What does the Market Rent Only option mean for pub tenants?

What does the Market Rent Only option mean for pub tenants?

 

Around 12,000 pub tenants in England and Wales are ‘tied’ to their landlords. Under legislation announced last July, the government says that they no longer have to be. We take a look at the Market Rent Only (MRO) option and what it means for tenants.

Background

The tenants of tied public houses were formerly required to buy the majority of the beer they served from a particular pub company or brewery. They were also under an obligation to pay the rent which the pub company demanded, regardless of the level of income the pub provided.

As part of a new code of practice, which was introduced in July of 2016, tenants in England and Wales now have new rights and levels of protection which enable them to take advantage of information about any tied deals on a prospective pub, as well as the ability to move to a ‘free-of-tie’ tenancy and a fair assessment of their rent.

Pubs Code Adjudicator

Six pub companies own around 500 tied pubs in England and Wales – these are the pubs which will be affected by the new code. The government has appointed Paul Newby as the country’s first Pubs Code Adjudicator in an effort to improve the relationships between the chains and their tenants in order to assist the latter in getting a fair deal in both their supplies and their accommodation.

Under the new code, tenants have the right to opt for an MRO, effectively ending the ties with the breweries, and request an MRO option when their leases are up for renewal or the rent is to be reviewed. The current ‘benefits’ for tenants are that they pay lower-than-market rents (dry rent) but pay a premium to their suppliers for the products they sell (wet rent). Critics of this system argue that tenants are paying a disproportionately large amount of wet rent which may not offset the amount they save on the dry rent they pay, and that if rents were reflected in the open market, they would actually be saving money.

Trigger points

Tenants whose rent review or lease renewal falls after the introduction of the code can now request an MRO option – this is known as the trigger point. However, it is not retrospective and those tenants whose review/renewal came before July 2016 will not be eligible to apply until the next review/renewal. Similarly, tenants of landlords who own less than 500 pubs will not be eligible to request an MRO although this is being considered as an option for the future.

The purpose of introducing the MRO option is to align pub tenants’ right to those of ‘traditional commercial tenants and remove the interference from landlords about how their business can be conducted. The landlord’s responsibility for insuring the building remains unchanged.

The government have brought in these changes in order to halt the closure of many pubs over recent years – an impact that has repercussions on the immediate community as well as on the wider economy.

If you’re a tenant of a pub and would like clarification on the new code, or are seeking to opt for an MRO, speak to one of our team. Our independent, specialist chartered surveyors can offer you guidance and support in all aspects of this matter.

 

Written by: Paul Gagan on Tuesday 08/11/2016

 

How to produce a winning Condition Improvement Fund application for educational establishments

How to produce a winning Condition Improvement Fund application for educational establishments

 

If you’re involved in the maintenance of educational buildings, you’ll be aware that you can apply to the government for funds to assist you. Our short guide will outline the information you need to help increase your chances of a successful application.

What is the Condition Improvement Fund (CIF)?

The CIF is a fund to which academies and sixth-form colleges can apply if they need help maintaining their buildings. Priority is given to those in which health & safety, poor building condition and building compliance requires attention. In some instances, CIF can also be applied for if colleges and academies need to expand.

The deadline to register for funds which will be allocated in 2017 is 30 November 2016, and applications must be submitted by 9 December 2016.

Applications must be made through the CIF portal, which can be found on the government’s website. Comprehensive guidance is also available on the site. We provide expert free help with CIF bids.

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Who can apply?

Applications can be made by single academy trusts, small multi-academy trusts (MATs) and sixth-form colleges. If you are considering applying for CIF you must demonstrate that your educational establishment has a pressing requirement for additional funds. The areas which are likely to receive priority include Health & Safety issues, safeguarding needs, asbestos removal, works involving fire safety, leaky roofs, cladding or windows, and heating and hot water systems. Academies or colleges wishing to apply for funds to extend can do so on the grounds of needing additional kitchen or dining, sports or science/technology facilities.

Making your application

For your application to be successful it is important that it meets the qualification criteria precisely. Projects are scored against 3 assessment criteria; need (70%), planning (15%) and value for money (15%). The assessors will review each application based on the information supplied, which is why it is essential that applicants seek professional help in obtaining supporting documentation such as a building condition survey or a Property Data Survey (PDS).

