Monthly Archives: October 2013

MORGAN & CLARKE NOVEMBER 2013 NEWSLETTER, THE LATEST LEGISLATION

The Law of Unintended Consequences

 

MORGAN & CLARKE  NOVEMBER 2013 NEWSLETTER NO. 26

Pigeon House, The Broadway,

Oakridge Lynch, Stroud, Glos. GL6 7NU

Email: info@morganandclarke.co.uk   Phone:  01285 719292

www.morganandclarke.co.uk

(Also at:  London, Cardiff, Matlock, Braunton, Lewes)

 

 

The Law of Unintended Consequences has always been something that is easily overlooked, not least because far-reaching legislation is introduced with an effective or operational date far-distant from the public announcement of the new regulations.  This was particularly noted in our recently reported unintended consequences of the Energy Act 2011 which, you may remember, has its implementation date on 1st April 2018.  Plenty of time to consider that, but also plenty of time to forget.  This month we have two pieces of legislation that have quietly nestled onto the statute book which, yet again, will not be implemented until either early or late 2014.  Full detail is set out below of the Taking Control of Goods Regulations 2013, which will be implemented on 6th April 2014 and the European Union Food Information for Consumers Regulations which come into force on 14th December 2014. 

 

We are more legally focused this month.  The final piece of legislation, which also has far-reaching consequences, is the Damages-Based Agreements’ Regulations 2013 which became operable on 1st April 2013.  The direct effect of these three pieces of legislation on our specialist world of licensed and leisure property is enormous and will affect the industry profoundly.

 

1. Taking Control of Goods Regulations 2013

As earlier stated, this piece of legislation will come into force on 6th April 2014 and is, effectively, the long-awaited second step of the Tribunals, Courts and Enforcement Act 2007 which was all very well except it has now taken six years to confirm the detail of the mechanism of Commercial Rent Arrears Recovery (see CRAR).  So you have a better understanding of what looks like a dusty piece of law, we can flag up that the Pubcos – some of whom have not yet caught on to these regulations – have every right to be deeply concerned over the effect of their clipped wings.  There will be a huge effect on the way landlords can seize tenants’ goods for the failure to pay rent.  This is known as Distress.

 

The regulations concerning Distress as they now stand, allow a Pubco to take action against non-payment of rent by instructing a Bailiff or Debt Collector to attend the pub and either collect the rent (not very likely), or seize goods and chattels which are held by them until the outstanding rent is paid.  This can either be by the straightforward physical removal of the inventory, or the taking of what is known as ‘walking possession’ by listing the inventory items and leaving them in-situ, the ownership then having been transferred.

 

Going way back – would you believe to 1689? under that legislation the Pubco was also entitled to sell the inventory to recover the rent arrears without even having to notify the licensee of an intention to exercise this action and without having to obtain a court order unless the tenant was insolvent.  The scene was set for the sudden appearance of the Bailiff (or more likely a Debt Collector), with absolutely no warning.  So, why the panic amongst the Pubcos?   Here’s why!

 

a) The Taking Control of Goods Regulations 2013, now set down a number of rules which need to be met before the Pubco can exercise CRAR. The CRAR, in order to operate, has to have a written tenancy or lease agreement which includes Tenancies at Will but excludes Tenancies on Sufferance, so a licence agreement will not be sufficient.

 

b) You cannot ‘contract out’ of CRAR by changing a new lease agreement, hopefully to circumvent the CRAR regulations.  An unlikely alternative is that any new lease could contain the agreement that the Pubco will not enforce CRAR – which is hardly likely.

 

c) CRAR will only apply to purely commercially-used premises where no part of the property is used for residential purposes.  This item is probably the ‘killer’ clause, as how many pubs are completely lock-up premises as against businesses with distinct and separate residential accommodation?   Not very many!

 

d) The second ‘killer’ clause is the obligation for the Pubco to notify the lessee at least seven clear days before using CRAR.  The regulations require that the amount of the ‘debt’ must be stated in the Notice, which might include other debts being treated as rent arrears (for example – Brulines’ fines) and also must specifically stipulate the clear amount of the rent owing.

 

e) The lessee can challenge the sum quoted with a set-off for “permitted deductions”.

 

f) The grouping up of other monies owed under the previously allowed heading of ‘Rent’ is not acceptable because now CRAR can only be used for the arrears of principal rent, associated VAT and interest.  Nothing else.  For example, CRAR will now not allow the Pubco to recover any service charges or any other items such as overdue insurance, contributions to repairing funds, unpaid inventory purchase sums, etc.   Rent and rent alone is the focus of CRAR.

 

g) The enforcement agent must then give the lessee at least another seven clear days’ notice of the date, time and place of sale after having seized goods.  If this notice is not given, the seized goods are then classified as being abandoned and must be returned to the lessee.

 

So what are the unintended consequences?  After 14th April 2014, the Pubco is unable to ambush the lessee in arrears by simply sending in the Bailiffs or Debt Collector.  There is a possibility, as recognised by Government, that in a practical sense, the giving of notice might allow the lessee the time to either dispose of or remove the inventory from the premises which, although not legal under the terms of the majority of leases, might still be seen as an act of desperation.  It is also possible that the new CRAR regulations might mean larger rent deposits and tougher leases.  However, the question still remains over how the Pubcos will cope with the legality of only being able to enforce CRAR on purely commercially-used premises where no part of the property is used for residential purposes.

 

2. Death of the Specials Board and the Menu Blackboard

Since the evolution of a blackboard and a piece of chalk, pubs have always utilised this medium, either for the announcement of daily specials or, in some cases, the permanent and only display of their full menu.  Well, from December 2014, all of this, sadly, is set to change.

