Tenant buy-out plan for Enterprise pubs

A high-profile Enterprise lessee whose pub is up for auction is examining plans for a mass tenant buy-out of pubs among the pubco's licensees.

Simon Clarke of the Fair Pint campaign said powers under the Leasehold Reform Act 1967 may let licensees forcibly buy the freehold if the residential accommodation could be defined as a house.

Clarke runs Enterprise's Eagle Ale House in Battersea, London, which is among the package of 27 pubs believed to be up for auction in the New Year. As with previous sales, the pubco is expected to offer the freeholds with a leaseback to itself.

Clarke said Fair Pint has begun collating a mailing list of the pubs sold by Enterprise at auction in sale and leaseback deals.

"So far around 70 pubs have been identified, with more recent auction results still to collate, and the 27 or so in the proposed block sale and leaseback we suspect around 140 pubs will eventually be contacted."

Clarke said the Leasehold Reform Act may provide an opportunity if licensees on renewable leases can claim that their pub has been adapted for living purposes.

"I suspect most smaller, wet-led pubs will fall within this," said Clarke.

The licensee would need to issue a Notice of Tenants Claim on the new freeholder and a tribunal may be necessary if a deal to buy the freehold can't be struck.

Clarke added: "It seems that even a renewable business lease, within the security provisions of the Landlord and Tenant Act, may be eligible.

"The new freeholders will have purchased at a rental level offered by Enterprise Inns, which I suspect is in many cases is as much as 20-30% higher than open market rental value for the property, even free of tie.

"What is interesting is that the tenant may find they can force the freehold sale at a price less than that paid by the new freeholder, and the over-inflated rent, which would then be paid to the licensee by Enterprise Inns, may sponsor the finance required to purchase the freehold."

Clarke said he's examining previous cases of the Act being used in such a way for mixed-use properties.