Enterprise licensees win 12% rent reduction
Rent at a London pub fell 12% in arbitration after Enterprise Inns proposed an increase.
The pubco wanted to increase rent at the Eagle Ale House in Battersea from £52,130 to an undisclosed figure.
Eagle Ale House lessees Simon Clarke and David Law believed the pub was already over-rented.
They originally proposed rent should be £17,000, although they conceded that was unrealistically low.
The licensees took the dispute to arbitration where the new level was set at £45,750.
They argued that the "good will" created by Law, who has run the pub for 11 years, was crucial to its trading success. They pointed to the fact that 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 to 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's chief operating officer Simon Townsend said: "I can't comment on the details of any arbitration, including those that 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."
modernising upward-only rent review clauses
The rent reduction at the Eagle Ale House came despite an upward-only rent review (UORR) clause in the lease.
Enterprise said it asks for any UORR clauses to be ignored in arbitration.
In 2003, Enterprise chiefs told the Trade & Industry Select Committee into pubco power that UORR clauses would be removed from leases where they exist as soon as possible.
Townsend said: "Our widely-publicised stance on [UORR] 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 modernised hundreds of old agreements that included UORR clauses, and have transferred them to Enterprise Retail Partnership Agreements, where no such clause exists."
l Property - p47
