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Can I escape my pub lease early and get fixtures payed?

Discussion in 'General Business Forum' started by Jabba, Jul 16, 2010.

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  1. Jabba

    Jabba UKBF Newcomer Free Member

    2 0
    I don't know if anyone can help here.

    I have had a pub lease now for 3 years and am facing imminent bancrupcy from the HMRC. I have quite accepted the likelihood of this happening and have tried to plan an exit strategy from my premises.

    Having not payed my rent this week and bought my stock in (not from the Pub co) I plan to not pay next week, coming out of the premises the following week.

    I do not want to let the Pub Co have my stock so that is why I am planning my exit, hopefully leaving after a weekend with a few quid in my back pocket to see through an expected period of unemployment.

    I also plan to tell the Brewery a few days before I leave that I am handing the keys back to them in the hope that they will get a management company in and keep the staff jobs. The bar is not making money at the moment but is not trading terribly. The problem I have is that making no money now leaves me with an inability to pay back the heavy debts incurred over the first 2 years trading.

    So, to cut a long story short, my query is to what the likelihood of the Pub Co letting me leave my lease early and purchasing my fixtures and fittings from me? I can't imagine them wanting to do this, but have heard stories of it happening.

    I am loath to contact the Pub co directly to early and ask them if this is a possibility in case they make arrangements to resecure the premises given that I am behind in rent and in breach of contract.

    I owe around £80,000, with my fixtures and fittings being valued after depreciation at about £20,000 with a £10,000 deposit being layed down too. My debt is to the bank, HMRC and Electric board.

    Thanks for any advice in advance...
     
    Last edited: Jul 16, 2010
    Posted: Jul 16, 2010 By: Jabba Member since: Jul 16, 2010
    #1
  2. sysops

    sysops UKBF Newcomer Free Member

    2,923 887
    Oh Jabba! How did you let it get to this point?

    Your best bet, by far, is to sit down and talk with your pub company, and to start a dialogue with HMRC, your bank, and the electricity provider. The sooner you do this, the easier things will be. Had you done this 12 months ago, I am certain you would be in a better position today.

    Your primary concern seems to be to walk away with a couple of weeks' worth of takings, when the reality is that your personal debt dwarfs this amount.
     
    Posted: Jul 16, 2010 By: sysops Member since: Feb 1, 2007
    #2
  3. Jabba

    Jabba UKBF Newcomer Free Member

    2 0
    We did work out a repayment plan 12 months ago but are unable to honour it. As I mentioned, we are not making any money, so to repay debt is proving problematic.

    My biggest concern is trying to avoid bankrupcy. If I can leave the lease early and get a fair value for my F&F from the pubco then I can put everything in a pot to an IP and try to come to some conclusion with the creditors, which i am told is possible.

    The issue I have is that when things started to look ropey, i signed the F&F to the pubco to cover the small debt we had with them which would also put off any bailiffs.
     
    Posted: Jul 16, 2010 By: Jabba Member since: Jul 16, 2010
    #3
  4. Esk247

    Esk247 UKBF Legend Free Member

    7,758 1,514
    oh eck! is it not just easier to get in touch with everyone concerned and then provide them with the evidence of earnings/profits etc?

    HMRC will give you more assistance if you tell them you're really struggling and you're having serious financial problems.
     
    Posted: Jul 16, 2010 By: Esk247 Member since: Oct 6, 2008
    #4
  5. Aussie Dean

    Aussie Dean UKBF Newcomer Free Member

    209 22
    Whatever you do, don't talk to your Pubco yet especially if they are PT or EI. They wont care and will start proceedings to get you out of the pub and get it re-leased.

    I would talk to a solicitor straight away for advice...also contact the owner of this website www.buyingapub.com and he will direct you to the right people.

    Cheers
     
    Posted: Jul 17, 2010 By: Aussie Dean Member since: Jan 24, 2010
    #5
  6. Chris Ashdown

    Chris Ashdown UKBF Legend Free Member

    11,479 2,366
    Face up to the facts, you have already assigned the F & F just accept the bankrup and move on with your life, you have nothing to wheel and deal with
     
    Posted: Jul 17, 2010 By: Chris Ashdown Member since: Dec 7, 2003
    #6
  7. shadownoire

    shadownoire UKBF Newcomer Free Member

    1 0
    Hi Jabba
    just joined but seen your query. I am in same problem now. Are you still trading? What road did you take?
    Hope you are ok now.
    Could you please let me know?
    Shadownoire
     
    Posted: Aug 24, 2012 By: shadownoire Member since: Aug 24, 2012
    #7
  8. tony84

    tony84 UKBF Big Shot Free Member

    5,745 1,044
    My parents have been in your position (not to quite the same tune but not too far off).

