Monthly Archives: January 2014

Another brilliant Post by Bob Sayles, well worth reading, (Barrel-Dregs, 271)

Let’s all raise a glass to The Right Hon, Bob Neill MP

It’s fair to say that few things in the world of the drinks industry surprise me these days.     

That said, the fact that Peter Furness-Smith, managing director at family brewer McMullen intimated that former pubs Minister Bob Neill would probably get a job within Robert Mugabe’s cabinet did raise an eyebrow.

It is without doubt an extraordinary statement from someone in his position; particularly when you remember that this is the very same brewer that once labeled big pubcos “the unwieldy beast”.

Perhaps it’s indicative of the nervousness the industry is feeling as the chill winds of reform blow through the corridors of power. Those with a vested interest in maintaining the status quo are becoming restless; understandably so.

Politicians across the board have lost patience with an industry that has countered repeated calls for reform with remarkable levels of intransigence.

And little wonder. Those contemplating entering the trade should be under no illusion; the pubco model is a world where time has stood still.  

As newcomers take their first tentative steps into this strange new land, they’ll find their vision immediately impaired by swirling mists of ambiguity, be somewhat taken aback by strange life-forms who converse in a weird and unfamiliar dialect.

“Reasonably efficient operator’…….‘countervailing benefits’…..‘fair maintainable trade’…. ‘comparables’ …….‘refurbishment opportunity’…. ‘support’… ‘low cost entry’……‘below market rent’…. ‘dilapidations’…

What do these strange terms mean?

One of the primary benefits of self-regulation is that pubcos are able to interpret this vague language to suit their own ends. These stakeholders have a vested interest in ensuring the ‘swirling mists’ continue to confuse and bewilder.

But time appears to be running out for the pubcos. It seems that at long last, the ‘dead hand of Whitehall’ might well be about to place itself on the pubco shoulder. 

And not before time I hear you say. Let’s be clear about this, the indiscretions of the ‘beast’ are not in question; they’ve been in the public domain far too long for anyone to seriously question.  

Let us also not forget that four Select Committees highlighted the imbalance of risk and reward in the so called partnership as well as the numerous ways in which pubcos were able to milk more out of a system skewed in their favour, condemning more and more tenants to a life of penury.

And what have the pubcos done to address widespread condemnation of their business model?

The answer is of course absolutely nothing; Bob Neill’s latest call for an FOT option is merely an affirmation of that fact.

They’ve most certainly fudged and prevaricated, that much is clear; producing vast quantities of smoke and hot air along the way. Self-regulation is working they say; all the evidence suggests it is most certainly not.

As the war of words continues, reform remains as elusive as ever. Brigid Simmonds insists the business model is evolving for the better; the high rates of pub closures tell a somewhat different story.    

The evidence points to regression rather than progression; many of the supposed ‘new’ agreements merely allow pubcos to take more under the guise of additional support.

Be in no doubt, the appetite of the corporate leech remains as insatiable as ever. And no matter how hard you try, this blood sucking parasite cannot be dislodged. Tied licensees have little option but to look on in helpless desperation as this obscene creature sucks and devours until there is nothing left to extract.  

So, rather than attack Bob Neill for saying what we all know to be true, perhaps those that inhabit the corridors of power would be better advised to shed the cloak of denial and acknowledge the need to implement reforms that in truth should have been made many years ago.

If they had then I suspect we would not be where we are today.

Then again, pubco intransigence is unsurprising. Nigel Wakefield’s in excellent article (http://www.morningadvertiser.co.uk/Opinion/My-Shout/We-need-a-new-definition-of-a-Competent-Operator), illustrates the extent to which the concept of meaningful reform is incompatible with the pubco business model.

Isn’t it a pity that those people who condemn an MP for highlighting his  understandable concerns did not have the courage to acknowledge this fact, or perhaps even take a step further and publically state that certain pubcos have been ‘bayoneting’ their tenants for years?

The question we should ask is why they chose to remain tight lipped when pubcos began taking a far greater share of a diminishing cake in order to service eye watering debts and pay inflated bonuses and salaries?

In fact what exactly did the supposed ‘ethical brewers’ do whilst all the subsequent carnage was unfolding?

Absolutely nothing.

What did they do when pubcos were stripping tenants of everything they had before tossing many out onto the streets destitute and homeless?

Absolutely nothing.

What did they do when they saw pubcos sucking more and more out of their pubs, resulting in increasing numbers closing their doors to the detriment of local communities?

Absolutely nothing.

What did they do when they saw pubcos inflating dilapidations to absurd levels, ensuring churned ‘partners’ left empty handed?

Absolutely nothing.

What did they do when they saw pubcos abuse the concept of Fair Maintainable Trade to the point that it became nothing more than a Fantastical Mythical Target?

Absolutely nothing.

What did they do as pubcos systematically manipulated the business model to the point that for many tenants minimum wage is now a dream, tax credits the reality?

Absolutely nothing.

What did they do when pubcos actively encouraged beer price hikes knowing full well the impact this would have on their tenant’s businesses?

Absolutely nothing.

The fact of the matter is that people like Peter Furness-Smith have spent years standing on the sidelines, watching licensees being systematically drained; both financially, and emotionally before eventually succumbing to their inevitable fate.

Throughout this protracted and painful saga they have chosen to remain silent. That silence has proved to be their undoing.

What is particularly galling is that they now deride those who feel compelled to speak out.    

Let us all raise a glass to Bob Neill.

I’m not sure whether Robert Mugabe would be proud of him but tied tenants up and down the country most certainly should be.

Bob Sayles  

The views expressed are not necessarily the editors and www.buyingapub.com accepts no responsibility for them, we do try to avoid offensive or litigious statements being made. They are written by concerned professionals in the industry who feel that these issues should be raised to ensure that all licensees are made fully aware of many hidden pitfalls.

