the process being repeated ad infinitum as long as alternative interest is secured – even if the sale again breaks down, and even for the same reason. Incredible! A disappointed seller to the left with no buyer, a disappointed purchaser to the right with no pub - and the agent satisfying neither buyer nor seller cleans up! This is why under English law, normal accepted commercial practice is for a substantial NON-REFUNDABLE deposit to be paid only through solicitors, and only after all legal processes and due diligence have been completed to the satisfaction of both buyer and seller.

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