These surveys need to be carried out by an independent suitably qualified professional surveyor who will rate the condition grade of the building and estimate its priority rating. This survey will outline the physical condition of the building and identify both maintenance issues as well as any apparent deficiencies. It should include the building’s structure and condition both internal and external, its fabric, electrics, plumbing, fire protection, sewerage and drainage, as well as highlighting any asbestos present. It should conclude with an assessment of the consequence of any delay in repair or refurbishment.

The CIF pot is limited, and many of those who apply for funding will not receive it. To maximise your chances of making a successful application, therefore, it is important that applicants seek the assistance of a RICS-qualified surveyor who can prepare professional and independent documentation.

If you require assistance in applying for funding under the CIF or would like to appeal against a decision, talk to a member of our team. We have experience of assisting in many successful CIF applications and can offer you timely and targeted advice.

We provide expert free help with CIF bids.

Find out more about Condition Improvement Fund or complete the form below and one of our experts will be in touch.

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Written by: Joseph Fitzsimmons on Monday 07/11/2016

Infographic: The Rise of Luxury Student Accommodation

Infographic: The Rise of Luxury Student Accommodation

A month on from Freshers’ Week frolicking, students at universities up and down the country are now settling down after the initial whirlwind of new friends, a new city, and a new place to call home. But what exactly does this new home consist of?

Ian Harrington, building surveyor and fit out specialist at Eddisons, says; “Student accommodation is not ‘one size fits all’. There is now a wider choice than ever before when students choose their term-time accommodation; from traditional university owned cluster flats, to luxury city centre studios, however each of these comes with its own (potentially high) price tag.”

Eddisons have looked into what today’s students can expect from their accommodation. We consider what factors are deemed important when choosing accommodation, and how much the average student can expect to pay for the privilege.

From The Young Ones to the more fortunate ones, we present the current state of university accommodation and the range of students catered for. It seems there’s been a shift from digs to bigwigs…

Written by: Ian Harrington on Wednesday 26/10/2016

Key Health & Safety rules to be aware of with commercial property

Key Health & Safety rules to be aware of with commercial property

 

Whether you’re a landlord or a tenant, Health & Safety awareness within a commercial property environment is essential. We take a look at the most important H&S rules to be aware of.

The rules

The Health and Safety Executive (HSE) is responsible for implementing all the rules which keep people safe while they’re at their place of work. In the last year, 144 people were fatally injured at work mostly due to falling from heights, being struck by vehicles or being hit by moving objects. Many more suffered non-fatal injuries such as falls, slips and trips. Health and Safety legislation is designed to protect against such accidents and minimise their occurrence.

Strict penalties are imposed on those who allow, through negligence, accidents to occur – the most severe of which can result in two years imprisonment and an unlimited fine, under the Health and Safety (Offences) Act 2008. It’s in everyone’s best interest, therefore, to comply with the rules.

Fire Safety: For Landlords

If the lease stipulates you as being responsible for safety on your commercial premises, it will fall to you to implement a health and safety risk assessment to determine possible fire risks within the building. The HSE has guidance on how this can be approached on its website.

Fire Safety: For Tenants

Most leases will state that fire safety is your responsibility – check through the details carefully before you sign it. If it is, you must carry out a fire risk assessment in order to protect yourself and those people working for you.

Asbestos: For Landlords

Once a popular fire-retardant material, asbestos is now regarded as a major risk to health, causing lung diseases which are often untreatable. If your building dates from before the mid-80s there is a possibility that it may contain asbestos – a survey will clarify the situation. Again, the lease you draw up will state who has responsibility for maintaining a building which contains asbestos, but if it is found on the premises, a thorough risk assessment will be necessary. Strict penalties for not managing its risk can be incurred.

Asbestos: For Tenants

If you suspect that the premises you are renting contains asbestos you must check your lease to see if you are responsible for maintenance and repair. If it is unclear, the law will state that the party with the ‘greatest degree of control’ over the building has a legal duty to establish the presence of asbestos in order for a risk assessment or remedial work to be undertaken.