 

The legislation is European-based and totally binding on the UK Government.  The regulations are contained in the European Union Food Information for Consumers Regulations (EUFIC), operable from 13th December 2014 and are specifically designed to inform and protect consumers with a focus on fourteen named major allergens and intolerance-causing substances.  This legislation requires publicans, restaurateurs, hoteliers and even café owners to provide allergen details on fresh and freshly prepared food, i.e. non pre-packed food.  Not alluded-to details, but full details.

 

The legislation requires that the allergen information should be easily visible and clearly legible for every dish offered.  Whilst it was hoped that the simple notification on a chalk blackboard or specials’ board stating “dishes may contain allergens and refer to our menu” would be OK, this will definitely not be sufficient for a specials’ board or a menu that is only set out on a blackboard.  It is quite likely that specials will, individually, have to carry the details of the dish contents.  Also a further scary factor is that there is an expectation that all staff taking food orders will be able to respond in detail to allergen and nutrition enquiries and be clearly able to give customers more information.   Some hope!

 

This European legislation also carries a maximum fine of, currently, £5,000 for non-observance.  The elephant-in-the-room is, of course, as to whether anyone will actually enforce this legislation and it is hoped that you won’t have any customers who have a severe allergenic attack or, in worst case scenario, have a serious illness or subsequently die as a direct result.

 

Unintended Consequences

Will public liability insurance, which is mandatory for all On-licensed premises, now have to change so that it encompasses specific compliance with the EUFIC and will On-licensed premises’ lessees be caught up in the catch-all (which is contained in every single lease) that they have to be compliant with all statutory and civic regulations?  Don’t blame the British Government for the further expansion of the nanny state Europe-wide.   All of this comes from Brussels.

 

3. Success-Related Fees.

New legislation was introduced on 1st April 2013 in the shape of the Damages-Based Agreements Regulations 2013 which allows an agreement between a lawyer and a client in which the client agrees to pay the lawyer a percentage of sums recovered in a claim.  This Agreement regulation would generally require the payment in the event that sums are recovered, either by settling the claim or after the trial.  Damage Based Agreements (DBAs) were not lawful for contentious work until 1st April 2013.

 

How does this benefit the litigant?  You don’t have to pay any legal fees, except expenses such as Expert’s fees, but not including any Barrister’s fees, until the sums with which you have to pay them are recovered.  The fee is always a simple, pre-agreed, percentage of the sums recovered.  There is, however, a sting in the tail for the giving of Expert Evidence and a recent case concerning David Morgan has highlighted the problem.

 

An Expert Witness cannot enter into a DBA himself as this would interfere with his independence from the party who has engaged his services.  If the Expert is unaware of the case funding arrangements between the Client and the Solicitor, there is no problem.  However, if those funding arrangements under a DBA have been confirmed to the Expert, then an attack on his independence under cross-examination could easily arise, with the specific intent of eating away at his impartiality and his duty to the Court rather than the Client.

 

Just such a situation arose recently where David Morgan had to stand down from an Independent Expert referral because of the openness of the Client reliance on a damage-based agreement with his legal team.

 

To ensure that this unfortunate situation does not re-occur, David’s Expert Statement of Truth now includes an extra final sentence as follows:-

 

            “I have no knowledge of the basis on which [the party] on whose behalf I have been           instructed has agreed or is liable to make any payment to the solicitor and/or counsel for        acting on his behalf in this claim”

 

Whilst the existence of the DBA will, we are sure, be of interest to a number of lessees thinking of taking on Pubcos, we know that other Chartered Surveyors who act as Independent Experts and subscribe to this monthly newsletter, will want to “cover the bases” for this important factor in their continuing independence.

 

4. Wage Growth.

We have for ages been at loggerheads with Pubco and Brewer rent assessments that seem to constantly under-estimate wages in the calculation of rent.  This is not an isolated moan and groan, but consistent throughout almost every single rent review we touch.  Statistical analysis is all very well, but it is often up to eighteen months out of date and, as we keep on reminding the world, a rent review is the process of looking forward for the next three or five years until the next rent review and ensuring that the rent settled is actually genuinely affordable for those years, rather than looking backwards.

 

It was interesting to pick up on the latest research in 2013 from the ALMR, which confirmed that wage growth in the On-licensed trade has outstripped inflation for each of the last three months on record.  The figures reflect the fact that key staff are still expensive and if you want to run a quality operation you have to pay for staff that you need rather than the theory of the minimum wage levels that you think you can get away with.  The ALMR 2013 Benchmarking Report, which in itself is out of date by its very nature, indicates that the average payroll now accounts for 25.4% of revenue which is an increase on 2012.  The latest three months’ figures, of course, reinforce that very finding.

 

5. Average Rents On New Leases Fall – Yet Again.

The RICS Pub Benchmarking Survey has revealed that, for the second quarter in 2013, new leases in England and Wales dropped slightly to an average rent of £24,368.  This, of course, is statistical evidence that concerns lease renewals throughout 2012 as almost always the lease rental is settled and agreed after the renewal date.

 

The telling point is that the four Pubcos (Enterprise, Punch, Marston’s and Stars Pubs & Bars) who have contributed to the RICS survey, confirm that the rent costs represented an average of about 8.2% of turnover on an average pub turnover of £293,698.

 

From our experience at Arbitration and tracking the very few PIRRS’ referrals, the Pubcos are still trying to promote the majority of their lease rent reviews at levels in excess of 10%.  As one lessee client said to us recently “pot calling kettle calling pot!”

 

6.  And Finally

“I tried not drinking once.  I heard myself talking all night and then, worse than that, next day I had total recall.  It was terrifying.” (Patsy Stone – Absolutely Fabulous.)

I have a profound respect for old age.  Especially when it’s bottled.”  (W.C. Fields).

 

 

Best wishes from the Team at M & C

Email:  info@morganandclarke.co.uk

Phone: 01285 719292

Punch Taverns’, is the House of Straw about to go up in smoke.

