Renting a Pub - Pubs for Rent - Pub Tenancies - Tenanted Pubs
Pub tenancies are viewed as a low-cost route to running your own business because in many cases the start-up costs are limited to covering a bond and for the pub fixtures and fittings and stock at valuation when taking over. Also in many cases tenants live on the premises.
Tenanted pubs tend to be the smaller and older community pubs in suburbs, estates or villages.
Renting a Pub: Rent Deposits
A rent deposit is principally a sum of money which is held in an account,
for an agreed period of time, to act as financial security in case of default
by a party to a contract.
The money would usually earn interest at a fixed or variable rate.When
new leases are entered into, a landlord will often require a rent deposit
from the in-going tenant.
The terms of such a rent deposit will vary depending on the financial status
of the tenant, but can involve the tenant paying up to 6 months rent in
advance.
This amount is then held by the landlord in an interest bearing account
for the duration of the lease, or until the financial integrity of the tenant
becomes established.
Alternatively, it might be held until such time as the lease is assigned
and a new deposit is obtained from the subsequent assignee.
Renting a Pub: Rent Reviews
Rent review provisions in commercial property leases were originally introduced
to counter the effect of inflation during the term of the lease.A standard
rent review clause will generally require the rent to be reviewed at fixed
intervals, usually five yearly, during the term.
The vast majority of rent review clauses require the assessment of the
open market rack rental value, at the review date, in accordance with specified
terms.
Some rent reviews are however geared to the tenant's turnover or profitability,
or movement in the Retail Price Index.In the case of calculating the market
rent for a demised premises, the form of the review clause will vary from
lease to lease.
In general however the clause should make clear:(i) the review period(ii)
the procedural steps for having the rent reviewed(iii) whether or not time
is of the essence in the service of notices(iv) the basis of valuation,
i.e. assumptions and disregards(v) any hypothetical terms and conditions
to be adopted(vi) in default of an agreement, the procedure for the appointment
and determination by a third party surveyor such as an Independent Expert
or Arbitrator(vii) the effect of a late review, i.e. from when the rent
is payable and whether interest is payable thereon(viii) whether the rent
can be reviewed upwards or downwards
Renting a Pub: Repair Covenants
Covenants in a lease are the terms of the contract between the landlord
and the tenant and they specify responsibility for matters arising out of
the lease.
Normally, a lease will make express provision for one party to repair and
maintain the whole or part of the demised premises and for the other party
to repair and maintain the remainder.In short leases the landlord will often
be directly responsible, while in long leases the tenant will usually take
on the obligation for repair and maintenance.
For leases held in respect of premises that form part of a larger building,
it is frequently the practice to require the tenant to keep the interior
repaired, while the landlord is responsible for the exterior and common
parts and the structure of the overall building.
The landlord will often seek to recover the cost of fulfilling this liability
by way of a service charge.
Renting a Pub: Tenants Improvements
The expression Tenant's Improvements is used to describe a wide range of
works, that are usually carried out by a tenant, at their own cost, and
usually require the landlord's prior approval.
Tenant's improvements may not necessarily increase the value of the demised
premises, but can have an impact upon the future rent payable by a tenant.Section
19 (2) of the Landlord & Tenant Act 1927 provides that a covenant in
a lease against the making of improvements, without the consent of the landlord,
is deemed to be subject to a proviso that consent will not be unreasonably
withheld.
As a condition of consent however, the landlord will often require:-·
The payment of a reasonable sum in respect of any damage to or diminution
in the value of the premises or of any neighboring premises also in the
landlord's ownership.· The payment of the landlord's legal and other
proper expenses incurred in connection with the granting of consent, usually
by way of a Licence.·
In cases where the improvement does not add to the value of the demised
premises, a covenant from the tenant to re-instate at the end of the lease.
Most rent review clauses will include a provision whereby Tenant's Improvements
are ignored for the purposes of assessing the revised rental value.
Renting a Pub: Service Charge
This is a sum of money payable by a tenant on account of services provided
by the landlord and is often collected quarterly in advance at the same
time as the rent.A service charge usually arises when a property is in multiple
occupation, such as an office block or shopping centre.
Typical service charge items include the repair and maintenance of the
external or structural parts of a building. Also, costs arising from repair
and upkeep of common parts, together with managing agent's fees and a sinking
fund. A service charge payment can be capped in order to limit the amount
of a tenant's financial liability.
In addition some service charge costs have a limit to the amount of increase
that applies during the term of a lease. For example, the charge cannot
rise in excess of the movement in the Retail Price Index.
This provision enables the tenant to restrict future service charge liabilities.
Renting a Pub: Sub Letting
A sub-letting takes place when a tenant grants a new lease for their property,
or part thereof, to an alternative occupier, for a period less than the
residue of the tenant's lease.
The period of the sub-letting must be at least one day less than the unexpired
period of the superior lease
If a tenant attempts to sub let the property for a period equal to, or
more than, the unexpired period of their own lease; this operates as an
assignment of the term and not as a sub-letting.
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