Historically, it was pub owning brewers who rented out some or all of the pubs in their estates to self employed tenants. This could work well for both parties, as although the brewer could tie the tenant to their drinks products, the brewer would often set the rent at a very reasonable level. A typical brewery tenancy was 3 years in duration, perhaps renewable if both parties were in agreement and the tenant would only be asked for a modest ingoing bond to be held by the brewer, fully redeemable at the end of the tenancy if the premises left if good order. Given that many tenants only last a few years before they become disillusioned with the trade, a 3 year tenancy made sense - easy in and easy out.

Also, as pubs were much busier before the 1990s the big brewers such as Bass and Whitbread had long waiting lists of prospective pub tenants and could carefully pick and choose who they put into pubs.

However, after the ill conceived Beer Orders in 1989, which restricted the number of pubs that a brewer could tie to 2000, the industry responded by spinning off their tied estates into separate pub companies, the so-called Pubcos. Crazy as it may sound, these Pubcos were lawfully permitted to tie their unfortunate tenants to various drinks products at inflated prices, despite the stark fact that the landlord was neither a brewer nor a soft drinks manufacturer. It gets even more bizarre, as a typical Pubco lease was for up to 30 years and often with big cash ingoings required from the leaseholder. It was never going to work and it didn't.

Huge numbers of Pubco tenants failed to survive financially and many are said to have lost everything.

Unlike the big brewers of yesteryear, it is reported that some Pubcos were less selective as to who they signed up, as long as the new tenant came up with the required cash input to effectively buy the lease.

PUB JOINT-OPERATION TYPE TENANCIES

Some non-brewing pub owning property companies are now advertising a different sort of lease, usually called something on the lines of a 'partnership'.

The pub company states that it picks up all or most of the bills, so the tenant does not have to buy any stock, which on the face of it sounds attractive. The tenant(s) is simply paid a fixed percentage of the pub turnover, usually not a big percentage. The big downside is that the tenant must recruit and pay all of the staff, which is by far the biggest outgoings in a pub and the most challenging.

From the pub company point of view they do not have to pay any wages and the poor self-employed tenant may well have to work maybe 80 hours a week in an effort to keep the wage bill down and to eke a living out of the pub.

And as the pub company is paying for all the drinks, their stocktaker will no doubt keep a sharp eye on the stocks and deduct from the tenant’s monthly remuneration at retail price any deficiencies - which in the case of real ales is down to unavoidable wastage. NOTE : While a stocktaker can quickly calculate a stock deficiency, the stressed out licensee is usually left baffled as to how this has occurred.

(The writer has noticed that some pubs he has visited that have subscribed to this type of lease tend to give short measure pints of beer, presumably in an effort to reduce stock penalties and such tenants in general do not seem to last long)

FAST FORWARD TO 2025

The pub trade has never been as challenging. Less people are using pubs and all overheads have gone through the proverbial roof. Survival is the name of the game.

Prospective tenants that are considering signing a partnership type lease with a pub company should look very carefully at the projected level of wages, given that the Living Wage keeps rising and in April 2025 employers' National Insurance contributions for staff are being hiked by the current government.

There may well be some decent smaller brewers who lease off their pubs on very favourable terms, but they are probably few and far between.

Someone new to the trade would be strongly advised to look carefully at the option of buying a pub at a good price, as this might make a lot more financial sense than leasing one. At the end of the day they would still own the bricks and motor if everything else failed.

Maybe there should be a Wealth Warning attached to all pub tenancy agreements, as not many tenants survive long term.

Although the Beer Orders were abolished in 2003, it was too little too late, as irreparable damage had been done and thousands of pubs have closed as a direct consequence of forcing the big brewers of yesteryear to sell off their large estates of well run pubs and to dispose or close many of their breweries as well, resulting in huge job losses.

Hugh Price

(Email : moc.loa@ecirpeihguh)