Punch Taverns’ big headache and a House of Straw

With a crippling debt hangover, could closing time be approaching for the UK’s second largest pub chain?

( With many thanks to Andrew Saunders of MT Management)

Formative years

Punch Taverns opened its doors in 1997, a time before the smoking ban when street-corner boozers were still two a penny. Big brewers were disposing of their tied pubs, so Hugh Osmond (former boss of Pizza Express) teamed up with Cafe Rouge co-founder Roger Myers to create a vehicle to buy them. First across the bar was the Bass pub estate in 1997, followed two years later by the £3bn acquisition of Allied Domecq’s pubs.

After that deal, Punch spun out its managed pubs into a separate business, the Spirit Group, and then floated itself on the LSE.

A series of complex leveraged takeovers followed, often pitching Punch against arch-rivals the Tchenguiz brothers, including the buyback of Spirit in 2005 for £2.68bn.

Punch became the UK’s largest pub landlord, with 8,000 boozers.

Recent history

When the crash hit in 2008, punters abandoned the local, instead drowning their sorrows at home with cheap supermarket booze. Punch’s debt-fuelled model left it massively exposed – in 2009, an 8% fall in revenues sent losses spiralling an eyewatering 500% to £400m.

In a desperate attempt to salvage some value for shareholders, Punch’s best outlets were hived off as the Spirit Pub Company in 2011, leaving Punch with the rump of the estate and vast debts. It began a huge sell-off to pay them down, but last autumn shares sunk to below 8p, 97% down on their 2007 peak.

Who’s the boss?

It’s all changed since the glory days. Current landlord-in-chief is executive chairman Stephen Billingham, whose most pressing task is restructuring Punch’s two huge loans. If he can’t do that soon, analysts reckon Punch may not survive.

The secret formula

Leverage. Back in the boom years there was no more readily securitisable asset than a juicy property portfolio. By borrowing more and more against the value of its pubs, Punch grew very big very quickly, but its debts peaked at over £4.5bn. However, the licensed trade has changed: now success is about good food and a memorable experience, but Punch can’t afford to invest in enhancing its estate.

Don’t mention

Loan covenants. Punch’s debts now stand at £2.3bn – 25 times its market cap or seven times total shareholder equity. A deal to renegotiate their terms has been on the table for six months but lenders have yet to sign up. Perhaps they need a bit of Dutch courage?

Vital statistics

Revenues: £458m Pre-tax profit: £49m Debt: £2.3bn No. of pubs: 4,096

Note: For years freehold pub valuations were based on Turnover or Bricks and Mortar, which gave a realistic tradable valuation to pubs and similar aligned businesses.

With the advent of the  Pub Co, Punch, Enterprise etc. and so called leases, they applied normal commercial property freehold valuations for leased properties based on an investment rental value, by over valuing the rent and ignoring viability this enabled further funding for expansion.

The reality now is that Pub Co rents in the main are unsustainable against viability, the freehold values have crashed and Pub Co’s estates (Assets) are worth very little in comparative terms.

I think Fire Sale is probably appropriate.

The latest comments from the Smoking Lobby

The Voice of the Smoking Lobby

Simple Simon Says…..!

The call for JUSTICE grows

Smoking bans KILL businesses – FACT!

Nice to see fellow bloggers picking up on the call for the prosecution of the charlatans of Tobacco Control and their accessories. It is now proven beyond reasonable doubt (and there’s a term no longer used in our courts when it comes to smoking related offences) that the smoking ban is/has been the biggest single fraud of the past 300 years.

 Justice, for smokers, has been hung out to dry!

Perpetrated by an unelected organisation that supposedly care for the worlds health, yet leave 2,000 per day to die in Africa and executed by smoker haters of every country. I doubt very much that any government envisaged the vitriol with which the FCTC would be executed when they were gently asked to sign the paperwork!      How much has this gigantic fraud cost each country, and in turn, what has been the personal cost to each smoker & non smoker?

 1/100th of what has been wasted would set me up for life!

Don’t look so surprised at the latter part “& non smoker” for I know plenty of ‘non smokers’ whose social lives have been slaughtered simply because they no longer have any smoker friends that bother to visit that once great British hub of social contact-the pub/club!      I’ve spent more than 6 years trying to get the powers that be to see what a giant con this has all been and yet it seems that all I had to do was to ask the WHO to tell the truth about Air Pollution & cooking fumes-never mind diesel and other exhaust fumes! So we all now know what a giant con this was and just how stupid, gullible and easily led Mr Blairs Labour government really were by a mini Jihad known as ASH!

 “I wandered lonel as a cloud, spreading cancer all around”

One of the worst things spawned from this debacle is the ‘smoker hatred’ created in some sad, really sad people. For instance we have this insane woman in Wales who decided that she was so contemptuous of a “smoker” smoking an e-cigarette she spat at him-worse-the spittle went in HIS mouth! Charming action from a supposedly normal, rational human being, who, just over 6 years ago would never have even thought of doing such a thing. The amazing thing is that she expected HIM not to puff away on his harmless ersatz cigarette in the bus station even though it gave off no harmless SHS. Perhaps she was concerned about Second Hand Vapes?

Phil Huxtable (representing), for Nicholls, also known as Dawn Wheeler, said she was upset at the time and understood it was wrong. She pleaded guilty to assault in front of city magistrates. Magistrates fined her £75, told her to pay £85 in costs and a £20 victim surcharge.

