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Our Agreements
Innovative new agreements designed to reward tenants for developing their business.
Types of Agreements
We offer four types of tenancy agreement, depending on the pub and the qualities, experience and financial status of the prospective tenant. These agreements are designed to reward and appeal to first time publicans, publicans with small financial resources, publicans who might alternatively be looking for the financial benefits offered by assignable leases and publicans with significant capital which they wish to invest and might otherwise be looking at free houses. We can meet all of these prospective publicans’ aspirations without the magnitude of risk often associated with leases and freehold properties. We commit to discussing the most suitable tenancy agreement with you at interview. It should be noted that all agreements are not available in every case.
All our agreements offer the benefit of a rent that cannot be increased by more than RPI for as long as the tenant is in the pub and meeting their own obligations.
ALL OF OUR STANDARD THREE YEAR AGREEMENTS HAVE NO RENT REVIEW
Summary of Agreements
All agreements offer the Profit Partnership Investment Arrangement (see below), Security of Tenure (except the 5 months and 25 days agreements), discounts, target discounts, no rent reviews and award winning business support.
Goodwill Creation Agreement: -
- Gives some of the financial benefits associated with an assignable lease without having to assign
- No premium payable
- Additional reward for developing the business
- Tenant is paid for increasing the profit of the pub over agreed level
Capital Investment Agreement: -
- Incentivises and rewards tenants for investing in their pub
- The % amount they increase the turnover by is the interest we will pay back (and return the capital sum)
Standard Three Year Tenancy: -
- Renewable at tenant's discretion
Fixed Term Agreement: -
- 5 months 25 days
- Allows tenants to assess whether the pub trade and the pub is for them
- Tenant can quit after 5 months and 25 days or enter into a longer agreement
Security
All our agreements, except the 5 months and 25 days agreement, are subject to the Landlord and Tenant Act (1954), which gives the tenant the automatic right to renew the tenancy at the end of each term, providing the statutory renewal procedures and notices have been followed and the agreement’s terms have been adhered to.
Notice
The tenancy, to all intents and purposes, is the tenant’s, until they decide they wish to terminate it. As landlords we can only serve notice to terminate the tenancy agreement on specific grounds; if the tenant has been in breach of the tenancy agreement or if we wish to redevelop the premises or get them back for our own use; examples include developing the site for alternative use or turning the tenancy into a managed house. However, we do not operate managed houses so this is highly unlikely! In the unlikely event of us serving notice to take the site back, compensation would be due to the tenant.
With all of our agreements, except the 5 months and 25 days agreement, the tenant has the right to serve notice to leave at the third, and subsequent tri-annual anniversaries of the agreement. Formal notice to terminate needs to be received by us between six months and twelve months prior to a tri-annual anniversary.
Profit Partnership Investment Arrangement
With this arrangement, which applies to all of our agreements, rather than purchasing the fixtures and fittings, as per the outdated tenancy arrangement, the tenant purchases the right to run the business (‘the investment’), at the same value as the public house annual rent. For example, if the rent is £15,000 per year, then so is ‘the investment’. This ensures that there is a direct correlation between the potential profitability of the business and the investment. The tenant is however responsible for the repair, maintenance and depreciation of the inventory. If a tenant does not have the full Profit Partnership Investment, we can make arrangements to withhold some of the product discounts to offset against the shortfall.
Profit Partnership PLUS
The Profit Partnership Investment Arrangement can also be linked into the additional benefits of Profit Partnership PLUS (PP+), where by the tenant can earn discounts from the first barrel purchased and these can be increased significantly for purchases made in excess of what we had agreed is an achievable level of trade. There is no minimum purchase obligation within the PP+ Arrangement. Discounts can total as much as £150 per barrel.
Discounts
All our agreements offer attractive off invoice discounts for products combined with PP+.
Machines
We do not take a share of the fruit machine and ancillary income this belongs to the tenant.
Agreement Details
Goodwill Creation Agreement
This agreement focuses on giving added reward to tenants who have increased their overall business, rather than just the drinks side.
The Fair Maintainable Profit (an achievable profit, FMP) for the pub is agreed and if on a third anniversary a tenant can demonstrate, through audited accounts, that for the previous two years they have exceeded the agreed FMP they will be rewarded with a payment of half the value of the average annual excess.
Example:
Target Profit: £30,000
Year 2 Actual: £41,000
Year 3 Actual: £43,000
Average Excess: £12,000
Payment (half): £6,000
This payment is obviously in addition to the extra profit the tenant has already generated. In effect the agreement provides the opportunity for a tenant to receive a payment for developing aspects of the business not directly linked to the sale of drinks, such as food and accommodation.
Obviously the tenant can continue with their tenancy at the pub when this option is exercised.
In the event of a tenant triggering the Goodwill payment and remaining in the pub then the target level is rebased.
Capital Investment Agreement
With the Capital Investment Agreement, there is the incentive for the tenant to invest their own money into the structure of the pub. Should a project be agreed with us and the level of investment (usually no more than £50,000), then at the date of the agreement to invest, the turnover of the business is determined. At any annual anniversary of the agreement to invest, or an alternative agreed date, if the tenant can demonstrate, through their audited accounts, a net percentage increase in the turnover of the business, they have the right to ‘call in’ their original investment with interest at the same percentage rate as the percentage increase in turnover. Obviously the tenant can continue with their tenancy at the pub when this option is exercised.
Example:
Investment: £20,000
Turnover: £250,000
Turnover Increased to: £350,000 which is + 40%
Payment to tenant: £20,000 + 40% = £28,000
Standard Three Year Tenancy
We also offer a standard three year tied tenancy with the conventional purchase of the inventory, for those tenants who prefer this traditional route.
5 Months and 25 Days Short Term Tenancy
This is an introductory agreement, sometimes offered to less experienced tenants, or when both parties may wish for a shorter agreement, for a variety of reasons. This type of agreement is not automatically renewable and does not fall under the regulations of the Landlord & Tenant Act (1954).
We would offer this shorter term agreement if for example, a tenant does not have the necessary capital to fund ‘the investment’ in full.
The basis for ‘the investment’ or the purchase of the right to run the business, is the same as the Profit Partnership Investment Arrangement described at the beginning of this section.
Agreement Variations
We are willing to consider variations to the aforementioned agreements, which may involve such things as a longer term or partial freeing up of the drinks tie.
Pre Entry Awareness
Before signing any agreement we commit to going through all the implications which will affect you and confirming this in writing for you to consider.
Once the agreement is selected and signed we are committed to helping the tenant develop the business to achieve its full potential.
After the agreement is selected and signed we are committed to developing each pub to achieve its full trading potential. To this end, we will discuss with the tenant ideas for developing the property and buildings to maximise the potential of the site, to the benefit of both parties.
Once an agreement has been entered into, it needs noting that we do not operate a ‘cooling off’ period.
Concessions
Should a tenant's business be facing a significant downturn, a full review of the operation will be carried out and concessions maybe given.