Electricity: For Landlords

Unless you are supplying electrical equipment to tenants, your main responsibility will be to ensure that the wiring in your premises is safe and fit for purpose. This will mean having a certified safety check undertaken before the premises is let.

Electricity: For Tenants

You must undertake a risk assessment of the equipment you intend to use on your rented premises and ensure that none of the equipment is faulty or is likely to cause harm. Check that your lease explicitly outlines your landlord’s responsibility for the maintenance of the wiring, and that he or she can provide a safety certificate.

Gas: For Landlords

If you supply any gas appliances to your tenants, such as water heaters, it is your responsibility to ensure that they have certified annual checks to guarantee their safety. Otherwise, you must ensure that, if your building has common areas, the heating equipment there is well maintained.

Gas: For Tenants

Generally it is your responsibility to ensure the safety of gas appliances in commercial buildings that you occupy. This includes appliances, pipe work and flues. Your lease should set out your exact responsibilities so it’s important that you understand what these entail.

Landlords and tenants alike must be absolutely clear what their responsibilities are for the health and safety of anyone who occupies a commercial property. To prevent injury or death and to avoid a large fine or possible imprisonment, leases should clearly outline who is accountable for each aspect of H&S. If you need help drawing up a lease or interpreting its clauses, or if you need guidance on any aspect of Health and Safety, contact a member of our team.

 

Written by: Joseph Fitzsimmons on Friday 14/10/2016

 

What do tenants need to consider when coming to the end of a commercial lease?

What do tenants need to consider when coming to the end of a commercial lease?

 

Commercial leases come to an end for all sorts of reasons – sometimes they die a natural death after the term has expired and the tenant wishes to move on; other times it’s a more abrupt ending. Writing your exit strategy into your business plan will help you cope with every eventuality. Here are our suggestions for things you need to think about it when the time is right.

The type of lease

It’s important to check the lease before you sign it, to establish which type of lease you are committing to. A Protected Lease means that you have protection under the Landlord and Tenant Act 1954. This means that you have security of tenure (permission to stay) after the end date has passed, with agreement from both parties, until one of you decides to break the lease. In this case, a reasonable period of notice (most experts say that between 6 and 8 months is acceptable) must be given by either side.

An Excluded Lease does not offer the protection of The 1954 Act meaning that the tenant does not have security and can be vulnerable to short-notice lease termination.

It’s in your own best interests, therefore, to find out what type of lease you’re signing and make plans for the end of it – however long away that is.

Other considerations

Check your break options!

It’s important to understand what you have to do to make your break legal. If you don’t adhere to these, to the letter, your break notice may be invalid and you may find yourself still liable for paying rent, VAT, service charges etc after you leave the premises for the last time. So make sure that you are up to date with the rent, that you have paid any VAT or service charges that are due right up until the day your lease breaks.

Your lease may also advise you that you must give vacant possession by the break date, so if you’ve sublet your commercial premises or you wish to pass the lease on to someone else, you must seek legal advice about your situation and discuss it with the landlord. You may be required to act as a guarantor in the case of passing on.

Check your covenants!

Your lease will probably require you to repair and reinstate the property to the state in which you found it. It is your responsibility to do so before your lease expires as you have no legal right to return to the property once it has. Again, common sense should tell you that proper planning must be made for such repairs and reinstatements, a timescale outlined and a budget put aside to deal with any that must be made. If you’ve made alterations to the premises (with your landlord’s permission, of course!), they can legally require you to reinstate the building to how it was before to enable them to offer a blank canvass to their next tenant.

When a lease comes to an end and a tenant moves on, it can be an easy thing or a hard one, depending on how you plan and communicate with your landlord. Don’t leave it all to the last minute and make sure you start the negotiations early to avoid any costly litigation. If you need advice about your course of action when your lease is coming to an end, contact a member of our team.

 

Written by: Steven Jones on Wednesday 05/10/2016

 

North of England ‘Struggling to Keep Its Endangered Buildings from Ruin’

North of England ‘Struggling to Keep Its Endangered Buildings from Ruin’

 

The north of England is struggling more than any other area of Britain to retain and rescue its historic buildings.

According to the Victorian Society, a national architecture charity, as many as seven out of 10 of the Britain’s most at-risk historically significant buildings are now to be found in the north of England.