 

 

An alleged true story of Local Authority interpretation of the Law (Unbelieveable or Par for the Course)

This should be a joke, sadly it is not.

A guy wrote to his MP in England, complaining that while you received an immediate £25 parking fine for being a few minutes late back to a Council Car park where you’ve left your car, nothing seemed to be done about groups of travellers also camped in Council car parks.

This is the reply Mr Javid [the MP] received from Bromsgrove District Council. ‘There appears to be some confusion regarding the basis upon which the travellers were on the car park in question.

The position in respect of any normal user of the car park is that, by entering and parking their vehicle, they are entering into a contract with the Council to pay a sum of money in return for the Council allowing them to leave their vehicle for a specified amount of time.

If the vehicle is left for longer than the paid for time, no payment is made, or there is a failure to comply with parking regulations, there is, in effect, a breach of contract which entitles the Council to make a Penalty charge.

‘In the case of the travellers, they were on the car park as illegal occupiers and, as such, there was no contract with them as the purpose for which  they entered was not permitted. ‘In the circumstances the appropriate course of action was not for “breach of contract” but for “illegal occupation”.

‘So, if you park legally, but overstay by a few minutes, you get Hammered. However, if you occupy the car park illegally, you can stay there as long as you like – or at least until the Council can get a court order to Evict you (which could take weeks/months).

You really couldn’t make it up.

Welcome to Britain 2014…….

 

MORGAN & CLARKE January Newsletter, some Nasty Legal Tricks being pulled on the Unwary.

 

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, Braunton, Lewes)

 

Happy New Year to all of our many subscribers in all the different corners of the licensed / leisure property world.   Let’s hope that 2014 will genuinely offer some hope of a reversal of the downward trend of discretionary spend in the On-licensed trade which has been witnessed in 2013.   This first Newsletter of 2014 contains a very mixed bag of ‘happenings’ in the latter part of 2013.

 

1.  Lass O’Gowrie, Manchester

This is a multi-award-winning, Greene King leasehold that used to be situated opposite the BBC Central Studios and Offices in Charles Street, Manchester.   It is a sad and sorry tale (as reported in the Publicans Morning Advertiser) of how a major Brewery Company – although acting perfectly within the law – can be seen by some to turn the Industry Framework Code on its head.   The background is essential in understanding the actions of Greene King.

 

When the lessee, Gareth Kavanagh, took the property over in 2006, the Lass was doing approximately 400 barrels.   The lease was granted on the basis of a Minimum Purchase Obligation (MPO) of 360 barrels, with any barrelage over that target level being free-of-tie.   In Greene King’s words, the object was to stop the Lass from being turned into a wine bar and ensure that they had a solid level of their own products being sold.   Through drive and personality, by 2007 Gareth Kavanagh (the Lessee) increased the trade up to 600 barrels which meant that nearly half of the trade was free-of-tie and largely composed of real ales which is where the personality of the Lass thrived, associated with the BBC and student trade.

 

It was always appreciated from the start of the lease that the BBC would be relocating at some stage which eventually occurred in the autumn of 2011.   This invoked an agreed interim rent review and David Morgan represented Gareth Kavanagh in the subsequent negotiations and ultimate referral to Independent Expert.   Since the departure of the BBC, the rent was still running at the original level of £53,000 which then took 19 months to settle, with a rent reduction of 40%.   The sting in the tail was that Greene King refused to change the MPO requirement of 360 barrels which by now, represented virtually all of the trade level that could be achieved.   Greene King reckoned that the pub should trade at £500,000 rather than the current levels of considerably less.   Greene King openly declared that they did not consider that Gareth Kavanagh was of Reasonably Efficient Operator status, notwithstanding the pub being the winner of the Best Community Pub (North West) in the Great British Pub Awards of 2012 and winner of Best Entertainment Pub (North West) in the same awards, culminating in the accolade of Supreme Champion, Best Overall Pub in Great Britain in the Great British Pub Awards of 2012!   In Gareth Kavanagh’s words:  “things got personal”, with the downturn in trade and associated cash flow problems being finally ratcheted into an untenable financial situation as a result of a threat by Greene King to force an interim dilapidations schedule (still seven years left to run on the lease), with the implication of costs in excess of £85,000.

 

The lease has now been surrendered and Greene King have secured the departure of Gareth Kavanagh – who had the temerity, with David Morgan’s assistance – to stand up and fight them for a very substantial rent reduction, by referral to an Independent Expert.

 

The insistence on the same MPO level of 360 barrels as at the start of the lease, was the killer blow.   All perfectly legal if the wish was to have an almost completely supply-tied public house selling non Manchester beer in the heart of Manchester.   Very sad and if the will had been there, totally avoidable.

 

2.  Transparency – Now you see it, now you don’t

A recent Enterprise Inns’ lease renewal in London was handled by Simon Clarke who gave detailed initial advice with the lessee subsequently settling matters out of Court (by their own negotiation).   The rent was reduced from £76,000 to £40,000 (49% reduction), but on the basis of a complete and totally binding Non Disclosure Agreement (NDA) which would ensure that outside of Enterprise Inns and the lessee, no-one would have any knowledge of the ultimate settlement.  

 

The assumption is reasonably made that this lease renewal rent will now not appear in the comparable evidence pro formas of other rent settlements in the general area as, by so doing, that would broach the NDA.   So much for transparency!

 

3.  Wellington Pub Company

It has been an interesting exercise to trawl through the Net and download, the representations that have been made to the Business Industry and Skills Committee (BIS) in their efforts of industry-wide consultation regarding statutory control of Pubcos.   Wellington Pub Company are the only totally free-of-tie leased pub operator and are the only major pub owner (ownership north of 600 pubs), that are not members of the British Beer & Pub Association.   As you may well remember, Wellington Pub Company are also the only pub owners who strictly enforce upwards-only rent reviews which, of course has been banned by all BBPA Members.  

