Enterprise lessee gets 12% rent drop
Rent at a London pub has fallen 12% in arbitration after Enterprise Inns proposed an increase.
The rent reduction came despite the upward-only rent review (UORR) clause in the lease.
Enterprise said its policy is to ask for these clauses not to be enforced in arbitration.
The pubco wanted to increase rent at the Eagle Ale House in Battersea from £52,130 to an undisclosed figure.
Lessees Simon Clarke (right) and David Law (left) believed the pub was already over-rented.
They originally proposed rent should be £17,000, although they conceded it was unrealistic to think the level would be set that low.
The licensees took the dispute to arbitration where the new level was set at £45,750.
We advised the arbitrator of our policy not to enforce the UORR clause in any agreementsSimon TownsendEnterprise Inns
They said the "good will" created by Law, who has run the pub for 11 years, was crucial to its success.
They said the back-street pub is small, with around 60 seats, and serves no food.
Enterprise has paid them about £9,000 after backdating the rent reduction from November 2006, when the level was set at £52,130.
Clarke said: "We are very pleased with the result, although we think it should be lower."
Arbitration costs of £15,000 were split evenly between Enterprise and the lessees.
Enterprise reaction
Enterprise's chief operating officer Simon Townsend said: "I can't comment on the details of any arbitration, including those which award in our favour, as my understanding is that the proceedings and results of any arbitration are supposed to be confidential.
"However, I'm delighted to hear that the lessees are pleased with the result, as this means we can put these matters behind us and concentrate on the business.
"It is interesting to note that this pub has been assigned twice in recent years, including to the current lessees, at the previous rent level, and I believe that a substantial premium was paid on both occasions.
"This doesn't suggest that anyone had previously thought the pub to be over-rented, and the open-market valuation of a premium clearly supported that view."
Enterprise chiefs told the Trade and Industry Select Committee into pubco power in 2003 that UORR clauses would be removed from leases where they exist as soon as legally possible.
Townsend added: "On the subject of upward-only rent review clauses, our widely publicised stance on this remains clear and unequivocal.
"We advised the arbitrator of our policy not to enforce the UORR clause in any agreements, and clearly stated that the rent should be determined without reference to it.
"Over the last few years, we have taken modernised hundreds of old agreements that included UORR clauses, and have transferred them to Enterprise Retail Partnership Agreements, where no such clause exists."
