The rental levels set by the RICS are for a Competent Operator (CO) or Reasonably Efficient Operator (REO).
The RICS do not, nor ever have run pubs and very few Chartered Surveyors have ever dirtied their hands with such hard work.
The Valuation Committee consisted of members whose main income is derived from perpetuating these rental levels and supposed high impossible demands of a Competent Operator (CO) or Reasonably Efficient Operator (REO).
Times have changed since this was originally written, the domination of Pub Co representation on the RICS Valuation has changed, there are surveyors who now act for lessees and tenants.
The BII was an august body and should have been consulted as to the scholastic and professional experience required to meet the standard required for a Competent Operator, which they were not.
The CEO of the BII at the time, declined to raise this issue with RICS.
However a number of senior members of the BII agreed that the standard required to meet the definition of Competent Operator would be three years profitable trading with advanced qualifications or five years profitable trading with basic qualifications, which are the requirements for an MBII. None of the Pub Co’s, without exception put their trainees through any training and experience sufficient to meet this criteria, in other words the deck is totally stacked against any would be lessee without any serious degree of managerial experience.
Sadly the BII is no longer a body of influence in many people’s opinion in the industry, following a succession of CEO’s, who had very little or no understanding of the problems in the industry.
The big question is, are the Pub Co’s guilty of fraud, misrepresentation or what???
They are all knowingly setting people up in an impossible situation, that is, all the companies that have followed the RICS valuation system, which the majority have.
I was a CMBII and I wouldn’t touch a pub lease in it’s present form, I would like to have seen the BII confirm the definition of Competent Operator to the RICS, I have tried and the RICS would not talk to me.
Certainly a BII Graduate Member or an Associate Member does not fit the criteria of Competent Operator, taking a few minor qualifications and a licensing qualification.
To confuse the situation, certain Pub Co’s have introduced Reasonably Efficient Operator (REO), possibly because of a total failure to meet the perceived standards of a supposed Competent Operator, however many of us have found the name has changed, with very little difference to the rental demands.
The licensing qualification is not like a driving test, it is more akin to studying the highway code booklet, you need good managerial working experience, pulling a few pints is the decorative side.
The qualifications used by the Pub Co’s will only qualify their trainees as BII Graduates and at best Associates, the majority would require a minimum of three years serious working experience to achieve vaguely suitable experience.
I suggested that a letter from everyone to the BII asking them to define Competent Operator along the requirements of an MBII and write to the RICS confirming this as being the standard, the RICS are not qualified to dispute this with the BII, it would have been interesting.
As long as this crazy rental valuation system is in place the failures, bankruptcies etc. will continue, the Pub Co’s have had serious problem over their debt structure and little space for movement, but the would be good lessees/tenants are getting streetwise, unfortunately they are being replaced by much older desperate people and totally inexperienced people who should never be in the business.
Hopefully it may change for the better with the new legislation, a voluntary code has not worked.
Note:- Since originally writing this article I received an invitation to the RICS to discuss the vagaries of rental levels and over valuation of leases/freeholds and certain changes have been made, though more changes are still required.
For every change certain companies try to block or avoid the change.
Unfortunately we would not recommend anyone taking a pub lease without consulting a professional who acts solely for lessees and tenants.
If you are hell bent on taking a pub, go to the Family Brewers and take a tenancy or a job leading to management in a pub.
I bought genuine freehold freehouses and built them up, the rents and draconian trading conditions of too many tied leases were far more costly than a commercial mortgage and the small print of your responsibilities when selling the lease.
Contact Chris for advice at PAS Link
Reasonably Efficient Operator Link
If in doubt email email@example.com