Belhaven

This section gives a more detailed account of what is involved in leasing a Belhaven pub. Click on one of the topics below if you have a particular query, or scroll from the top to look at all sections.

The lease

Type

It is Belhaven's aim to offer a degree of flexibility to accommodate the needs and resources of a potential lessee.

Two principal types of lease are available:

• 5 year non-assignable
• 10 year assignable

The entry cost to the 10 year lease is higher, reflecting the extended security of tenure, inflationary rent reviews and assignability.

Assignability

Where an assignation is requested, in all cases, Belhaven would have the right of pre-emption. If Belhaven do not wish to exercise their right, consent to assign will not be unreasonably withheld, but always subject to Belhaven's approval as to the suitability, capability, experience and creditworthiness of the proposed assignee.

On assignation, the terms and conditions of the existing lease must be agreed and accepted by the proposed assignee.

Expiry

We will strive to ensure that should the existing lessee wish to renew their lease when the current term ends, he or she will be given first option. This, of course, would be subject to the existing contract having been satisfactorily conducted and the trade maintained at an acceptable level.

There is no formal break clause in either lease.

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Rent

In circumstances where an existing lease is being assigned to a new lessee, the rent payable is at the level ruling at the date of assignation.

In instances where a new lease is drafted (both 5 year lease and 10 year lease) rent is based on what is considered to be the "FAIR MAINTAINABLE TRADE" (FMT).

In calculating the rent, recognition of the "Beer Tie" conditions are taken into account.

Rent is payable monthly in advance by Direct Debit and is liable for Value Added Tax at the prevailing rate.

Rent reviews

The rent in the 5 year lease increases at the end of every year by a fixed rate of 4%.

In the 10 year lease the rent will be reviewed at the end of every third year and the review is based on the movement in the previous 36 months in the cost of living, as measured by the Retail Price Index.

In both instances, the lease will include a clause giving Belhaven the right to review the rent on a market value basis at any given point in time, should there be a significant change in either UK or EU legislation striking at the core of the lease contract.

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Fixtures and fittings

Heritable

The ownership of the Heritable Fixtures and Fittings, which includes such items as bar counters, gantries, fixed seating, etc, will remain with Belhaven. The lessee will be responsible for maintaining these items.

Non-Heritable

At the commencement of a 5 year lease, the in-going lessee will usually be required to purchase the non-heritable fixtures and fittings from Belhaven. The value of these will be determined by an independent valuer, on an "in situ" basis.

In most instances where entry is taken by way of an assignation, the premium or consideration payable to the outgoing lessee covers the purchase of the non-heritable fixtures and fittings.

In circumstances where a new 10 year lease is drafted, the consideration payable for entering into the lease would be split between the lease premium and the purchase of the non-heritable fixtures and fittings. The inventory will be independently valued on a "going-concern" basis.

Belhaven reserve the right to purchase the lessee's inventory at any point during the currency of a lease. The value of the inventory would be determined by independent valuation, on an "in situ" basis.

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Repairs and insurance

Repairs

The 10 year lease is of the Full Repairing and Insuring type. That is, all repairs, maintenance, redecoration and common factoring charges are the responsibility of the lessee.

The repair and decorating obligations for the 5 year lease are in the main, similar to the 10 year lease, except that the lessee will not be liable for major structural repairs. The decorating cycle, both interior and exterior, will be at the start of year one and at the end of year three.

A prospective lessee, whether it be by assignation, or a new lease, should satisfy himself/herself, preferably by taking professional advice, that the premises are in good and tenantable repair and condition.

It is a condition of the lease that both the interior and exterior of the premises are decorated at least once every three years.

Insurance

The Buildings and the Heritable Fixtures and Fittings are insured by Belhaven and the premium is recharged to the lessee who will be advised of the annual cost. The premium will be charged to the trading account over two consecutive months.

The lessee is required to obtain insurance cover for stocks, cash, non-heritable contents, consequential loss, public and employers liability. It is recommended that the lessee take advice from a reputable insurance broker who has a working knowledge of the licensed trade.

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Trading tie and terms

Tie

For the duration of the lease period, the lessee is required to purchase exclusively from Belhaven all draught and packaged beers, ales, lagers, ciders, stouts, premium packaged spirits, flavoured alcoholic beverages and soft drinks. This trade tie is central to the contractual agreement and must be honoured in full.