Meanwhile, there is not a single building on the society’s list that’s located either in London or in the south-east of England, which has raised concerns of a divide opening up between southern England and the rest of the country.

“This year, for the first time, the Top Ten has no entries from London or the South East. We simply got far more nominations from other regions,” explained Christopher Costelloe, Victorian Society director.

“This perhaps reflects the vastly different financial climate for development in many areas outside the south-east,” he said.

Regardless of their location, the Victorian Society is keen to see local authorities, property owners and local people find ways to keep alive buildings that are of historic importance but which are nonetheless in danger of being lost.

Among the Victorian Society’s list of “at-risk” properties for 2016 is the childhood home of the Victorian explorer Gertrude Bell, whose old house in Redcar in the Tees Valley is described by experts as being an “architecturally important building”.

There are three endangered buildings on the society’s list in Lancashire and Greater Manchester, namely the Mount Street Hospital in Preston, Rylands Mill in Wigan and St Paul’s Church in Chester.

The hope for the Victorian Society is that by highlighting some of the most endangered historic buildings in the country they might be able to galvanise support for restoration efforts that haven’t yet been forthcoming.

“The nationally important buildings on the Victorian Society’s Top Ten list are in dire need of help,” said Griff Rhys Jones, the well-known comedian who is also the society’s vice president.

“Restoring important historic buildings is worth investing in as it can be a catalyst for wider regeneration. I hope people living near these buildings will seize this opportunity and campaign to save them. Ultimately, it is the support of local people which will ensure that they are not lost forever.”

 

Written by: Charlotte Peel on Tuesday 04/10/2016

 

What is a Business Rates Valuation Tribunal?

What is a Business Rates Valuation Tribunal?

 

We look at the Business Rates Valuation Tribunal process and what you can do if you think you’re paying too much.

What are business rates?

Business rates are paid by businesses to support services in their local communities. These include transport infrastructure, roads, policing and fire services as well as less high-profile services such as marketing for the local area to attract more business and visitors and increase the revenue the council has to spend.

The new business rates will come into effect on 1 April 2017 but business owners were informed of their new RV on 30th September 2016. It’s been six years since the last review and eight years since properties were valued for rating, so many business owners were steeling themselves for what could have been a shock when they opened the envelope containing the new level of rates.

Appeals via a tribunal

If you’re one of the unlucky ones whose business rates have soared, you have the right to appeal the decision.

The process is as follows:

  • Firstly, double check that the amount you’re being asked to pay is correct. The government has an online tool to enable you to check your rateable value as well as one to compare your property to other similar ones in your local area. You can contact the Valuation Office Agency (VOA)’s regional offices to discuss the matter with them and make your argument for a reduction. In most cases the VOA will review the information you’ve sent them and amend their records to resolve the issue without the need for a formal appeal process.
  • In some cases, however, an agreement cannot be reached. In these circumstances, you can appeal against the decision. You can appeal online or download a form which you can post to your local VOA office. You should read carefully through the guidance notes which will explain who can appeal, in which circumstances and on which grounds you can make an appeal, the time limits and the formal procedure which you must follow. If you are appealing on hardship grounds, you must make this very clear on your form. The appeal process is free and you can do it yourself. Please note that it is important to continue paying your rates during the appeal process.
  • When you have submitted your appeal and the supporting documents, the VOA will acknowledge receipt and allocate a case number to you. They will check that your appeal is valid, based on the information you’ve supplied. You should note that this validation means that your appeal meets the ‘statutory requirements for completion’ not that they agree that your rates have been set at the wrong level.
  • If the VOA decides that your appeal is invalid they will write to you and explain their decision and offer other options available to you. If they believe that your appeal is valid, they will write to you to keep you informed of the process and when your case will be discussed. The VOA prioritises cases where valuation mistakes have been made or in instances of financial hardship. Your appeal will then move onto a programme for discussion, with a timescale of which you will be informed. You will be invited to participate in the discussion to outline your argument. Your argument must contain any relevant factual discrepancies, evidence to support your case, and an alternative valuation based on your previous research. You should prepare this information at least two weeks before the start of the discussion process as any delay will hinder progress.
  • If you’re not happy with the outcome of the discussion process, you can take your case to appeal which will be heard by the Valuation Tribunal at a public hearing. These work differently depending on whether you live in England or Wales. Here, we will be discussing England. The Tribunal will attempt to arrange a hearing within six months and will try to give you six weeks’ notice. You will need to prepare a written Statement of Case (SoC) for the VOA, the Tribunal and your local authority at least six weeks in advance of the hearing. In this you’ll need to outline the disputed issues, set out your desired outcome and present your evidence and arguments. You should receive the VOA’s SoC four weeks before the hearing. At the hearing you’ll be required to explain to the Tribunal why your argument should be accepted. If you are successful, the Tribunal will instruct the VOA to amend its ratings listing. The Tribunal also has the authority to propose its own value or it may accept the VOA’s original decision.