     Yet again we see the law taking the absolute p**s when it comes to smoking related court appearances. This female, supposedly human, reptile spat at another human being who was doing absolutely nothing wrong simply because she has been indoctrinated by the evil fraudsters above mentioned. Had he thrown a cigarette end on the floor he would have automatically received an £80 ticket. Had he refused to pay it and gone to court it would probably have cost him between £300-£500 but she is only fined £75 for such a disgustingly vile act on an innocent bystander!
     Now the second point that needs to be raised is this victim surcharge codswallop. The gentleman was most certainly “The Victim” so why wasn’t he awarded this phantom £20 that this vile woman has to pay? Who gets the £20 I ask? A shisha bar owner was ordered to pay £400 ‘VS’ when in actual fact there were no victims as everyone inside the place was there of their own violition! But, in any event, this vile woman should have been exampled and made to pay her victim (literally) at least £200 for having to suffer such an indignity. Hope she hasn’t got AIDS! Now I wonder what the outcome would have been had he slapped the silly cow? “SMOKERS ATTACKS WOMAN” – does that sound about right?
     Meanwhile, back in this crazy world of ‘more moneis needed’, so called scientists are looking into why NRT is a complete failure-probably because the e-cig (above mentioned) is exactly the opposite! It’s probably because NRT is utter rubbish and does nothing to assuage the smokers ‘thirst’ for that long, cool, satisfying drag of inhaled smoke into the lungs. OK, so that’s not everyone’s cup of tea but it seems to assuage about 25%-30% of the worlds population on a regular basis.

Similarly this mob are trying to figure out why smokers smoke, why they are addicted, why they feel they ‘need the fix’ (poor use of words but never mind eh!). It has not occurred to these “Dumbo’s” that the answer is simply that people who smoke actually ENJOY smoking! Who needs nicotine? Why do they think that ‘vapers’ are equally happy puffing on their ersatz cigarettes-BECAUSE THEY ENJOY THE ABOVE DESCRIBED FEELINGS! There is no scientific basis to it, no mathematical formulae or any other reason excepting the fact that people ENJOY smoking!

     Now when are the doom-meisters going to actually understand that simple fact and when are this government going to stop funding the shysters at ASH. I’ll bet ‘the Arnott’ called an emergency meeting when the WHO announced their AIR Pollution news because she would immediately see that the WHO had simply ‘sold them out’. Removing their legs from beneath them would be a more appropriate term methinks for with AP & home cooking on at least an equal basis to smoking, ASH have absolutely nowhere to go! So why are they still being funded? Ooh ar missus-the chiiildren!
     Similarly, one of our loyal members is hot on the trail of those at CROOK (Sorry-CRUK) as they are now blustering the good bluster that the WHO didn’t mean exactly that smoking was no worse, or more damaging, than cooking, air pollution, bonfires, BBQ’s or anything else as smoking is still the biggest killer of all. Apparently, SHS, although now known NOT to be carcinogenic, still kills 11,000 people per annum in this country (shades of Jamrozik anyone?). Of course they have no proof of such but that doesn’t stop them spreading misinformation from their website!
     In the face of all this anti smoking hogwash we find that one of our european neighbours has had enough of the poverty caused already. Bulgaria have ousted their government at the polling booths and the incoming Socialist Party are already rolling back the smoking ban to allow businesses CHOICE. It seems that former prime minister Boyko Borisov was not a popular man for caving into the WHO and their extremist demands!

Take note “call me Dave” – CHOICE. They have already seen the massive financial destruction caused by these silly & illiberal bans and as Bulgaria virtually exists on poverty it is obvious that they don’t want to incur anymore!

Duncan Brakes of the Littlehampton Gazette lays it all out quite neatly here as he calls for the smoking ban to be relaxed. He quite rightly says

We know it has played a part in decimating the pub trade, with thousands of pubs across the country closing for good. The ban has contributed to tens of thousands of jobs being lost in the leisure industry, as not only pubs closed, but also clubs and bingo halls shut down.

Note that the Bulgarian socialists soon picked up on what we sent them re the destructiion caused by our intolerant ban and soon got an organising committee sorted to set about restoring their freedoms of choice. Shame the idiotic, gullible & spineless licensees (most of them anyway) in this country didn’t do the same!  What did we have? 65,000 pubs & clubs was it? Yet only 4 people of note railed against this persecutionary piece of legislation! So folks, the only question that remains is “how do we prosecute these blatant fraudsters”?

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4 comments:

  1. There is no doubt that the smoking ban was brought in under False pretences, a wisp of second-hand Tobacco smoke could Never be proven to be harmful. The ban Was Discrimination of Smokers and still is, obviously the smoking ban Must be changed for more than that reason now we know from the WHO that other Indoor Risks pose even more of a danger and always have. This blog has always been instrumental at showing the Economic Disaster of the smoking ban and it is good to see the Bulgarian Government showing some common sense, it should always have been about CHOICE, both for Businesses and the Public and it is time that D Cameron followed and Reformed our Ban. ASH and the other false “charities” can no longer continue with their hatred of smokers or to receive the Taxpayer Funding they have been living off, they Must go. Once again D Cameron can fulfil his promises by getting rid of the Quango’s as not fit for purpose.

    ReplyDelete

  2. Great article again Phil. David Cameron get rid of ASH anon? Hes scared stiff of the health lobby the smoking ban would have been amended by now, if he wasn’t. I expect hes got shares in big pharma anyway ! Ash won’t stop until tobacco is taken off the shelves, their aim is tobacco free now. They want to stop all smoking and have openly admitted that they are,against smokers.
    Ash are persecuting people that smoke for their perfectly legal lifestyle choice; introducing law, the smoking ban that disallows an identifiable group the freedom of right to assemble in any public building is discrimination and should be illegal. The price of uk cigarettes has been raised so much that smokers have to buy on the black market. Ash want to rid the UK of smoking and therefore smokers. Is the description smoker hate group so wide from the mark ? They have far too much power.