The tie does not encompass wines or spirits.

Terms

All trading accounts with Belhaven will fall to be settled, fortnightly in arrears by means of variable direct debits.

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Consumable stocks

The ingoing lessee is required to purchase the stock on hand at a mutually acceptable valuation on entry.

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TUPE regulations

The lessee must accept responsibility under the TUPE legislation for ongoing employment of the staff in the business.

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Fidelity bond

The lessee will lodge with Belhaven, a Fidelity Bond, the value of which will be advised at an early stage in the negotiations but will be in the region of £10,000-£15,000. Subject to the terms of the lease being adhered to, the Bond will earn interest, calculated annually, at a rate of 1.5% below the base-lending rate of the Bank of Scotland. The interest payment date is the 31st March in each year. The interest calculated annually will be added to the Bond. The Fidelity Bond plus interest is returned to the lessee at the end of the lease term, less any deductions for outstanding trading/rent balances.

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Amusement and other machines

In the majority of cases, the appointment of a machine supplier is at the sole discretion of the Lessee, with all related income for their account, however, the individual pub lease schedule will specify if the income is to be split 50:50, between Belhaven and the lessee, after payment of rentals, licences and gaming permits.

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Business development and support

Belhaven believe strongly in the concept of "mutual support", and this commences right from the initial interview.

Once a suitable outlet has been identified, we would request the prospective lessee to produce a business plan, C.V., projected Profit and Loss Accounts, Projected Cash Flows, and evidence of funding.

The Operations Manager will discuss the business plan with the prospective lessee. On a successful appointment, the dialogue will continue on a regular basis, at which help and guidance on its implementation will be given.

Refurbishment projects

Belhaven is committed to developing its Leased Pubs and understands that a lessee may not always have the financial resources to undertake alterations of any magnitude, even though there may be a clear commercial benefit.

In such instances, and where the proposals meet Belhaven's return on capital criteria, the company will fund improvements in whole or in part with the contribution from the lessee being in the form of a pre-agreed rent increase. This rent increase should be self-funding given the expected commercial benefits of the refurbishment. The lessee will also be expected to meet the cost of the provision of non-heritable fixtures, fittings and contents, over and above any contribution towards the building development project.

All proposals would be fully discussed, evaluated and mutually agreed prior to implementation.

Marketing

Belhaven, in conjunction with its major suppliers, such as Interbrew, Diaegio, Matthew Clark, Schweppes and various other companies, is able to provide established consumer promotions and other marketing support to assist the lessee in the growth of his/her business.

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Trading history

Belhaven will endeavour to supply a prospective lessee with as much available information on the property as can be obtained. This will include the beer throughput for the past three years, always on the assumption that the outlet has been Belhaven supplied for that period of time.

Where an outlet has been Belhaven managed, profit and loss accounts will also be made available.

In outlets which have been recently purchased by Belhaven, historical barrelage and turnover figures as available will be issued, but no warranty can be given to their accuracy and the prospective lessee will require to make his or her own judgement.

The present rateable value of the property will be made available and it should be noted that it is competent under the current legislation for an appeal to be lodged on a change of occupier within a period of six months.

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Legal fees

The lessee will be required to meet Belhaven's reasonable legal expenses (including stamp duty if applicable) in connection with the granting of the lease. For a 10 year lease legal fees and Stamp Duty should be in the region of £2,000. It is advisable to obtain a quote from a commercial lawyer prior to appointment (fees do vary).

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The licence

The Public House or Hotel licence will be transferred into the name of the lessee. At the end of the lease period, or on termination of the lease at an earlier date for whatever reason, it will be transferred as required by Belhaven without any consideration being paid to/from either party.

Lessees will be required to participate in the Belhaven/Harper MacLeod licensing scheme.

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Accounts

It is a condition of the lease that quarterly management accounts, VAT returns and annual accounts are submitted to Belhaven.

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Stocktaking

In order to assist with the professional management of the business the lessee will be required to retain the services of a stocktaker nominated by Belhaven.

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Business set up

Partnerships and Limited Companies will only be accepted in exceptional circumstances, and where permission is given to enter a lease as a Limited Company, then Belhaven will insist on personal guarantees. It is by far Belhaven's preference that our lessees operate as sole traders.

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