    The pub company probably wont pay you didly as you will no doubt have to give 3 months notice? So 3 months notice = 3 months rent. If theyre anything like ours, they will insist on their rent before paying you your f&f back and we wouldnt trust ours as far as we could throw them.

    They will no doubt put a manager in, we left on Sunday morning with the saturday nights take and literally took everything but the barrels.

    Personally i would take everything you can and then negotiate with them, but they have pubs all over the place probably so any tables and chairs etc they will just get from another pub so youll be stuck with a load of old furniture.

    We asked for help for months just to do the outside up for summer, no doing. We left and within 2 weeks they brought a load of tables for outside from another pub....amazing what they can do if they want to.... still bitter (no pun intended). Just screw them over for as much as you can because thats what they will do to you.
    This is all my opinion though.
     
    Posted: Aug 24, 2012 By: tony84 Member since: Apr 14, 2008
    #8
  9. Spongebob

    Spongebob UKBF Ace Free Member

    2,208 1,115
    That is exactly what anyone in this situation should do.

    That is exactly what anyone in this situation should NOT do!


    I know it's an old thread, but it is clearly relevent to many people. The OP owed £80k, had no income, and no assets other than a pub full of furniture worth maybe a couple of grand tops. (It may be in the books as worth £20k but its true fire-sale value would be no more than 10% of that)

    Bankruptcy is realistically the only solution. Once that decision is made it is important that nobody knows what is going to happen until after it has happened. Get as much cash in as humanly possible and then vanish overnight with whatever you can fit into a borrowed van. Flog the furniture and stash the cash.

    The following day, attend a pre-arranged interview at the county court and file for bankruptcy.

    This is not the course of action that would be recommended by a 'professional', because it is not strictly lawful. However, it will work and you will get away with it! That few thousand pounds will prove very useful when bankrupt but is such a low figure that no-one in authority will care about it.
     
    Posted: Aug 24, 2012 By: Spongebob Member since: Dec 9, 2008
    #9
  10. Arjessa

    Arjessa UKBF Newcomer Free Member

    21 3
    Hi, I read of your difficulties and debts. We bought a 15 yr Lease on a Freehouse, and pay quarterly rent (or supposed to) but have only been in here 6 months and can no longer afford to carry on here. The first quarter's rent we didn't have and had to loan of my 89 year old mother some 4,000, now the second quarter's is due and we don't have the money. We owe around 10,000 after the 6 months, including my mother! Trade has dropped right off since Feb, so rather than wait until the rent goes unpaid and past the due date, we have offered to Surrender the Lease to our Landlord, which he can either accept or not - but haven't heard reply yet. We are not waiting around and are moving 3 adults and 5 cats in with my mother in a 2 bed bungalow as don't want to wait until Bailiffs are sent in and we lose everything. We plan to move out a few days before the rent is due and have told the Landlord we intend to vacate the premises. Question is; Can we recover any of our initial Lease money as we paid 39,995 for the 15 years and have only used a small portion of this? Does anyone know if we stand a chance of getting any of this back and what we have to do to ensure this?? Thanks for any and all help...............I think the plan of take everything and run sounds good and hope things go well for Jabba!
     
    Posted: Jun 7, 2013 By: Arjessa Member since: Jun 7, 2013
    #10
  11. Spongebob

    Spongebob UKBF Ace Free Member

    2,208 1,115
    The thirty grand has gone, I'm afraid. The premium paid for a lease and the subsequent quarterly rent are unconnected; the premium is a one-off payment giving you nothing more than the right to undertake or to take over the lease. This you have received.

    I suppose that theorectically you could sell the lease to someone else; however the rent would have to be up to date and it sounds like the value of the lease has been seriously eroded during your tenure.

    Your biggest potential problem is that you are still bound by the terms of the lease even if you move out and rent is mounting up. I supect your best option is to follow my advice in the post above and do a flit before declaring bankruptcy. That at least will draw a line under the whole unhappy episode. It is a pity that you have already telegraphed your intention to quit to your landlord; a more effective ploy is simply to do it.

    Good luck and may your story serve as a warning to anyone contemplating taking a pub. If you want to run a pub either have very deep pockets or get a job with Wetherspoons!
     
    Posted: Jun 8, 2013 By: Spongebob Member since: Dec 9, 2008
    #11
  12. Vectis

    Vectis UKBF Enthusiast Free Member

    782 203
    Sorry, but I really can't believe that anyone would take on a 15 year lease and then find they can't pay the first quarter's rent.
     
