Enterprise plays down impact of rent ruling

Enterprise Inns says a High Court ruling where rent at one of its pub was reduced "does not bind the outcome of any other lease renewal or rent review".

In a high-profile case, Judge Iain Hughes QC said Enterprise tenants Charles and Leslie Brooker should pay a lower proportion of their pub's divisible balance, the shared profit, towards rent (High Court gives hope for rent cuts​).

The industry standard, as set in guidelines from the Royal Institute of Chartered Surveyors (RICS), is 50%. But Hughes accepted 35% would be more suitable, taking into account the current difficult trading conditions.

Enterprise wanted to increase rent at the White Horse at Hambrook, near Bristol, from £16,000 to £30,500.

The licensees, represented by Fair Pint founder Brian Jacobs, wanted £14,500 and the final settlement was £18,000. "This is 35% of the divisible balance of £51,000," the written judgment says.

Industry commentators said the ruling means licensees hit by the economic downturn could find it easier to secure rent reductions.

The judge said his assessment is based on what the pub "might reasonably be expected to be let in the open market" on 7 August, when the case was examined.

This meant factoring in the "unprecedented economic crisis" with rising unemployment and falling demand for pubs; restrictions on "ready, inexpensive capital"; the "market-depressing" effect that news of pub closures is having; and the smoking ban.

An Enterprise spokesman said: "Enterprise Inns plc is pleased to note that...the judgement by Iain Hughes QC has explicitly approved and applied guidance issued by RICS on the methodology by which pub rents are assessed.

"The judgement sets a precedent on this point of valuation methodology which is now legally binding. Further, we are pleased to note that the judge explicitly rejected the alternative methodology proposed by the Brookers' advisor.

"In the matter of the actual rent payable, the judge's decision reflects his view of this one particular property, the specific terms of the applicable agreement — in this case a non-assignable tenancy which lacks many of the benefits included in more modern agreements — and the current state of the market.

"This is a matter of fact and is not a decision of principle or law and, as such, does not bind the outcome of any other lease renewal or rent review."