 

It now seems that Wellington class themselves as the same as any other owner of commercial property.   They have squealed loud and hard that if statutory regulation does come to pass and that there are upwards and downwards rent reviews, this would lead to less investment and support for its pubs.

 

Morgan & Clarke are currently handling a significant number of Wellington Pub Company lease renewal cases where the rent can be set higher or lower than the current rent.   There has been not one single instance where our Clients have confirmed that there has been any investment or support from Wellington Pub Company who have been more than happy to collect rent and ensure that the lease clauses are dutifully honoured.

 

One choice comment that has been picked up by journalists, is a classic.   Wellington consider that a ban on upwards-only rent reviews, would distort the market and lead to unintended consequences whereby companies alter their behaviour.   Well, surprise, surprise!   Wellington now feel that they are being discriminated against because they have “a relatively large number of properties that happen to be let and operated as pubs”.   It is almost as if they are surprised by what they purchased.

 

When Wellington bought their estate, they knew full well that the only nationally recognised method of rent assessment was the profits test.    That has nothing to do with shops, offices or warehouses that are, of course, rent-assessed on an equated square footage basis.   Quite why it now comes as a complete shock to Wellington that pubs are not remotely similar to ‘other commercial properties’, is probably on the basis that they could see the asset value of their estate being decimated in the light of statutory enforced downwards rent reviews.  

 

It was noted that there was a predictable and tactful silence from Wellington’s agents Criterion Asset Management in any element of the representation that was made by Wellington to the BIS Committee.   Whether or not statutory regulation comes to pass is, regrettably, not seen as a certainty as a result of far too many vested interests having an influence.   We sincerely hope that the long grass does not beckon to Vince Cable and that the consultation process that started in 2004 (yes, a full seven years ago!), will now finally reach a satisfactory conclusion.

 

4.  Household Debt – The Statistics

Last November, the Bank of England announced that UK household debt had hit £1.43 trillion – quite how that looks as a line of noughts is staggering, but the calculation was that the average adult owes more than £28,000.   Not to be forgotten, this is now with interest rates at rock-bottom.   The Centre for Social Justice found that more than 5,000 households became homeless last year due to rent and mortgage arrears.   It is suggested, however, that this is the tip of the iceberg which will go decidedly wrong if interest rates rise to 5% by 2018.   It is estimated that over two million households could be spending more than half of their disposable income on mortgage payments.   Factor in the necessity for buying food, paying utilities, clothing, etc., the situation looks far from rosy.

 

In the past five years, food prices have gone up by 24%, public transport costs by 30%, childcare costs by 37% and social housing rents by 26%.   It is also reckoned that over the last five years, a night out in the pub has increased by 35%.    Set against those across-the-board increases, wages in real terms, have actually decreased rather than increased.  (see our December Newsletter).

 

The Catch 22 is that as the overall economy is seeing the green shoots of recovery, he only way to keep inflation under control is the raising of interest rates which is exactly the reason why household debt will inevitably increase.

 

5.  Deeds of Variation on Rent Review

Enterprise Inns are market leaders in the insistence on a Deed of Variation to accompany a rent review.   This was initially instigated as formal confirmation of the then general variation of old leases in which there was only ever an upwards rent review provision.   The Deed of Variation is then binding on both the current lessee and successors in title, to ensure the fairness of upwards and downwards rent reviews.

 

However, this Deed of Variation has now been considerably expanded and the latest version has now come into our possession.   The sting in the tail is in the Third Schedule which starts off with being very user-friendly by offering WI-FI installation to the Tenant at no cost.   The second clause concerns the understanding that the Tenant must maintain internet access and hold a current email account and the Company “may require” the Tenant to place its stock orders electronically.   The following is the verbatim quote of the Third paragraph of the second clause:

“If the Tenant fails to comply with the terms of this clause then the Company reserves the right to apply an administration charge upon the Tenant (for each and every instance that the Tenant fails to comply) for an amount as the Company may think reasonable in the circumstances as a result of the Company (and/or its nominees) having to manually process any such correspondence, order or payment and such administrative charge shall not be less than £150 per transaction (plus any Value Added Tax) or such greater amount as may be reasonable from time to time”.

 

So if your broadband packs up and your internet is faulty and you in desperation phone Telesales, it would seem that every transaction now carries an administrative charge of not less than £150 per transaction plus VAT.   Very friendly!

 

The real stinger is clause 3 which again is quoted verbatim:

“Upon the request of the Company (or that of a relevant third party supplier) the Tenant shall agree to receive and pay for utility supplies to the Property (either in whole or in part) on a pay as you go meter system (or some other similar or updated system or arrangement) and to allow such access as may be necessary for the installation, inspection, maintenance, replacement or removal of such equipment as may be reasonably required during the term of this Lease either by Company or any relevant third party supplier (or a nominee) for that purpose and the Tenant (and those under its control) shall comply with any standard terms and conditions in respect of the use and maintenance of such equipment as may be in force from time to time and shall not attempt to interfere or manipulate the proper use of any such equipment”.

 

We have consulted with ‘Mi’ Learned Friends’ who are quite adamant that an unconnected third party cannot change the contractual arrangements between connected parties – say the Tenant and British Gas or Scottish Power, for example – without the prior, formal consent of the connected parties.   Don’t forget that a Deed of Variation is also binding on successors in title.   Clause 3 appears to give Enterprise the unilateral right to change utility contracts without the Tenant’s authorisation.   It is also a running cert that a ‘pay-as-you-go’ meter system, will have a far higher tariff than a long-term contract, sometimes volume-based.

