Rent rise too far

Mr Q is considering surrendering the lease of his Welsh pub because of a proposed rent increase by his pubco

I fear I may have to surrender my lease if the pubco enforces its suggested rent increase. I have been here for seven years.

Our current rent stands at £34,368, which I feel is already too high, especially as the smoking ban has just begun in Wales. Our net turnover last year was £161,418 (£189,667 gross) on 100% wet sales.

The area manager wants to increase the rent to £45,000 a year. That would put me out of business and I would rather hand the pub back to them and come to some arrangement about fixtures and fittings than carry on.

The area manager believes the pub has the perfect opportunity to capitalise on a food offer, as it does have a kitchen and restaurant area. Currently, I serve no food because I consider that the lack of car-parking space means it would not be viable.

We are on the high street - but I wouldn't call it a real high street, as all the shops close at midday on a Saturday. It is hardly busy and there is a real lack of parking available.

I have a beer garden, which we developed at our own cost. They may be trying to force me out because I have so far refused to let them install Brulines in my cellar. I said I would only agree to do that if they paid me £100 a week electricity costs. I know it would not cost that much, but they charge me over the odds for my beer.

I worry that we will be forced out and, effectively, I will have wasted my time and money on nothing. I would welcome your advice please.

Paul Davey, managing director, Davey & Co

At present your current rent represents about 22% of your net annual turnover and the rent increase proposed will represent approaching 30% of net turnover. As a rule, annual rents should be in the 10% to 15% range for most tied leases.

On the basis that you are in a tied lease, the rent burden, in addition to your other operational overheads, suggests to me that the current value of your business is unlikely to exceed the value of your fixtures and fittings, even without the increase in rent. Therefore, perhaps the real decision you are facing may be whether or not it is viable for you to remain in your current unit at all. Only you can determine this.

As your business is 100% wet-led, it is probably not

unreasonable for your area manager to suggest additional revenue streams to you. As for their requirement for you to install Brulines in your cellar, maybe this represents an

opportunity for you to consider this proposal in return for a substantial reduction in the proposed rent increase. After all, successful negotiation is all about give and take on both sides.

If you do decide to soldier on, you definitely need to take professional advice. Your adviser will check the rent review provisions in your lease as a starting point.

Settling rent disputes is all about "reasonableness" and if your relationship with your area manager is not a

particularly happy one, a professional adviser acting on

your behalf will certainly help to diffuse the situation and hopefully introduce the "reasonableness" required to settle the matter satisfactorily.

Costs for a professional adviser to act in rent disputes can be agreed on the basis of a percentage of the annual saving achieved against the increased rent proposed, thereby

ensuring the adviser concerned is correctly incentivised.