The appeal and Tribunal process can seem time-consuming and overly-bureaucratic but can be worth the effort to save thousands of pounds per year. If you need any advice on appealing a business rates decision or the Tribunal process contact a member of our team. Our RICS-qualified business rates experts can talk you through the process and offer you support when you need it most.

 

Written by: Craig Newton on Monday 03/10/2016

 

Business rates revaluations – what does the new draft list mean for commercial property owners?

Business rates revaluations – what does the new draft list mean for commercial property owners?

 

From April next year, 1.8 million ratepayers of commercial properties will start to feel the effects of new business rates revaluations. You may already have received a questionnaire sent from the VOA, asking you about how much rent you pay or how much income you receive, so that your new business rates can be calculated. We take a look at how it might affect you.

Saturday 1 April 2017

This is the day that the new business rates revaluations come into effect. It has been seven years since the last revaluation and if you’re a commercial property owner you may feel concerned about how the new rates will affect you. You will find out in October of this year what your new Rateable Value will be.

However, it may not all be bad news. For many businesses outside of London, a rate reduction is anticipated. Many retail centres (shops in high streets, and some shopping malls) will actually have their business rates reduced, some by up to 71%, leading to a lessening of the financial burden for their owners, and it is hoped that the new lower rates will encourage more small businesses to begin trading.

Some London-based businesses, on the other hand, primarily those based in central areas, and some parts of the South East, are expected to see significant increases in business rates with some experiencing rises of an astonishing 415%. Business leaders have warned that these increases could lead to many retail premises closing their doors as they struggle to meet the new rates.

Relief

The government will still be offering relief from business rates. Properties with a rateable value of below £12,000 will receive 100% relief, meaning that they pay no business rates. Those which attract R.V.s between £12,000 and £15,000 will be offered tapering relief. The threshold for the standard rate of business rates is also increasing from £18,000 to £51,000 which, it is estimated, will reduce higher rate liabilities for around 250,000 small businesses.

Changes

These changes to business rates come at a time when the government has announced that local authorities will be allowed to retain the money they raise from business rates, an estimated £26 billion per year, to spend in the ways they best see fit. Some council leaders have argued that the cutting of business rates will affect funding for local services, at a time when significant cuts have already been made.

Preparation

Business owners are advised to plan ahead for when the new business rates come into force. Many will see reductions in the amount they have to pay, but some will see rises. If you’re one of the ones affected by an increase you will still be able to appeal.

If you’re concerned about how the changes will affect your business revenue or need guidance about how best to prepare and present your appeal once you’re informed of the amount you’ll have to pay, get in touch with our team. Our experienced staff will be able to offer you advice and information about the new rates and how best to mitigate your business rates.

 

Written by: Craig Newton on Tuesday 27/09/2016

 

Over £26 million of commercial property lies empty in Brent

Over £26 million of commercial property lies empty in Brent

 

Research from Getwestlondon has revealed that there is more than £26 million worth of commercial real estate standing empty in Brent. They requested a register of empty business property in the borough, and received an extensive list of 949 commercial properties including offices, warehouses, and shops. If rented out over the course of the year, this property would cost a whopping £26.8 million. The findings also revealed that much of the property has been vacant for several years, with some last being occupied as far back as 1994.

Expensive rental rates thought to be the cause

Many businesses are thought to have been put off by the sky high rental rates, which has meant many potentially profitable buildings now lie empty.