 

Can the Tenant refuse to sign?   Difficult.   Enterprise Inns are requiring the Deed of Variation to be signed before the rent review is formally signed off.   If, as in the circumstance of the rent review that sprung this document, the tenant is in for a substantial rent reduction and the payment of back rent, and if it is an absolute requirement that neither the rent will be ratified, nor the overpaid rent be refunded until the document is signed, there is more than a little financial pressure hanging over the Tenant, despite the very substantial legal issues that might be the subject of challenge under Contract Law.  

 

We wonder what effect Clause 3 in the Third Schedule in the Deed of Variation will have on the ultimate saleability of a supply tied leasehold.   Would you really want to sign up to a binding Deed of Variation annexed to a lease, that allows your Pubco to apparently have the ability to change your utilities contract if they see fit?

 

An interesting case for further detailed scrutiny and perhaps clarification in the light of clauses 2 and 3 of the Third Schedule NOT appearing in the very latest Retail Partnership Agreement (RPA) – Why?

 

The latest RPA on lease renewal is, of course, open to challenge under ‘subject to modernisation’ stipulations of the Section 25 Notice.   If clauses 2 and 3 of the Deed of Variation, Third Schedule were not in the previous lease, it is more than difficult to include them in a new RPA.  Rent review – with the pressure of a lower rent and a back rental repayment for overpaid rent hanging in the balance – now that’s different!

 

6.  And Finally

“After the first glass of absinthe, you see things as you wish they were.  After the second, you see them as they are not.  Finally, you see things as they really are and that is the most horrible thing in the world”.  (Oscar Wilde)

“The last mosquito that bit me had to book into the Betty Ford clinic”  (Patsy Stone, Absolutely Fabulous)

“We had gone there to pass the beautiful day of high summer like true Irishman – locked in the dark snug of the public house”  (Brendan Behan)

 

 

Best wishes from the Team at M & C

Email:  info@morganandclarke.co.uk

Phone: 01285 719292

M&C Newsletter, as always an essential read for anyone with a lease.

My apologies for not publishing this before.

MORGAN & CLARKE  DECEMBER 2013 NEWSLETTER NO. 27

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)

 

 

We make no apologies for concentrating this month on three main features, namely dilapidations and the obligation to repair, and the recording of structural alteration works undertaken by the tenant at the tenant’s expense.   We have had a number of cases recently that are depressingly similar and every single time, to the detriment of the tenant.  

 

The start of the process is the imbalance between the experience of the two sides.   On one side you have the Pubco/Brewer with a wealth of experience of similar circumstance and on the other side, you have the individual – or perhaps a husband-and-wife, or even a small corporate operation – who are solely focused on the business of running a successful public house.

 

It is appreciated that in every modern transaction or agreement, there is an obligation for the future lessee to openly declare whether or not they have taken professional advice.   The problem is that solid professional advice rarely comes free-of-charge (although there are exceptions!) and it is understandable that adding further costs to a surprisingly cost-generative transaction of a new lease, is something that is looked at with concern.   As often as not, extra professional costs are saved wherever circumstances allow.

 

1.  Dilapidations – A Salutary Lesson  (Pub name and parties’ identities omitted for obvious reasons!)

Flat roofs at the rear of a linear, terraced pub property fronting a busy high street.   On either side of the front of the pub are two large retail premises and at the rear of one of them, some open land that was once used for car parking, which is now overgrown and has ivy growth substantially up the side of the rear flat roofed pub function room, which has crept in under the flat roof.   At the start of the lease nobody went next door to look at the side of the building from the empty land and the new lessee was completely unaware of the ivy growth.   No Schedule of Condition was taken and the lease was a standard full repairing obligation.   Spin forwards five years and the ivy growth is now a major problem, having penetrated a substantial element of the flat roof over the function room.

 

Lessee finally notices that the flat roof is leaking like a sieve and realises that the ivy growth is a substantial reason why.   They contact the next door owners who confirm that the rear land which contains the ivy growth, was sold off three years ago to some private investors who live overseas.   The lessee tries to sue the original owner at substantial cost and the legal route effectively led nowhere but cost nearly £10,000.

 

The Pubco wake up to the situation and serve an interim Dilapidations Schedule on the lessee which, together with a number of other outstanding wants of repair, adds up to just over £50,000.   The Pubco point to the repairing clause of the lease which quite clearly states that the lessee must ‘put and keep’ the building in good and substantial repair.   The lessee claims that the building always had ivy growth at the side of the function room and anyway, the ivy growth was not the lessee’s responsibility and the lessee could not control its spread.

 

The lessee tries to mount an insurance claim for the replacement of the flat roof as a result of the ivy damage and the ease with which rainwater is now penetrating the entire structure.   The insurance company send in their loss adjustor who quite rightly points out that the ivy damage pre-dated the grant of the new lease and if a claim were accepted for the complete replacement of the roof and associated structure, that would be classed as ‘betterment’ – in other words, putting the whole affair in a much better condition than when it was originally taken on.   Claim dismissed.

 

The core issue is that there was no Schedule of Condition taken out at the start of the new lease which then would have documented the state of repair of the property that was being handed on to the new lessee.   The only area of slight relief that could be offered to the lessee, was that the Pubco required that all of the electrical wiring and central heating system should be replaced completely.   The lessee, however, could easily repair the central heating system rather than replace it and also could easily repair the electrical systems without, again, having to completely re-wire.   Basically it is the tenant’s obligation in the absence of a Schedule Condition, to return the premises in a good and tenantable condition with the items of plant in satisfactory working order.   There is no direct obligation to deliver up the premises with brand new equipment on the basis that the standard of repair is to be judged by reference to the condition of the fixtures, fittings and effects as at the date of the grant of the lease.   This was recently covered in an influential recent piece of Case Law:  Sun Life Europe Properties Limited –v- Tiger Aspect Holdings Ltd [2013].

