tenancy & leasing
Pub lease market is holding up – agent
LIKE all commercial property, the value of pub leases has been influenced negatively by the economic downturn. But there is still a good level of demand among potential buyers for leased properties anchored on viable business plans. Such is the market assessment of Keith McBain, associate director of Jones Lang LaSalle, whose career in commercial property has seen him market leases for Belhaven, Punch Taverns and Scottish & Newcastle Pub Enterprises. “As with most interests in commercial property, pricing on leases has come under very significant downward pressure,” he told SLTN.
“What has not changed is the basis for an attractive and marketable lease which does not have onerous or unusual provisions, like automatic uplifts in rent upon assignation or subletting.
“Although there remains some nervousness around leasehold interests, we continue to receive enquiries from occupiers about leasing rather than purchasing. “In the past, we successfully sold a number of tied and non- tied leases, with one particular tied lease changing hands for a very healthy six-figure premium. “The business in question did have a very successful and busy food operation underpinned by a good trading location and operator.”
One factor which is potentially making it more challenging to
Keith McBain: good leases in demand.
market leases is the volume of freehold properties which are on the market, thanks to the general slowing of the economy. However, McBain said this is
offset to some degree by the fact leases are more realistic targets for prospective buyers due to the ongoing difficulty of obtaining bank finance. “Good properties and businesses in good locations still attract new proprietors,” he said.
“The difference is that, in
prevailing market conditions, there is a plentiful supply of heritable (freehold) licensed property available on the open market, with the expectation that there will be more to come. “This is often introduced by potential buyers as part of negotiations on property we are marketing. “There is no point in trying to deny it, and instead we emphasise the strength of each individual property, whether leasehold or freehold. “Where leasing is benefiting is
from operators’ current ability to raise finds, aligning their budget for acquiring a business closer to leasehold than freehold.”
SMEs told to test the system
BUSINESS owners can now seek a second opinion from their bank if their initial approach for a loan has been refused. The new appeal process was announced by the British Bankers’ Association earlier this month and gives recourse for operators who feel they’ve been unfairly refused bank lending. It comes after a report from the industry-led Business Finance Taskforce last year, which acknowledged the difficulties small and medium-sized businesses are encountering in accessing finance.
16 - SLTN - April 28, 2011
Lobby group the Forum of Private Business said the move had the potential to restore some trust in banks among SMEs. It urged business owners to use the appeal system even if they feel they will be denied again as it would flag up information on its effectiveness. The new appeals process follows the launch of the Better Business Finance Campaign, which aims to provide faster approval for bank lending, and a new lending code that banks say they will follow when dealing with small businesses.
New code i well for pub
Leaseholders getting results from new rules governing pubco conduct, BII chief executive Neil Robertson tells Scott Wright
HE body tasked with ensuring the UK’s major pubcos stick to the terms of their new code of conduct is convinced the new agreement is working well for pubs.
T The code, which underpins the
relationship between tenants and pubcos, was updated last year after MPs on the Business, Innovation and Skills Committee were highly critical of the way the major leasing firms treated their leaseholders. The revamped code promises more transparency in leasehold agreements and new mechanisms to resolve rental disputes.
It was launched in October, with BII Benchmarking and Accreditation Services (BIIAS) given the job of ensuring its correct enforcement, and so far companies representing 85.9% of the UK’s tenanted/leased estate are said to have had their codes approved. Although the bulk of the sector has signed up to the new code, problems still persist between tenants and landlords.
We have relatively few breaches of the new code, which shows companies are doing what they said they would.
In a report published last month, BIIAS confirmed it received more than 20 “serious complaints that are relevant to the codes of practice” to date. Four were said to relate to the ‘old’ code (and therefore not covered by the revamped agreement); six were investigated and recorded as ‘no breach’ and nine remain under active review. Only one complaint was upheld. According to BII chief executive Neil Robertson, the figures demonstrate the new code and the mechanism for tenants to report alleged breaches have been positive developments for the operators of leased pubs. He urged tenants to make use of the new options available to them. “We’re running this service in the
interest of the tenants, so that they can have some comeback when they’ve
exhausted their company complaints procedures,” he said. “If they’re in any doubt, they should write in. “It’s our job to make sure the companies do what they say they’re going to do.”
Robertson said there is evidence the changes to the code have brought positive changes to the sector already, and promised every complaint is examined in detail by the BIIAS. “What we’re starting to see is tenants starting to get used to the idea that they have someone else to complain to, and starting to use it,” he told SLTN. “In practice, we have relatively few
breaches under the new code, which shows that the companies are doing what they said they would do. “Those who disagree with that need to write in and tell us with evidence. “All complaints will be treated in confidence right up until the point we establish that there’s something valid to talk about. “We don’t just say to Enterprise [Inns] that we have all these guys who have something to complain about. “We research each one, and if there’s a case to answer we then, with the tenant’s consent, get involved with the company on it.”
Robertson highlighted other positive developments for tenants which he said had spun out from the BIS Committee’s investigations. These include a new system for
resolving rental disputes (Pubs Independent Rent Review Scheme or PIRRS) and a now mandatory course for would-be tenants (Pre- entry Awareness Training or PEAT), described by Robertson as the “£20 course than can save you £20,000”. “It explains to new entrants what they need to understand,” he said. “No one can get a substantive tenancy or lease now without having done it.”
The BII boss also pointed to the early impact made by a new mediation service, which can be used if a relationship between tenant and landlord becomes especially fractious. “We’ve done three in the last two months between tenants and landlords to resolve situations, usually for things outwith the code, and we’ve had positive outcomes,” he explained.
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