London & Edinburgh licensee Jim Wyllie has endured a nightmare time following the collapse of the company and wants to know exactly where he stands
I have been involved in the licensed trade all my working life (about 30 years).
In January this year, I signed a 10-year lease at the Chameleon bar in Lichfield, attracted by London & Edinburgh's (L&E) Super Premium Discounts. The derelict site needed full development but was in an excellent location for day/night circuit trading. I was also informed that it had the benefit of a 2am premises licence.
I agreed to a six-month rent-free period and favourable rental terms to help recoup my £100,000 refurbishment investment. The money had come from my earnings, family savings and bank and lease company loans.
In March I reopened as the Feria. On my second trading weekend, police informed me the licence was actually until 11pm as L&E had not applied correctly. It took L&E almost four months to get the variation. My trading losses for this period totalled £20,000.
I agreed to a further six-month rent-free period with L&E in recompense.
You can imagine my horror when, in the week of our second re-launch, we received news that L&E were handing back their lease to the superior landlords and I should start negotiations with them.
With all my money put into this business, how can it be right that I have to find more money and have to start negotiating a new lease with someone else?
To clarify, my tenure was a 10-year sub-lease from London & Edinburgh's 35-year lease from their landlords, Johal Properties, who at the time of writing have shown little understanding and support of my situation.
I need answers to the following questions:
l Is my investment lost?
l Is my tenure lost?
l How can I avoid bankruptcy and loss of my personal licence and ability to trade that comes with it?
What the administrators and L&E have done may all be lawful, but it's far from moral that myself, my family, banks and creditors have no recourse in law.
What about the Human Rights Act? Or a Trade & Industry department enquiry?
What about some form of re-start funding?
Peter Coulson MA legal editor
There are two elements to this unfortunate business — the misrepresentation over the licensing hours and the financial loss incurred in starting up this venture.
My advice to all incoming lessees, as part of their due-
diligence procedures, is to check all licences and permissions for themselves and not to rely on verbal assurances. It would have been simple for Mr Wyllie to have asked for the existing licence summary or to have contacted the local licensing office for details. I appreciate that a lot was going on, but the loss of three hours of trading was critical to his business
success, so checking on that was absolutely essential.
Variation of the licence to add the extra hours would
normally have taken up to two months, especially if there was a hearing due to representations. During that time he would have to trade until the 11pm closing time, unless he used temporary event notices for some of the weekends. Four months is a long time, but the problem was that London & Edinburgh held the licence in its own name.
Mr Wyllie agreed to a settlement with L&E on the misrepresentation issue, but clearly his investment was vitally affected because he lost a considerable amount of potential income, not to mention goodwill, during the early-closing period. He can't, of course, recoup those losses directly from the liquidators but he must face the fact that all business ventures entail some financial risk and that if something goes wrong there is a chance that an investment can be lost.
His only recourse now is to reach a satisfactory agreement with the head landlord and hope that his estimate of the site's potential is accurate enough to begin to make money.
Barry Gilham chairman, Fleurets
Jim Wyllie's story is a horror-tale and it will be of no comfort to him that this is one of a great many that my colleagues have been trying to resolve over the past few weeks.
I suspect Ernst & Young are out of the picture and Jim should be talking directly to the freeholders. Those who leased pubs to L&E face similar problems - they expected to receive high rents from L&E for the next 35 years.
There is usually a compromise to be reached and Fleurets are often asked by landlords to advise what is an appropriate and affordable rent for the premises so that the unfortunate landlord and equally unfortunate tenant can strike a deal that will make the best out of a bad job for them both.
I suspect the landlord won't want a liquor tie which means Jim can still obtain big discounts on his supplies. He must be prepared, though, to pay rent that reflects his future profit and improvements he has made to the building.
Many of the landlords we have talked to are disillusioned by the pub business and would prefer to sell the freehold, even at a loss - this may be another opportunity for Jim. Bank repayments could be less or similar to rental levels.
If Jim is to learn anything from the past it is that he should have taken appropriate advice. A competent solicitor would have been sure to look at a copy of the licence before Jim ever took possession and signed the lease. If a deal is now to be made with the superior landlords, I would advise that a competent surveyor negotiates the key terms of the lease, including the rent to be paid now and the wording of the future rent review clause, assignment provisions etc.
A solicitor should then finalise the lease terms.
David Morgan chartered surveyor, Cookseys DMP
There could be a surprising number of positives for Jim Wyllie. First, the bad news: Ernst & Young are acting within the law; his investment is at risk; the tenure is technically in danger and he can forget about the Human Rights Act, Trade & Industry enquiries or re-financing. And the good news: his landlords do not want rent payments to increase; the bank won't want to lose its investment in him by letting him become insolvent, and he has a viable up-and-running business.
The renegotiation of the lease must ensure that rent payments are maintained. Any sensible landlord will want to keep him in occupation, as his departure would cause administrative mayhem and present a heap of difficulties in re-letting the property.
As the operator of the business and head lessee,
Wyllie should be recorded as the premises licence holder. The freeholder/landlord can be named as joint holder, but the business operator must also be a premises licence holder.
His bank manager will, if possible, find a short-term
solution if positive cash flows exist. A brief holiday on
interest or capital repayments is possible - it does not serve the bank's interest to see him go under. Both of them would lose out and banks can be supportive if he has successfully negotiated his lease on favourable terms.
Where did it go wrong? The key is the lack of the 2am licence in the beginning. Why didn't Jim's solicitor pick this up on pre-contract enquiries? Did the solicitor or the bank's valuer confirm the 2am licence was in place?
A case for damages?
Maybe. But certainly an avenue for leverage.
Jim Wyllie's response
I thank the MA experts - in particular David Morgan, who has been of great assistance to me so far - for their advice, but unfortunately the situation has just gone from bad to worse.
I have just officially returned to work after three weeks off due to stress. While I was off sick, the landlord has changed the locks. Now I cannot even get into my pub.
They say that I don't have a valid lease because they did not give L&E consent to sub-let the premises to me. But I am sure that I do have a valid 10-year agreement. My solicitor has advised me to go back in and change the locks again but I am not sure. As it is, I stand to lose at least £120,000.
If the first chapter of this story was a