 

However, the outlook does appear very bleak for the lessee who is unable to sue the landlords of the property next door for having allowed the ivy growth to cause so much damage.   An insurance claim has been ruled out and the Pubco is able to act under the repairing obligations of the lease as there was no initial Schedule of Condition drawn up and agreed between the parties.

 

2.  Mediation

There are a large number of lease renewal cases being pursued, generally because of disagreements over the rent that should apply as at the start of the new lease.   Almost all of the third party referrals are now settled by Private Arbitration on Court Terms which is generally seen as a more cost-efficient and time-expedient method of resolution compared with the County Court.   However, there are still one or two large, well-funded cases, marching sturdily towards the County Court.   We always press for mediation as a method of resolving difficulties, as it almost always leads to a negotiated settlement.   Strangely, the Pubcos and Brewers rarely offer the opportunity of mediation and would far rather see the issues settled at far greater cost in open Court.   Some say they might be trying to ‘cash starve’ the tenant into settlement pre Court hearing.   This often happens.

 

Mediation is a system of genuine give-and-take in that each side will probably, in the fullness of the day’s haggling, concede much more than they had originally intended, to broker a settlement which can be signed there and then.   We always start off mediation hearings on the day by telling the Client “you will not necessarily like the outcome, but you will have achieved certainty and the outcome is a huge cost-saving”.

 

The two opposing sides have a ‘face-to-face’ airing of views as the first steps in the process.   Both parties then retire to their respective conference rooms and the mediator, in effect, shuttles between the two rooms exchanging direct views over factual and non-factual issues.   Generally each side will have a Solicitor present and indeed sometimes a Barrister, and will certainly have their own valuation experts.   Sometimes the experts meet separately and independently of the parties to try to the narrow the issues which is always helpful.

 

Strengths and weaknesses are openly aired and it is almost like a game of poker as to who blinks first and concedes the most to gain a formal written settlement.

 

In our considered view, it is essential that the offer for mediation should be made as early as possible, which forces the other side to have to respond positively.

 

There was a recent reported item of Case Law in the Court of Appeal which confirmed that failure to respond to an invitation to mediate, may well be penalised in the issue of final costs, even if the party that turned down the mediation is ultimately successful when the whole affair proceeds to the County Court.   The Judgement underlines the enthusiasm which the Judiciary has for mediation as a positive means of resolving disputes out of the formality of a prolonged Court hearing.   The decision was PGFIISA -v- OMFS Company 1 Limited [2003].

 

It should be recognised that not every single mediation is successful – if one of the parties comes to the process with no intention whatsoever of negotiating, but just to posture and bully.   This can also be supported by hostility and total aggression which thankfully is rarely encountered with pub disputes.

 

Pub disputes are slightly special in that it is recognised that there is an ongoing trading relationship between the Pubco and the lessee and the process of mediation can sometimes save – and even re-structure – that relationship which might have been founded either on a ‘misunderstanding’ or a personality clash that can be resolved by the member of the Pubco’s retail staff being assigned to other outlets.

 

If push comes to shove, mediation is infinitely preferable to marching off to the County Court.

 

3.  Structural Works

If we could have a pound coin for every time that we have a case where structural works have not been documented, we would all be very rich people!   There have been a spread of recent rent review and lease renewal cases where the Pubco / Brewer has had full knowledge of sometimes quite extensive structural works, have had planning application forms served on them and have even suggested that they as the freeholders would undertake the relevant work, and had the works themselves costed.   However, in every single instance, the freeholder never offered to document the whole affair with a standard Licence of Alteration. 

 

Then the rent review comes along and either the extensive structural works are ‘forgotten’, or if the issue is raised, it is batted away with the mantra of ‘it hasn’t been formally documented as required under the terms of the lease’.  

 

Generally, rent review disregards will confirm that the effect on rent of structural works being undertaken by the tenant at the tenant’s expense, should be ignored from the rent review process.   That being the case, it is in the freeholder’s interest to conveniently forget this sometimes quite substantial disregard and proceed on the basis that all of the structural works that were undertaken at the tenant’s expense, are included in the assessment of Fair Maintainable Trade.

 

The way out of this situation, which we propose in every single instance of its happening, is the application for a retrospective Licence of Alteration which cannot reasonably refused.   Indeed, if the works themselves are not massive, we have had a number of instances – certainly with Enterprise Inns – where there has been the grant of a Small Works Agreement, generally in letter form, which helpfully regularises the situation.   However, not all Regional Managers even know that the facility of a Small Works Agreement exists.

 

4.  Economic Forecast

Salutary thoughts from the Office of National Statistics who published their latest Report on the 3rd December 2013.

 

Working households have seen their incomes fall 6.4% since 2007, set against the income of pensioners which has risen more than 5% in the same period.   By contrast, tax credits for lower paid families have been cut and child benefit has been frozen and removed altogether from higher earners.

 

Stagnating wages have hit families hardest with the following thoughts from Gavin Kelly, Chief Executive of the Resolution Foundation:

“Since the financial crisis, wages have risen by between zero and 1.5% while inflation has risen by between 2% and 5%.   This means for most people, their wages have fallen a long way behind.

 

He then said that lower earners with a couple of children, have fared particularly badly with the changes in personal tax allowance outweighed by cuts to tax credits and benefits to families.   The biggest losers are those under 30 and in work.   Their incomes have fallen by about 12% since 2009 according to the Resolution Foundation.

 

John Hawksworth, Chief Economist of Price Waterhouse Cooper said that “we are returning to the growth rates common in the 1950’s and 1960’s.   In general, we will have to live within our means.   It’s a return to the 50’s and 60’s ‘make-do-and-mend’ with consumers becoming much more price-conscious”.