    ReplyDelete

  3. Good article Phil, we all know that SHS is a con. B7

    ReplyDelete

  4. “It has not occurred to these “Dumbo’s” that the answer is simply that people who smoke actually ENJOY smoking! Who needs nicotine? ”
    Coincidentally, I was pointing out much the same thing in a comment here:
    http://www.scienceworldreport.com/articles/10476/20131025/nicotine-sole-addiction-causing-agent-cigarettes.htm
    It’s an article about how ‘researchers’ are scratching their heads about why smokers smoke. Huh?

Consultation – further deregulation of entertainment licensing

DCMS Consultation – further deregulation of entertainment licensing

Posted: 22 Oct 2013 05:00 PM PDT

The Department for Culture Media & Sport (DCMS) has launched a consultation on the implementation of reforms to deregulate further types of regulated entertainment via a Legislative Reform Order. The consultation anticipates that the changes could come into force as early as April 2014. Proposals

  1. Cross-activity exemptions

    The following will not be regulated between 08.00-23.00 with no audience limitations:

    • entertainment activities held by, or on behalf of, local authorities on their own premises;
    • entertainment activities held by, or on behalf of, hospitals and schools on their own premises; and
    • entertainment activities that are part of nursery provision on non-domestic premises.
  2. Live music

    A performance of live amplified music in alcohol licensed premises or in a workplace will not be regulated where the entertainment takes place between 08.00-23.00 and the audience consists of up to 500 persons. (The current audience limit is 200 persons).

  3. Recorded music

    Any playing of recorded music in alcohol licensed premises will not be regulated where the entertainment takes place between 08.00-23.00 and the audience consists of up to 500 persons.

  4. Live and recorded music exemptions

    The following events will not be regulated for live and recorded music between 08.00-23.00, where the audience consists of up to 500 people:

    • activities held on local authority premises;
    • activities held on hospital and school premises; and
    • activities held in community premises.
  5. Circuses  Tented circuses will not be regulated in respect of live music, recorded music, indoor sports and any performance of a play or dance that takes place between 08.00-23.00. There is no audience limit to this exemption.
  6. Greco-Roman and freestyle wrestling Greco-Roman and freestyle wrestling will not be regulated between 08.00-23.00. There is no audience limit to this exemption.

The consultation principally invites comments on how the proposed deregulatory measures will work i.e. it is seeking views on the detail of the announced policy position. The consultation and how to respond can be found here and the closing date for responses is Tuesday 17 December 2013.

Business rates set to increase for the licensed hospitality sector.

Business rates set to increase for the licensed hospitality sector.

ALMR Press Release – Immediate

Licensed hospitality may be hit with an increase in business rates which leading trade body the ALMR estimates could cost the sector up to £58 million, following the Office for National Statistics’ announcement earlier this week of RPI of 3.2% for September 2013.

 

The annual business rate increase for April is currently set by reference to the previous September’s rate of RPI. The snapshot is applied irrespective of annualised RPI levels and historically, September’s figures have been higher than the annual average. Last year, the September RPI was 2.6% and in 2011 it was 5.6%.

 

In response, the ALMR has called for the Government to take immediate action to address the rise which is higher than its target rise of 2% for inflation and represents a significant increase on last year’s figure of 2.6%.

 

Commenting on the announcement, ALMR Strategic Affairs Director, Kate Nicholls said:

 

“This level of RPI could lead to another substantial business rates hike in April which our sector can ill afford. Continuing unpredictable increases in rate bills have put pressure on businesses and this is stifling investment in our property and our people. We already have one of the highest commercial property taxes of any EU country and we urge the Chancellor to use the Autumn Statement to limit next year’s business rate increase to his inflation target of 2%.

 

“In the longer term, we need a fundamental root and branch review of the system to explore options for reform – more frequent revaluations, a cap or annualised CPI increases to ensure it remains responsive to economic circumstances. Take the brakes off and free us up to continue to deliver the jobs and growth the country so desperately needs.”

 

M & C, October Newsletter on the Vagaries of Licensed Property (Always a good read)

Vagaries of this months Licensed Property

Well, what a summer that was! A good solid spell of better-than-average sunshine and genuine warmth to rival the sunspots of the North Mediterranean. The debate, of course, continues to rage over climate-change with a very mixed bag of future forecasting for subsequent summers. Put in the context of the previous seven years which were distinctly below average expectations, it is a more than difficult call to predict the summer of 2014 and its effect on trade. If you listen carefully, the Pubcos will tell you that we have now turned the corner weather-wise and future projections of trade should be positive rather than negative for the summer months.

Looking ahead, one of the more interesting predictions was that climate-change and ocean-warming in the mid Atlantic will actually make Britain generally colder! The difficulty is trying to future-guess trade and in our considered view, current rent reviews should not be guesswork, rather the certainty of trading profile over say, the last three years.

1. Energy Act 2011

Not that they get much publicity, but it is understood that the RICS are actively lobbying Government (and we hope with some success), to clarify the stipulations of the Energy Act 2011 that from 1st April 2018, all commercial property – and that, of course, include pubs – must be energy-efficient over what is assumed as Band E on the Energy Performance Certification. It transpires that the RICS are trying to ensure that any building that is Listed of architectural or historical interest, should be exempt from the implementing of the 1st April 2018 regulations.

This has to make practical sense as the energy-efficiency of buildings of architectural or historical merit cannot be the sledgehammer to crack a nut to irreparably harm these iconic structures.

2. Genuine Evidence of 2013 Summer Trade

Interesting article in ‘Big Hospitality’ in September with direct quotes from the Wine & Spirit Trade Association’s Chief Executive Miles Beale, who has summarised the hot summer as turning into a ‘long dry drought’ for the On-trade which has evidence that alcohol sales at restaurants and pubs have actually fallen 6% in the months of July, August and September. Volume sales of beer and cider fell 7% and 4% respectively, while RTD sales dropped 24%. The only categories to experience growth were wine, sparkling wine and spirits.

