Hundreds of London & Edinburgh Swallow Group (LESG) licensees face the extraordinary prospect of a direct relationship with the freehold owner of their pub in the wake of the company's collapse.
As reported on monrningadvertiser.co.uk earlier this week, administrator Ernst & Young is handing back the head leases of more than 450 tenanted pubs to the individual freehold owners.
Ernst & Young has been unable to find anyone willing to take over the leases held by LESG -which number more than 450 - and is asking individual landlords to make contact with tenants directly.
An Ernst & Young source said: "We're abandoning the tenanted side. Given the cash constraints of the business, we're unable to pay rents to landlords of tenanted sites. We're encouraging landlords to contact sub-tenants directly."
Freehold owners, many of whom bought LESG freeholds at public auctions, face becoming direct hands-on landlords, effectively replacing LESG.
Experts believe a number will try to place the running of the sub-lease with individual tenants in the hands of other management companies such as County Estate Management. Others are expected to negotiate directly with individual licensees as to how rent will be paid.
One LESG tenant, Colin Horton, of the Swan, Winslow, Buckinghamshire, was contacted by his freehold owner at the weekend.
His pub was sold at a public auction in December 2004 for £320,000 with a leaseback to Newlord, an LESG subsidiary, for 35 years on a rent of £22,500 per annum.
Horton was paying LESG a rent of £11,500 per annum - with the remainder of the rent promised by Newlord being made up from the company's beer discounts.
The freehold owner has told Horton he took out a second mortgage on his house to buy the pub.
His repayments are around £18,000 per annum so he has asked Horton to pay that amount and take on a full repairing obligation.
Horton said: "London & Edinburgh didn't have a clue what it was doing."
Another LESG tenant, Jim Mellor, of the Lion Hotel, Nantwich, Cheshire, received a call from his freehold owner this week.
"He wants to come and see me to sort something out," he said.
LESG sold his pub for £377,500 with the promise of a rent of £29,000 from the company.
Mellor pays a rent of around £24,000 a year and has been losing money on weekly takings of about £2,500.
"It's been touch-and-go whether I'm staying."
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