 

However, the length of time that consumers will have to tighten their belts has really shocked experts.  It is considered that consumers will face being saddled with austerity until 2030 with rising housing, energy and food costs eating into squeezed household budgets.   Economic forecasts, if right, suggest that consumers will be left with the longest hangover in history after bingeing on debt-fuelled spending in the 20 years leading up to the financial crisis which most agree kicked off in the autumn of 2008.  There is a direct effect on the discretionary leisure spend in the On-licensed trade, particularly with sensitive high pricing as a result of supply ties.

 

We know it is somewhat doom and gloom.   However, it does place into proper perspective the outlook of one independent expert valuer acting for a Pubco in a recent disputed rent review, when he declared that:  “relatively the economy has recovered and the outlook is now far more positive”.  

—————————

 

But less of the dry stuff, Christmas is almost upon us and we wish you all the very best for the Festive Season and for a, hopefully, financially viable 2014.

 

5.  And Finally

“I drink champagne when I’m happy and when I’m sad.   Sometimes I drink it when I’m on my own.   When I have company I consider it obligatory.   I trifle with it when I’m not hungry and I drink it when I am, I never touch it – unless I’m thirsty”  (Lily Bollinger)

 

“Don’t put any ice in my drink.   Takes up far too much room”.  (Groucho Marks)

 

“I have a theory.   Beer makes you smarter.   It made Bud Weiser”.  (Bill Mather)

 

 

Best wishes from the Team at M & C

Email:  info@morganandclarke.co.uk

Phone: 01285 719292

How to boost Cash Flow and Profitability in difficult times

Protecting a business during difficult economic times requires both obvious and more subtle legal measures. This article looks at some easy steps businesses can take to boost cash-flow and profitability through more effective management of their customer relationships.

Practical advice

  1. Request a payment in advance or staged payments – you may be surprised at the willingness of customers to consider these types of arrangements for appropriate projects.

 

  1. Politely but firmly enforce credit terms (i.e. periods during which invoices must be paid) – there is very rarely any reasonable justification for customers taking any longer than 30 days to pay invoices. If they do, in all likelihood they are trying it on and in effect you are providing them with free credit unless you charge them interest. Whilst it may not be possible to persuade large customers, with a clear policy of taking longer than 30 days, to make payments earlier, in many cases provided that you are clear in your contract (see below) and communicate clearly and promptly then you are unlikely to be criticised for exercising your rights to charge interest on amounts due. By doing so you can boost your revenue and create an incentive for clients to pay earlier.

 

  1. Credit checks of customers – if you are offering customers generous credit terms it may be advisable to conduct credits checks on the customer before doing so particularly if the amount of credit is material. Two well established credit agencies are: Equifax (http://www.equifax.co.uk/) and Experian (http://www.experian.co.uk/).

 

  1. Debt factoring – some companies “factor” their debts to improve cash-flow albeit these arrangements can have serious downsides such as:

 

¨       Factoring companies often require personal guarantees from shareholders/directors;

¨       It can give a negative impression to customers about your financial viability.

¨       There is a risk of damage to your reputation if the factoring company enforces debts in an over vigorous way.

  1. Review you customer contracts/terms of business – we are always surprised by how many businesses operate with no written contracts at all with their customers. In good times the risks associated with this may be acceptable. In a recession, having a good contract with your customers may be the difference in enabling you to survive.  We would advise clients to consider in particular the following things:

 

¨       deliver any goods and beware attempts by customers to impose their own terms and conditions. The Courts are unlikely to uphold your terms and conditions if they are inserted on the back on your invoices only as the contract will have been wholly or partially performed before the customer becomes aware of the terms.

¨       For contracts where you are making a regular supply of goods or services, is a fixed “initial term” of the contract possible? In other words a minimum period during which the customer is committed contractually to buy from you and cannot terminate the contract.

¨       Can you include a period of notice which the customer must give to terminate your contract (say for example three months or possibly more)?  Without any explicit words contracts can be terminated on “reasonable notice”.  That is too vague a principle under which to operate for many businesses and your business may get into trouble if a big customer terminates a long standing unwritten arrangement with very little or no notice.

¨       Include a clear provision giving you the right to charge interest and also to terminate the agreement if invoices are not paid by the due date. Even if you do not have an documented right to charge interest in your contract, the Late Payment of Commercial Debts Regulations allows businesses to claim a rate of late payment interest of 8% above base rate provided both parties are acting in the course of business.

¨       If you are supplying goods to customers (as opposed to services), you should have a clear provision in your contract under which ownership of the goods does not pass until you have been paid. This is essential to protect your ability to recover the goods if your customer goes bust. Unless such a clause is in your contract the ownership of goods passes to the customer on delivery, not payment, so you will get nothing back if the customer goes bust. These so called “retention of title” provisions need to be carefully drafted to ensure that you can easily enforce the terms against a liquidator or administrator so legal advice should be sought but in essence the idea is that if a customer goes bust you can walk into their premises and take your goods back.

  1. If you have doubts about the viability of a customer, recover your debts quickly – often he who proceeds first recovers money. Do not let big debts build up with those customers who you suspect may not be able to pay.
  2. Can existing onerous contracts with customers be re-negotiated? Look at getting out of onerous contracts which are not profitable. Obtain advice about whether legally binding obligations have been formed or not or whether early termination rights exist. Consider the cost of terminating contracts which may be cheaper than continuing.
  3. You could consider 7.5-10%, discount if paid within 7 or 14 days, 5% discount is not enough to encourage early payment with struggling small companies.

The reality of Senior Management, at least some of them

The Paper Tiger Syndrome: Standards that Only Work on Paper

Executive Director of Operations at NovusLuxus LtdTop Contributor

The Paper Tiger Syndrome: Standards that Only Work on Paper Admit it. We’ve all been there and seen in practice.

The message that’s handed down from upper management, through the ranks, to the employees who work directly with the actual customers who pay the bills and drive the revenue.

Or the ideals that management expects you to uphold that they fail to do themselves.