Miles Beale stated:

“While the hot weather provided a temporary and welcome boost for the off-trade, ongoing duty increases and squeezed consumer spending, continue to damage the trade and WSTA Member businesses. Given the record hot summer, the fall in sales in the on-trade is a surprise and underlines the need for an early end to the alcohol duty escalator to provide some relief for struggling pubs, bars and restaurants”.

Subsequent to that comment, Government has now not implemented the annual alcohol duty escalator, although the damage has already been done.

3. Drinking at Home

Once again, thanks to Big Hospitality for the recording of the Report compiled by CGA, Neilsen and Wilson Drinks Report. It transpires that alcohol sales within the off-trade have risen 3% during the same three, hot summer months, with drinkers deciding to stock up on beer, cider and wine to drink at home. The average monthly spend on alcohol to drink at home, has also risen £3 over the last three years, with consumers spending an average of £32 in August 2013, compared with £29 in August 2012. It seems that lager is now gently losing its volume following, with bitter and ale drinkers in August 2013, spending £55, lager drinkers £53 and cider drinks £49.

4. Mind-set

It is often the case that if you are very close to a specific subject, you tend to forget the self-evident – the so-called ‘elephant in the room’.

We were contacted the other day by a multi-site lessee who has a lease renewal issue with one of his sites. He had been canvassed by a substantial specialist licensed/leisure property firm who had offered the provision of advice to him as tenant, despite the fact that as a company, they acted for a number of Pubcos (although not his Pubco in that instance).

Why he was troubled, was what he called “mind-set”. He wondered how – if they robustly acted for some Pubcos and in the fulfilment of their instructions promoted the Pubco’s interpretations of the landlord’s view of rent issues – they could then suddenly do a complete mental somersault and promote tenant issues with equal vigour.

We discussed matters such as goodwill, REO status, structural works and a number of other items personal to the pub in question. His concern was that if you truly and honestly held one set of views (and he had no problem with that principle), how could you then hold a diametrically opposed set of views acting for ‘the other side’.

We really had no answers, fundamentally because we have never acted for Pubcos and have never had to perform the change in mind-set.

5. Confidentiality Agreements

The current version of the Industry Framework Code concerning confidentiality agreements, states the following:

 

“In addition to the information requirement set out in the Code, pub-owning companies also undertake to respond to all reasonable additional requests for information and where this is not available, the reasons for this must be disclosed. In particular, information which may be used in third party determination of rent, should not be unreasonably withheld and should be shared on request subject to appropriate confidentiality agreements“. (Emphasis added).

There are one or two confidentiality agreements being widely circulated that completely preclude any further research to verify the information supplied. It is normal practice for valuers to inspect comparables – quite often in the first instance as a customer – but if a query surfaces, which is often the case, how could we discharge our full responsibility to our respective clients, until we had made further enquiries.

We have in our possession, a draft confidentiality agreement issued by Punch that, in its opening paragraphs, actually requires “in this agreement the term ‘confidential information’ means….. rent comparables for the property…… any information in connection with the assessment and determination of the level of rent payable for the property…… and shall also include the existence or contents of this agreement…..” which effectively means that you cannot tell anyone that you have actually signed a confidentiality agreement!

We will continue not to sign confidentiality agreements and will certainly not transgress the Data Protection Act on the basis that if a dispute moves to arbitration, the opportunity either voluntarily or through disclosure, then exists to further investigate (if appropriate), any comparables offered in support of the rent aspiration of the freeholder. It is comforting that there are a number of like-minded licensed property professionals who also act for tenants, who hold the same view that the Draconian nature of the current confidentiality agreements, are far too restrictive.

Whether or not further assistance can be obtained under the Industry Framework Code, is far from certain as the current wording which has been set out above, allows for virtually any form of interpretation “as appropriate”.

6. New Lease Start

We were contacted by an old-established client whose original 20 year lease came to an end in March. Because of the pressure of his own business, he really didn’t take much notice of the date and the Pubco didn’t contact him. Now he has woken up to the fact that he has not been served with a Section 25 Notice confirming that the Pubco would grant another lease and also naming the date when the lease will start. There is a very strong chance that the rent will come down significantly.

Urgent advice has been given in respect of the issuance of a Section 26 Notice under the Landlord & Tenant Act 1954 and it surprised our client that as a result of the six month’s notice period contained within the Section 26 Notice, the earliest his new lease can start, is the end of April next year. That will be over a year after the expiration of his old lease and he can only have his new lease rent from the date of termination of the Section 26 Notice. Only then – not March this year – will the rent be eligible for reduction.

Yet another example of there being no urgency from the Pubco to have to stir matters to happen as they know full-well that the rent will go down rather than up.

7. Oblique Praise

There was an active thread in the Morning Advertiser forums over the last few days concerning The Garibaldi pub. The thread has now been closed. However, we did get mentioned in despatches in the covering article in our favourite newspaper. Amongst the comments made were:

  • “If you have got M & C plus Dave Mountford, you are well set”.

 

  • “Both M & C and Dave are worth their weight in gold”.

 

  • It is good to know that there are such people as Morgan & Clarke and Dave Mountford who will help individual tenants when there are ‘issues with landlords’”.

 

  • M & C are some of the best in the business”

 

(This last quote was later removed – can’t think why!)

8. And Finally

There is always much debate over exactly how dry a dry martini really should be and whether or not it should be shaken or stirred.

One of the more delicious quotes from Winston Churchill over the question of what should constitute a true dry martini, was his thinking that the only way to make a ‘proper one’, was to put a large measure of gin into a whisky tumbler, drop a couple of olives in and keep the Vermouth bottle firmly in sight on the other side of the room!

