Monthly Archives: October 2014

A curious tale of the vagaries of a Tenancy Valuer. (Barrel-Dregs 269)

Bad Beer For Export

A curious tale of the vagaries of a Tenancy Valuer. (Barrel-Dregs 269)

This sorry tale bounced off  Potboy North’s ear whilst supping a crystal clear pint of the landlords special “Guest Ale” in a delightful hostelry at the southern end of God’s own County.

A very hard working couple with a tenancy due to expire next year, specializing in quality eating wished to withdraw from the non assignable agreement with a very reputable brewer.

This would under normal circumstances not be a problem, a well equipped, reputable business with a brewer that has not taken lessons from the Pub Co model.

The couple had spent a vast amount of money on the establishment, most of it in the last year on upgrading and replacing major items of value which were essentials to running a good business.

The brewer, being experienced in these things, gave a valuation of the inventory and put the tenancy on the market, which sadly did not cover the expenditure and the tenants expectations, which raised the point of an independent valuation.

An alleged reputable Valuer with letters after his name was summoned, came in, assessed and gave a valuation approximately two thirds of the Brewers valuation.

Horror upon horrors, he refused to discuss or give details to the tenants of his valuation of any individual items, because he said that this was standard practice. MORE

Auto Enrolment a Nightmare for small businesses, without help or guidance.

Auto Enrol

Auto Enrolment a Nightmare for small businesses, without help or guidance.

Auto Enrolment a great idea from the Government, to ensure that everyone has the option of a Pension.

However, the reality at this moment of time is something else for a small employer.
Every employer big or small has to be in a position to offer a pension to any staff that qualify or would like be involved, between the ages of 16-74.

The key factor is how many staff are employed in the business, this dictates the date that they have to comply with implementing a scheme that complies with the legislation.

If you ask any small business man if he knows anything about Auto Enrolment, the majority will not have a clue, you mention the Government Pension Scheme and they say “Yes”, but it doesn’t apply to them, they only have part timers.

You speak to anyone trying to implement a scheme and they are struggling, even a number of accountants. MORE

Rent, Rates and FMT

Some of you may think that we are a trifle obsessive with Rent, Rates and FMT, those that have freehouses may think it has no bearing on them, sadly it does.

The Rates are calculated using the same system that Rents are calculated on, with comparables being used for convenience and expediency by Valuers, having crossed swords with a number Rating Valuers in respect of my freehouses.

The RICS are well aware that the industry has been infected with many abuses of their system and by the use of comparables this has perpetuated the abuses until it has virtually established a Norm of high rent and rating valuation.

The serious weak link in this could be the FMT which nobody has queried in depth.

People have appealed against the calculation of FMT and had the assessment reduced, thereby effecting the rent demanded.

We raised the issue in a previous article to gauge opinion and it was surprising how few people had viewed the issue of FMT logically.

Having just discussed some outrageous rent demands by landlords with aggrieved tenants in the order 20-33% where their businesses turnovers have dropped conservatively by 25% in the last two years, the FMT’s that the increases were supposedly based bore no relation to reality and would appear to be based on a desire to regain the lost discount on the tie generated by the recession on the part of the landlord.

This raised the question of the capacity needed by brewers etc to meet theoretical demands of the FMT across the board, which may well enter the realms of fantasy, in the difference between reality and speculation for convenience.

Theoretically if you take the overall running costs of the business annually, plus your stock purchased, you should arrive at a figure, which when deducted from total sales and other income directly derived from the pub wouls leave the amount of the divisible split for rental valuation.

The fact that the Pub Co’s do not allow a basic wage for the tenant and partner is highly contentious and has to be included in the net profit, in theory allowing the Pub Co to claim half the tenants  wages if a 50/50 divisble split is used.

The Brooker case has raised serious comment and thought on the 50/50 divisible split as a figure.

For mathematical convenience, we will assume a 50/50 split of the divisible balance.

Using this method you may well find that your rental level comes out to say 6% of your gross turnover, but in fact your  actual rent equates to 15% of your turnover.

Assuming a turnover of £200K your rent would equate to £12K but in reality is £30K.

If you then take the proportion of wet and dry purchases say 70% and 30% against a notional purchase figure of £100K  (assuming a GP of 50%).

The actual wet purchases figure equates to £70K, if you now multiply that by the actual rent divided by the theoretical rent 30/12 =2.5 and multiply that by the £70K, you have a theoretical sum for wet purchases £175K.

If that were the case the brewers would have to more than double their capacity.

The pubs that I have viewed in the last few weeks all fall into that category.