They could be instructions about how to work with customers, how to get jobs done, and the manner in which responsibilities are handled.

There are so many processes and procedures in place that many of them actually never make it down to the lower level employees; there are simply too many of them.

Yet when you spend your time in the trenches, down in the mud, you know full well that these systems, these ideals, rarely ever works out the way it should on paper.

There are a million things that can go wrong (or right, if the stars align in such a perfect way for your day) that can transform what might be a typical situation into something far beyond the scope or ordinary.

Ultimately, though, we all know and fully understand the value of teamwork, customers, and service, but at the same time, those standards can sometimes seem as though they’re written from outer space.

There’s always going to be those individuals (customers as well as employees) who are ornery, who are never happy, and who will try and take advantage of the system. Managing hospitality or a company requires care, patience, and a thick skin.

For some, it might be easier to be thrown into a tiger cage and hash it out with one of those four-legged creatures.

There are some people who simply will not be satisfied, who have no interest in obtaining service from your company again, and who make it a habit to be as ornery and difficult as possible.

Some employees take on a managerial role and dictate what everyone else needs to do while doing little themselves. This creates nothing but tension among the ranks.

Then you have the customers who are never happy. That’s where the rules and expectations on paper can fall apart.

Standards on paper are fine to get everyone on the same page.

You still need to apply them to the real world, though. For that, you need some common sense, a little faith from the boss, and a system by which everyone can be heard. Find out what a talented team can do for your hospitality business, contact NovusLuxus today

Taken from the Caterer and Hotelkeeper.

Latest Licensing and John Gaunt & Partners News

Nottingham – Late Night Levy update

Posted: 07 Jan 2014 04:00 PM PST

Further to our news item on the 17th December at which time we confirmed that Nottingham City Council  were to launch a formal consultation on the possible adoption of a LNL (see our articleNottingham city to consult on late night levy“) we can confirm that the consultation will run from 13th January 2014 to 6th April 2014 and the responses will be considered at a further meeting of the Licensing Committee before the issue is finally determined by a meeting of the full Council later in the year.

The Late Night Levy Consultation Document can be found clicking here.

If you have premises which will be affected by the Levy and you require advice or assistance in drafting or presenting your representation, our many solicitors are ready to help.

We shall keep you informed as to progress of this consultation.

New client appointment

Posted: 07 Jan 2014 04:00 PM PST

In one of a series of new client ‘developments’ we are delighted to be able to announce that following a thorough tender process and panel review, we have now been retained by Sodexo Limited as the sole provider of licensing and associated regulatory services across England and Wales. Sodexo develops and delivers a unique array of on-site services aimed at improving Quality of Life and through ‘Sodexo Prestige’ delivers corporate dining, hospitality and event services across the UK and Ireland, for which there is an ongoing licensing requirement.

 

John Gaunt said that ‘we are delighted to have been appointed to the Sodexo panel following the assessment process and look forward to working with the Sodexo team to assist them in delivering their professional services to their clients. This is a significant development for JG&P’

Why you should praise the economy’s unsung heroes.

If you are looking for business finance for anything, click on the link below, ASC’s latest newsletter.

Click here to read our latest Newsletter

You don’t need me to remind you that the last few years have been tough economically. But as we look ahead to 2014 things are slowly beginning to look up. The British Chambers of Commerce has predicted that the UK economy will grow by 2.7% and pass its pre-recession peak of 2008.

And ever so slowly the politicians and pundits are beginning to realise that the most solid backbone of the British economy has been its SME’s – business people and entrepreneurs, like you, who have weathered the storm for the past 5 years. It is not just down to the big guys with their multi-billion pound businesses. But there are still so many hurdles to face, whether it is red tape, employment regulation, compliance or a lack of sensible business finance.

So where does ASC come into this? Well for the past 40 years we have been focusing on assisting business people and entrepreneurs in organising finance for their business, so that they can focus on running and developing their business. We recognise that our clients are human beings and deserve to be treated as individuals, not just form-filling robots who can be fobbed off with call centres or fixed lending criteria. And since facts speak louder than words: ASC arranged over £100 million of finance for small businesses in 2013.

If your users want to speak to an experienced director, with straight and direct communication we would love to talk to them and listen to their business ideas. The benefits are simple: there is no obligation and they can find out how their business can benefit from working with ASC.

P.S. Throughout 2014 we will aim to highlight specific groups of small businesses and entrepreneurs, from retail to manufacturing to healthcare. And to start off, we wanted to highlight an often overlooked sector of the economy which deserves its praise and moment in the spotlight – Light Industry. These small firms are producing key items which we all use every day – from clothing, to electronics, furniture and home appliances. And generally speaking, they don’t attract the same level of attention which the larger heavy industrial companies receive. So we wanted to take this moment to thank them for their vital contribution. Click here to read more.

 

Paris Wine Fair 2013, a fantastic day out.

Paris  Wine Fair 2013

Firstly I must say, I am not a wine Buff, I enjoy a glass or two of nice inexpensive wine, the subtleties of expensive wine are wasted on my pallett, as with the extreme costs of some fine wines, anything over £8 to is not considered for normal drinking.

I have sold many thousands of bottles of wine in my various pubs and restaurants and many people think that I must be very knowledgeable on the finer points of good wine, which I am definitely not.

For many years I was unable to drink wine, beer and neat spirit, owing to a medical problem, which miraculously cured itself about ten years ago.

Since then I have been a careful imbiber of reasonably priced wine.

Our Parisian branch of the family have been telling my wife and I that we must go to the Paris Wine Fair for Independent Wine Producers, held at the begining of December, every year, this year we succumbed.

The Wine Fair runs for five days, from Thursday to Monday, it would appear that Saturday and Sunday are to be avoided, since they are the most popular, there is an invitation only preview on the Wednesday and this is also very well attended, in fact we were assured that it was very crowded.