Best wishes from the Team at M & C

MORGAN & CLARKE OCTOBER 2013 NEWSLETTER NO. 25

Pigeon House, The Broadway,

Oakridge Lynch, Stroud, Glos. GL6 7NU

Email: info@morganandclarke.co.uk Phone: 01285 719292

www.morganandclarke.co.uk

(Also at: London, Cardiff, Matlock, Braunton, Lewes)

Government Response to Triennial Review of Gaming Machine Stakes and Prizes

Government Review of Gaming Machine Stakes and Prizes

Posted: 09 Oct 2013 05:00 PM PDT

The Government has today issued a response to the consultation on proposals to change the maximum stakes and prizes for category B , C and D Gaming Machines.

The full document can be viewed by following the link below but a summary of the main proposals is as follows:

  1. The Government will reinstate the triennial review of stakes and prizes. After the current review, the next anticipated will be in 2016.
  2. It is intended to lay draft regulations before Parliament this autumn with the aim of implementation by early 2014.
  3. The changes to stakes and prizes are:
    1. Category B1 – the maximum stake will rise to £5 (from £2) with the maximum prize increasing to £10,000 (from £4,000) with the option of a maximum linked progressive jackpot on a premises basis only;
    2. Category B4 – stake up to £2 (from £1) and prize upto £400 (from £250);
    3. Perhaps of most interest and certainly to the pub trade is the increase in the maximum prize on category C machines to £100 (from £70). This is because the vast majority of pub gaming machines are these category C machines; and
    4. Category D combined money and non-money prize maximum prizes move up to £20 (of which no more than £10 may be a money prize. These are up from £15 of which no more than £8 may be prize money).

Interestingly on category B2 (FOBT) machines which constantly receive a lot of negative publicity, the Government has decided not to alter the stakes or prizes but in a note in the consultation state “We consider the future of these machines to be unresolved pending further work which is already underway”

We shall see what that eventually comes to mean!

For a link to the full document click here: Consultation on Proposals for Changes to Maximum Stake and Prize Limits for Category B, C and D Gaming Machines

Carbon Reporting,for listed businesses, where will they go next?

Keep an eye on carbon reporting or face ‘hefty fines’

Companies have been warned they face ‘hefty fines’ if they don’t keep an eye on their new carbon reporting responsibilities.

Carbon reporting specialist Inteb said companies that fail to comply with the law by miscalculating emissions or reporting late will be made to pay for their mistakes.

From the start of this month all incorporated UK companies have been legally obliged to include a report on their greenhouse gas emissions in their annual directors’ report.

Inteb added carbon reporting should be seen as opportunity – giving businesses a competitive advantage by proving they are green, showing investors they are managing the long-term costs of greenhouse emissions and demonstrating they are using the law to drive efficiency improvements and cost reductions.

Inteb CEO, Philip Hargreaves said: “Poor carbon emissions performance can have a negative effect on both share prices and investor perceptions.

“Deputy Prime Minister, Nick Clegg, has said that carbon reporting makes ‘good business sense’ and has claimed that listed businesses want a level playing field so that they can be fairly judged against each other. This is why this legislation is in place, so businesses need to consider the wider impacts of this energy initiative and use it to their advantage, rather than just viewing it as an onerous and time-consuming duty.”

Note:-MCR covers all UK companies listed on the main market of the London Stock Exchange, a European Economic Area market or whose shares are dealing on the New York Stock Exchange or NASDAQ.

Just keep an eye on it, this only applies to listed companies, but if someone has created a highly paid paper shuffling job, be assured smaller businesses are a soft target.

Barfly

Personal licences – a cause for concern and some thoughts.

Personal licences – a cause for concern

or why you should be worried about their possible abolition

Posted: 03 Oct 2013 05:00 PM PDT

Paul Charity (Propel) kindly published an opinion piece from us on this subject today.

The article can be found here: “Why you should be worried about the abolition of personal licences“.

In our view there is significant danger in the detail of the proposal to abolish personal licences and the industry must make its voice heard individually and collectively. Perhaps the title to the consultation says it all!

The Government consultation closes on 7th November 2013 and information on how to respond can be found here: “Consultation, Personal Alcohol Licences: Enabling Targeted, Local Alternatives“. If you would like to know more, please contact us.

 

Note:- I was asked to make a submission to the Government Consultation, expressing my thoughts on the subject, by a prominent figure in the Industry.

If licenses are abolished.

My first thoughts were that professionalism would go to the Four Winds, the industry desperately needs far greater professionalism than exists at this present moment with many of the Pub owning companies, having inspected thousands of pubs for the BII and others.

That is if the Industry seriously wants to make being a Licensee a career for life, we have far too many problems with Binge Drinking and Underage Drinking and the social problems generated, most could be attributed to the businesses selling alcohol and in turn the Licensee.

The licensee whether On or Off Sales should be totally responsible for whoever they sell alcohol to and the subsequent actions, not push them out of the door and let someone else deal with a drunk, or knowingly let an eighteen year buy alcohol and sell it on to juveniles.

The age limit for buying Off Sales should be raised to 21, as it is in many other countries, at 18 they are still at school or have just left and many buy and resell to juveniles, they are to 16-17 year old their peers and to an 18 year old their friends.

Whereas a 21 year old has just left University or is working and his friends are no longer in the 16-17 age group and is very unlikely to buy alcohol and resell to juveniles.

Sadly, whichever Party is in power would block this move, because it would alienate a larger sector of electors, the supermarket lobby would do the same since it would reduce Off Sales.

The 18-21 year olds can buy alcohol for consumption on the premises, as in a pub, in a controlled environment, which should lead to responsible drinking.

If the licence is removed and left to individual local authorities to decide on a policy, we will have chaos across the country.

A licence to sell alcohol has been in for many centuries in some form or another.

The majority of drinkers respect the holder of a licence, since they should be well aware of the law in respect of selling alcohol and their legal and moral responsibility to customers.

