I read with interest your opinion article 'Struggling hosts need help in the 11 August issue of the Morning Advertiser and write regarding this and associated articles. How very true much of what you say is.
My wife and I have worked successfully for ourselves for the last 20 years until recently, becoming associated with a national pub company. We now find ourselves facing possible bankruptcy.
We are desperately trying to avoid this, but have received little or no help from our pubco. In fact much the opposite.
The greed and unsympathetic attitude of the pubco is killing the trade. It seems to suffer from ostrich syndrome bury your head in the sand and the problems go away. When are they going to get in the real world?
We closed our doors for good on 1 August. We could not see the viability of continuing to trade. Since that date all we have received is threats from the pubco and its solicitors: 'bully boy tactics.
We are trying to sell off what assets we have to pay our creditors, so that we in turn don't hopefully disrupt other people's business.
Max R Course
Former landlord of the World's End
Ecton
Northampton
Transparency's the key in rents and reviews
I write following Barry Gillham's My Shout article on rents and reviews (Morning Advertiser, 4 August), and I seek to show why valuers have got it wrong in the past and how the Trade & Industry Select Committ- ee (TISC) requirements will promote transparency.
Tenants have good cause to look at both valuers and pubcos as the cause of excessive rents, primarily due to the lack of transparency.
Valuers have sought to cast aside the evidence that shows them as one of the prime causes of excessive rents. The TISC recognised pubcos were not playing fair. Valuers were supposed to exercise professional competence, ethics and fairness. The TISC has now set the basis for rent assessment and rent review; clearly the valuers will have to address their failures and embrace the recommendations.
So what are the issues? The valuers suggest:
l that letting or selling a pub is little different to selling a house. Utter claptrap! A pub is a business; a house is not. The pub value depends upon not just what the purchaser can put forward as a deposit, but how much the business can service borrowing and earnings. A house does not require the latter consideration since the buyer would have an income stream from some form of employment.
a prospective tenant offers a rent that he would be comfortable in paying. Who told him what the business would generate? A valuer? Evidence suggests that valuers tend to suggest higher volumes and margins and lower costs. Valuers have been known to omit or understate costs thereby increasing 'profit and justifying a higher rent.
tenants should not look on landlords as being 'wicked. The recommendations of the TISC suggest otherwise. They recognised that there was no transparency in rent assessments. And whose fault is that? Valuers of course.
they look at the evidence. That is like saying: 'She stood over him with a knife in her hand; he was dead... The evidence is that she killed him. We all know that such singularity is not evidence. Where is the detail? Is the evidence capable of scrutiny? Was there due diligence?
l the evidence that valuers say they use are comparables. But what use are they? In another sphere, it was proclaimed that two siblings dying of cot death suggested murder. The so-called 'evidence was shown to be flawed primarily because it was not transparent. Comparables are currently not transparent. If 10 people are browbeaten into accepting a rent they cannot afford, valuers conclude that does not matter they agreed, and therefore it sets a benchmark of rents that everyone should use as acceptable. Rubbish! The valuers have just created and endorsed a false market. The TISC saw through this charade.
that comparables, hinged to lease and supply tie restrictions, are sound since they are based on the generally recognised profits method of valuation. There could be a grain of truth in this. Unfortunately the construction of the 'profit assessment in its current format fails to exercise professional competence, ethics or fairness. The TISC has seen this and given its recommendations to put this right.
Pubcos use valuers. It is quite conceivable that valuers looking to their income stream recognise that looking after their main source is their future. It is not uncommon for valuers to act for both sides, something totally unacceptable in virtually any other profession. When a valuer acts as an independent expert is he going to consider what is right when he practices a different code on a daily basis? Do you think this is likely? I would doubt it.
So the valuers in acting for pubcos, and sometimes as an 'expert, do set the scene for rentals. A sitting tenant faced with a review and claims that other pubs are seeing rent increases in spite of falling volumes and costs rising above inflation, frequently settles. This forms another benchmark for other rent reviews. Why don't the tenants resist? The answer lies in the fact that most do not know the basis on what rent should be calculated; that national and regional trends should be considered; and that the valuers advising them omit or understate costs and hype volumes and margins to arrive at a figure that bears little or no resemblance to reality. And tenants are uncertain or phased by the prospect of professional costs they have to bear.
The valuers would have tenants believe they are 'just doing a job claiming they do not set the tone of rents and values. The above shows this to be totally untrue, and the TISC has seen through this fog and come up with recommendations. You can be sure it will ensure they are carried through.
So both valuers and pubcos must now look to their laurels. Their previous stance, poor information and hidden agendas need to be opened up to examination. Transparency is the order of the day.
Brian Jacobs FCCA
via e-mail