There are some essential ground rules.

You need to have a car parked in or close to where the Wine Fair is, you definitely need a small hand trolly to transport your purchases to your car, otherwise you need a taxi to get you back with your purchases to your car.

We went on the Thursday, the Wine Fair is held in a large Exhibition Hall, near Porte De Versailles away from the centre of Paris.

My apologies for going to some length to explain things that you need to consider or follow, it is not like any trade exhibition that I have been to and I have been to many.

We arrived at the entrance to the Wine Fair and were given a suitably labled wine glass, this was our admission ticket for want of a better word, our glass was checked before we entered a vast hall and we were given a re entry ticket.

There were hundreds of stands laid out before us, every one was exactly the same size, with a round sign with its reference number and the name of the wine producer, it looked like hundreds of wooden lollipops in rows, in fact there were around twenty aisles with up to sixty stands on each aisle.

I immediately bought a catalogue, which is an essential, otherwise we would have got absolutely nowhere, I speak no French, but the catalogue gave some very essential guidance and information about the regions of wine growing and vineyards, for four euros it was worth its weight in gold.

It would appear that with the aid of your wine glass you can sample anything that is on display, normally French reserve to the Enlish across the Channel is paramount, not at the Wine Fair, I met a selection of charming knowledgeable wine makers, who ignored my ignorance and made me feel like a fun guest, explaining at length all sorts of aspects of making and drinking wine

Our hosts took us to Aisle A, Stand 21, as a first port of call, they had been buying Entre Deaux Mers for many years from the Doublet family.

The wine was superb, the discussions were fascinating and hilarious, interspersed with samples of all their wines, we agreed to return later to buy a selection, which we did.

Chateau Vignol – Tour de Calens, Bernard and Dominic Doublet, 33750 Saint Quentin de Baron, Tel:- 05 57 24 12 93 email info@famille-doublet.fr.  www.famille-doublet.fr

Their speciality wines are Entre-Deaux-Mers, Graves, Saint Emillion Grand Cru and Bordeaux Claret.

The next stop was to locate a wine that we had with dinner the previous night called Gicondas, which rated by all of us, as certainly the best red wine that we had tasted for some years.

Sadly the wine on display was not the same, they were good and possibly too young by comparison to the wine of the previous night, so we moved on.

Opposite was the Chateau Bovila stand, we had bought two cases in Cahors two months previously, purely by chance, never having heard of it. We had a half bottle of Chateau Bovila in the restaurant of our hotel.  They were selling cases of wine in the reception for twenty five euros, we bought two.

The family of three were manning the stand, only one appeared to speak English, we tried everything amid hoots of laughter and bought a further three cases.

Chateau Bovila – Chateau de Rouffiac

Pascal and Oliver Peron, Rouffiac, 46700 Duravel, tel 05 65 36 54 27, email vignoblespieron@orange.fr

The day continued in a similar vein, every stand that we visited was interesting and often humorous, with the exception of two, one was very grumpy and the other was not very cheerful or helpful, not dissimilar to a UK Trade Show.

I would recommend anyone that has the slightest interest in wines or selling wines to go, we bought more than we intended and they were very good value and I came away very much wiser than I was before, not from the conventional approach put out by people selling wines, but the real people that grow the vines and make the wine.

Below are the other stands whose hospitality we enjoyed, sadly or fortunately we didn’t go to every stand.

The Wine Fair caters for wine of all types, champagne, brandy, cognac, liquers etc.

Domaine Martin

Wines, Rasteau, Cotes du Rhone Villages – Plan de Dieu, Cairanne etc.

Eric and David Martin, Plan de Dieu, 84850 Travaillan, tel 04 90 37 23 20, martin@domaine-martin.com

Paul Bossuet

Logis de Folle Blanche, Senouche, 2 Chemin des Terrieres, 1760 Chaniers, France, 0033 (0)5 46 91 51 90

Superb Pinot, Cognac and Liqueurs.  bossuet.logisdefolleblanche@wanadoo.fr

Clos Val Seille

Jean-Marc Bonvin, 71 Boulevard Jean Vilar, 84350 Courthezon,  04 90 70 70 75  closvalseille84@orange.fr

Superb Chateauneuf-du-Pape, Cotes du Rhone Villages, Cuvee Saint Georges.

Great humour and a lot of laughs and got me to spend more than I would normally spend on red wine.

Chateau Les Ifs

Jean-Paul Buri, 46220 Pescadoires, Nr Cahors,05 65 22 44 53,  chateau.les.ifs@orange.fr

Jean-Paul does the best quality Wine Boxes and some other superb wines, but do phone before you go there.

We had a lot of laughs with him even though he doesn’t speak English.

I have listed these wine producers since we bought a considerable number of cases from them and they were all highly recommended by our french relations.

If you just enjoy wine and Trade Shows, this has to be a must in the callender, or if you want to buy some interesting wines for your restaurant and pay the duty, it’s well worth it.

Barfly

 

 

 

 

 

Great British Pub Award 2012 Pub of the Year forced to surrender lease

Great British Pub Award 2012 Pub of the Year forced to surrender lease

By Ellie Bothwell , 02-Jan-2014

The Great British Pub Award 2012 Pub of the Year winner has been forced to surrender his lease after his pub company claimed he was a below-average operator.

http://www.morningadvertiser.co.uk/General-News/Great-British-Pub-Award-2012-Pub-of-the-Year-forced-to-surrender-lease

This has to be read, another good operator sent to the wall, by an uncompromising Pub Co.

How can these Pub Co’s ever be accepted as serious pub owning companies when they treat good operators this way?

Bring back the old Family Brewers and get rid of the lawyers, accountants and property men controlling these Pub Co’s, sadly I saw a lot of previously good Morelands operators fail or get out when this company took them over, nothing changes.