The licensee is legally able to refuse entry to any unfit  person trying to gain access, and can refuse to supply alcohol to a person that they consider to be under the influence of alcohol.

In fact holding a licence is a badge of responsible authority, if this is removed we have further chaos.

There is a lot more that can be said and should, so please contact John Gaunt & Partners and i am sure that they will give you details on how to make a submission.

Barfly

The Smoking Lobby, Monthly News Letter, the other view.

Smoking Lobby Updates

Editorial Note:- I am a committed non smoker for those that don’t know me.
Sadly I have seen too many pubs lose their core businesses through the smoking ban, which in turn has driven many to buy from the Supermarkets and drink at home, which may be an additional influence on underage drinking, since many parents and myself included allowed our children to drink in strict moderation and responsibly  at home.
Unfortunately many do not, hence the problems of underage drinking and in turn binge drinking amongst young people.
The sad thing is that the responsibility for a smoking policy was not left to the licensee, who would be driven by customer demand and staff considerations to make a practical decision.
In stead we are left with decisions made by the so called establishment, some being passionate about closing pubs because they never ever used them, yet the same people, I am sure would have had no qualms about having the occasional or regular use of Wacky Baccy, because it doesn’t have any harmful effects or so they claim.
I have seen a close friend destroy his life smoking these so called harmless things, finally setting fire to his house and perishing in the flames, because his brain was totally shot.
We can’t put the clock back, but it might regenerate the community and village pubs, if some sort of common sense prevailed and a sensible practical solution was found, before we lose every village and community pub that is not a trendy Gastro Pub.
This is why I give space to the smoking lobby.
Barfly

Freedom2choose Newsletter


September NewsletterPosted: 30 Sep 2013 01:00 PM PDT

In this month’s issue:

  • Message from the Chairman
  • F2C Interviews Michael McFadden
  • News in Brief
  • Round the Blogs
  • The Last Word

MESSAGE FROM THE CHAIRMAN

 

F2C’s recent AGM was thoroughly enjoyed by members as we basked in warm sunshine in a delightful seventeenth century pub garden. After the formal business we discussed a variety of topics, including ways of improving our online presence.

I am very proud of the members and supporters of F2C, all of whom are volunteers.

I said then, and say now, that we ‘punch far above our weight’, and were one of the first groups to link the Nanny State with not only smoking prohibitions, but drinking and eating.

However, we will never amend the smoking ban on our own, and it’s important to continue to work closely together with all our colleagues on the issues we have in common.

Dave Atherton Chairman Freedom To Choose

F2C’s EXCLUSIVE INTERVIEW WITH MICHAEL MCFADDEN

 

Recently published on the F2C Blog to highlight his new book TobakkoNacht – The Antismoking Endgame, our interview with Michael was fascinating.

You can read the whole interview for yourself here, but he was particularly good when he gave advice on tactics:

“The strongest single piece of advice is to remember that that the Antismokers have untold mountains of hundreds of millions of dollars and pounds to pay themselves with, to hire staff with, to buy TV ads with, and to buy the laws that they want.  We in turn have diddlysquat.  So the advice is simple: we can’t afford to hit them at their strong points: we need to constantly seek out their weaknesses because it’s only at those weaknesses that we can really win at this point.

Their greatest weakness is in their lies, the more outrageous the better for us — because truly outrageous lies are easier to expose in quick and simple ways, and it’s easier to convince people who’d earlier believed them without much thought that actually they ARE lies.  And when people realize how they’ve been played for fools with those lies, they’ll get angry and they’ll fight back.  And it’s that anger and that willingness to fight that we need.

So pick out the craziest and weakest of their lies: the thirdhand smokes, the outdoor death from a smoker a hundred feet away, childhood asthma doubling or tripling while exposure to smoke has gone down by more than half, smoking bans being good for pubs while we can see that their numbers are being decimated twice over, the most advanced ventilation and air-filtration systems being helpless against wisps of smoke from a few leaves while they easily handle deadly pathogens in hospitals and clouds of thick cooking smoke from restaurant kitchens.  Anyone can be fooled temporarily by slick and expensively produced advertising and propaganda sound bites, especially when it’s all wrapped up with emotional appeals and pictures of lovable little children, but most people can see beyond those sound bites and pictures if the lies are transparent enough.

We need to pick out the most transparent lies, and hit at them, over and over again, in the simplest terms possible.”

 

NEWS IN BRIEF

Sugar is ‘addictive and the most dangerous drug of the times’

Report reveals mental health smoking impact

Cigarette ban for prisons will go up in smoke

Peers plot to revive shelved plan for plain cigarette packs

Gangster v. Gangster: Al Qaeda rocket blows lid on IRA cigarette cargo

 

ROUND THE BLOGS

Octabber 2013

Shisha Bar business survey

Professor John Brignell has just published his review of Michael McFadden’s ‘TobakkoNacht‘ (NB takes a little time to load).

Simon Cooke of ‘The View from Cullingworth’ on ‘Politics is Broken’

Junican of ‘Bolton Smokers’ Club’ – Is there some sort of race going on to bring in plain packaging?

.

THE LAST WORD

“The evidence we took on passive smoking leads us to doubt whether government guidelines on risk management have been properly implemented. In particular, the purpose of legislation should have been defined more clearly and greater attention should have been given to available scientific evidence, the relative merits of alternative policy options and the impact of legislation on personal freedom and choice. Failure to consider these matters properly has resulted in the introduction of a policy that appears to demonstrate a disproportionate response to the problem.”

– House of Lords Select Committee on Economic Affairs June 2006

 

 

 

Freedom2choose: c/o John H Baker 22 Glastonbury House, Priestfields, Middlesbrough, Cleveland TS3 0LF

Freedom2choose (Scotland): c/o Michael Davidson, 15, Linksview House, Leith, EH6 6DP Tel 0845 643 9552