    Posted: Jun 8, 2013 By: Vectis Member since: Jun 10, 2012
    #12
  13. Arjessa

    Arjessa UKBF Newcomer Free Member

    21 3
    Hi. We saw all the figures for this place beforehand - earn 3,000-4,000 a week we were told. Well, we missed out on the bumper Christmas period and came in mid-Jan. Takings were averaging at 2,000 per week - off Season, not bad - although when we asked to see the figures for same time in 2012 they averaged 3,000. Since Feb 25 takings have been spiralling downwards and now reached as far as only 400 in a week. A big difference, and one still has overheads to pay; Electricity, Council Rates etc regardless of whether you have two people in the Pub or 200 - a lot easier if it were 200! The locals have not been supportive at all, and we think some of them have been a bit 'funny' as some villagers are. Doesn't help.
     
    Posted: Jun 8, 2013 By: Arjessa Member since: Jun 7, 2013
    #13
  14. Socio South West

    Socio South West UKBF Enthusiast Free Member

    949 246
    And therein lies the answer to why you should never ever have taken a village pub in the first place - if you think that of them.... no telling what they think of you, and in a village community word travels like wildfire: In your trade, personality is as much of the business as anything else, and whatever you think of your clients, outwardly they have to be the best people in the world.

    I'm afraid its an old old story....
     
    Posted: Jun 8, 2013 By: Socio South West Member since: Mar 24, 2013
    #14
  15. Arjessa

    Arjessa UKBF Newcomer Free Member

    21 3
    Thanks, but we really liked the locals to begin with - our thoughts and opinions have changed since and once we've heard the gossip spreading around!
     
    Posted: Jun 8, 2013 By: Arjessa Member since: Jun 7, 2013
    #15
  16. Socio South West

    Socio South West UKBF Enthusiast Free Member

    949 246
    Let me guess....

    The village bucket head, probably the third son in a family of nine with about fourty cousins living in the village as well had one too many one night and you banned him?
     
    Posted: Jun 8, 2013 By: Socio South West Member since: Mar 24, 2013
    #16
  17. Arjessa

    Arjessa UKBF Newcomer Free Member

    21 3
    Ha ha....good one, but haven't banned anyone - in fact we have un-banned a couple. Just found out our chef, who has been off on sick pay with a nervous breakdown of sorts ever since the Council's Health Inspector visited last, had been telling a few 'porkies' and exaggerating a few facts that would have put trade off, as tell one person and the whole town knows in next to no time..........explains a few things!
     
    Posted: Jun 8, 2013 By: Arjessa Member since: Jun 7, 2013
    #17
  18. Alan R Price

    Alan R Price UKBF Newcomer Free Member

    2,123 1,037
    Recent experience advising people in the licensed trade who have lost their savings/redundancy pay/equity in their house leads me to agree with this! Unless you have a very good track record and understand exactly how it works, taking over a pub is a very risky business.
     
    Posted: Jun 10, 2013 By: Alan R Price Member since: Jul 5, 2010
    #18
  19. sjb84

    sjb84 UKBF Newcomer Free Member

    128 14
    A few years back I leased a pub - spent months and months researching everything to the maximum possible.

    The place was taking £1300 a week - within 3 months of being there I managed to get the take to a steady £5000 - £5500. That was down to provideing customers with something they couldn't get anywhere else - enthusiasm/customer service and a great experience. Not saying they wouldn't get that anywhere else, they just wouldn't get mine and my staffs.

    Pubs are notoriously long hours and people lose sight as to why they take a pub on in the first place - yes to make money but also because that is part of you.

    Things do conspire in some cases and I think the posts who say that this could have been avoidable isn't necesarily correct, i think you will have to simply accept the inevitable.

    Running off with the weekend take may seem like a good short term idea but you will be chased for it in the long term - if you still owe rent obviously.
     
    Posted: Jun 10, 2013 By: sjb84 Member since: May 1, 2013
    #19
  20. daniel.benson

    daniel.benson UKBF Enthusiast Full Member - Verified Business

    618 112
    Have you thought about getting a manager/management couple in on a %.

    This seems to be where the industry is heading as I see at lot of job adds with the salary on a weekly % of the pubs take. I think this could work well if you get the right manager in as they will work to drive profits.

    Not only this they might win the locals back over.
     
    Posted: Jun 11, 2013 By: daniel.benson Member since: Nov 16, 2010
    #20
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