No pub, no rent

This very quickly – and understandably – became a key issue for pub tenants; would the pub owning businesses (POBs) expect their tenants to keep paying rent on a closed pub which was generating no income? For clarification, tenants are those publicans who rent their pubs from POBs, rather than manage them as an employee of the POB. Around a quarter of London’s pubs are tenancies. Most are subject to the ‘tied house’ system.

The response from the POBs was mixed and brought an angry reaction from both pub protection and consumer groups. To start with, this is what CAMRA’s National Chairman, Nik Antona, had to say on 31 March: “CAMRA welcomes the move by businesses such as Admiral Taverns and Fullers to cancel rent for their pub tenants in recognition of the unique circumstances we are in. We are now calling on other pub owning businesses to follow those examples and listen to the concerns of tenants, and of pubgoers who want their locals to survive this crisis. Pub owning companies must cancel rents during this period; deferring until a later date simply doesn’t go far enough. Rent for publicans is based on turnover so it makes sense that when a pub is closed and doesn’t have a turnover they shouldn’t have to pay any rent. The Government is rightly offering support to pub owning companies with financial and employment schemes so that staff can still be paid and so that businesses can re-open once Covid-19 restrictions are lifted. It is only right that support is passed down to individual licensees in the form of rent holidays to protect their pubs and livelihoods.”

This was followed by a request to CAMRA members to e-mail the chief executives of the remaining five of the ‘big six’ POBs (Ei Group, Punch Taverns, Greene King, Star Pubs and Bars and Marston’s) asking them to follow Admiral’s example and simply cancel rents. Members were also asked to write to their MPs.

Marston’s took exception to CAMRA’s approach. Chief executive Ralph Findlay was ‘disappointed’ that CAMRA had not first asked the POBs what they were doing. He also said that they were helping tenants on a ‘case by case’ basis, which has since become a standard answer. Mr Findlay quoted from the Chancellor of the Exchequer, as did Emma McClarkin, chief executive of the British Beer & Pub Association (the POBs trade body) in a letter to the Morning Advertiser, “The Chancellor’s intent with his support package is clear: to help cover fixed business costs, including rent. This means pubs, like other businesses, have the support they need to continue to meet their fixed outgoings – supporting the entire business ecosystem.” The POBs are, of course, not getting the additional income from the beer that tenants have to buy from them under the tie, usually at above market prices.

When writing about pubs that had been forced to close because of the floods, I said, ‘Let us hope that the publicans concerned get full support from their POBs and that any enforced temporary closure is not used for some sort of skulduggery.’ This, of course, now applies equally to pubs closed because of the current crisis. Happily the Government has placed a moratorium on landlords taking legal action for the forfeiture of leases because of rent arrears or seeking winding up orders, so that avenue is closed, at least temporarily. It could however be an important point for the future as to when rent that was deferred with the POB’s consent becomes rent that is in arrears.

On 27 April, six MPs, led by Daisy Cooper and Caroline Lucas, put forward an early Day Motion to the House of Commons entitled ‘Charging of commercial rents during closure by pub companies’ (EDM #388). It sets out the situation very well.

‘That this House expresses support for all businesses during the Covid-19 pandemic; notes that the UK’s pubs, which are of huge importance to communities, to the economy and tourism are closed and unable to trade and are dependent on Government support to survive; further notes that some pub-owning companies are still charging rent to their tenants, despite them being closed and having no trade and no income; highlights that this includes including five out of the six regulated pub-owning companies Star Pubs and Bars (Heineken), Punch Taverns, Greene King, Marston’s, EI Group (Stonegate Pubs); supports the No Pub No Rent campaign started by pub tenants; believes that pub-owners should not be charging commercial rent during the forced closure; notes that deferring rents results in tenants building up considerable debts that they will have to pay back when pubs are able to trade again, when trade as a whole will be affected; condemns the behaviour of some pub-owning companies asking tenants to hand over Government grants to cover rent for pubs not trading; believes that these grants are vital for tenants to survive the closure period; commends those companies who are cancelling rents for tenants which is vital to helping them get through this crisis; calls on the Government to ensure that owners of pubs cancel commercial rent during the period of forced closures; and further calls on the Government to do all it can to support pubs including removing the £51,000 rateable value limit so that all pubs can access grants.’ As I completed this article, the EDM had not received much support but it still makes valid points.

Among the ‘good guys’ with a London connection who deserve a mention are Adnams, Fuller’s, Hall & Woodhouse, Harvey’s, McMullen’s, Shepherd Neame and Young’s.

Inevitably, this situation is very fluid. On 27 April, Admiral announced that, after the original six week rent free period for which they were lauded, they will be looking for a ‘contribution’ from pubs that have received Government grants. Ei Group have decided to waive the rent for April to June for those pubs not receiving grants and other pubs will receive ‘trade credits’. Greene King have set up a ‘Pub Partners Support fund’, although there has been a least one report that it has not been well received. Hall & Woodhouse have extended their rent waiver until the end of June.

I apologise if anything I have said is out of date by the time that you read it and I’ll try to keep track of developments to report next time.

Finally, we ought to spare a thought for pub managers as well. Many of them are on a fairly low basic salary, topped up by bonuses calculated on sales. A lot will have been furloughed, possibly, depending on their employer, on just 80% of their basic salary.

Tony Hedger