Entoria House in Wembley is the most expensive vacant property in Brent, and has been vacant since July 2014. Valued at just over £1 million, the property tops the list of the most expensive empty properties in Brent. Located on Cumberland Avenue, near to Central Middlesex Hospital, the property could fetch £1.05 million a year in rental income. Following Entoria House, a former Wickes branch located near to Wembley Stadium is also empty, with an annual rental price of £825,000. A total of 55 of the 949 properties reported would cost at least £100,000 to let for a year, but many of these have been collecting dust for decades. In fact, 20 properties have been vacant since the turn of the Millennium, while nearly 200 have been empty since 2010. Eight properties have been registered as vacant from 1994, a whopping 22 years ago, while a further 11 have not been occupied this century.

The local council are aware of the many empty commercial properties in Brent, and so are offering grants and incentive schemes in a bid to attract investment. “If you leave a property empty, the condition and value of your property will depreciate, the property could be the target of arson, vandalism and squatters,” reads the council website. “You may be faced with high insurance premiums, and you will receive no rental income.”

Vacant commercial properties are hotbeds of theft and damage, at risk of fire, criminal activity, and overall deterioration. Landlords can incur millions of pounds worth of damage, which may not be covered under insurance if they have not notified their insurer that the property had become vacant. Examining vacancy rates and the local economy of an area before deciding whether to invest in a commercial property is therefore nothing short of crucial.

 

Written by: Charlotte Peel on Wednesday 21/09/2016

 

Understanding “Right to Rent” for landlords and tenants

Understanding “Right to Rent” for landlords and tenants

 

In February 2016, the government introduced new legislation designed to establish a tenant’s right to rent, based on their immigration status. These rules were part of the Immigration Act 2014 which was set up to establish a ‘fairer and more effective immigration system’. We look at how the rules affect both landlords and tenants.

For landlords

The new law places the onus on private landlords and letting agencies to check their potential tenants’ rights to rent in the UK. Those who fail to comply face a fine of up to £3,000 per tenant. Under the new rules only certain groups of people have a right to rent. These include:

  • British citizens
  • EU or EEA citizens
  • People with indefinite leave to remain
  • Some people on time-limited visas, such as students, people working in the UK from overseas, or spouses of British citizens
  • People who have leave to remain based on humanitarian, discretionary or exceptional grounds.

It is now the responsibility of the landlord or the letting agency to make checks on identification documents. Only certain documents are acceptable and it’s important that, as a landlord, you make a note of which are. These include: a UK passport, a EEA or Swiss passport (or identity card), a registration document originating in the EU, EEA or Switzerland, residence or biometric cards indicating indefinite leave to remain, and a certificate of registration. A comprehensive list of acceptable documents is available on the government’s website [gov.uk] together with an online checking tool which guides landlords through the process.

You are legally allowed to charge prospective tenants for checking their documents.

If your tenants no longer have a right to rent, e.g. their leave to stay has expired, you must report this to the Home Office as soon as you can, giving their details and copies of the documents which you originally took. This process does not mean that you have to evict them.

For tenants

If you are a UK citizen or are classified in the groups of people listed above, the renting process should be straightforward. You’ll have to produce your documents and allow your landlord or the letting agency to make copies of them (which they must keep in a safe place).

If your tenancy began before 1 February 2016 (apart from the following areas of the country: Birmingham, Dudley, Sandwell, Walsall and Wolverhampton), or if you are renewing your tenancy at the same property, you will not need to produce documentation.

If you do not have the right to rent, your landlord cannot evict you. The eviction process must take its legal course after proper notice has been given.

It is also illegal for a landlord to discriminate against you because they ‘believe’ you are not a British citizen. You can take legal action against them if you think they have discriminated against you because of your nationality, race or religious beliefs. In fact, all new tenants must provide documentation, whether UK citizens or not.

The new proposals are designed to offer fairness to all tenants and to protect them against unscrupulous landlords.

For more details of how the right to rent affects you, either as a landlord or as a tenant, contact our team. We can offer you specialist and confidential advice to ensure you understand both the law and your rights, and to enable you to make informed decisions.

 

Written by: Craig Newton on Wednesday 21/09/2016