pub lease problem

[derna]

a freind and I are renting a privately owned pub with a ten year lease
he has now decided ,after 3 months, that he wants to leave and is demanding £15,000 for his share !!
The lease is his name only as I am a homeowner and he arranged this so in the event of insolvency my home would not be at risk.
Does he have the right to so much money

 

[oldeagleeye]

How long is a piece of string. It depends how much you both put in and what the pubs worth. Either that or what you are prepared to pay.

I am a former publican who was previously a finance director and can usujally value pub to a pound note but I would need. How much ingoing and from each of you +

1) Location. Rough would do. County + high st or country.

2) rent and if there are any reviews

3) Turnover wet & dry

You can PM me if you don't want to reveal in open forum

Robert

 

[derna]

don,t know how to PM you !! We both put in £1500 for stock,pub is located nottm centre, rent is £1000/month,1st 3 months were free ,turnover 4500/wk wet only no dry,have offered him £3000 cash no ties , no profit yet due to expenses, cctv,decor,tvs,alarms etc etc.

 

[Homshaw]

After 3 months he is expecting a profit of 15K less the 1500 he put in. That is 13.5K

The implication is that the business is increasing in value or generating profits of 54K for each of you or 108K per annum in total

Seems a good return

 

[derna]

seems highly unlikely too ! he is using the lease as his leverage even tho the verbal agreement was that the lease was both of ours

 

[Homshaw]

I am amazed at how unsucessful partnerships are unless they are between couples sharing a common personal agenda

People go into them thinking they have an agreed strategy but are thinking totally different things or outside influences, such as one of the partners finding a new interest and wanting more money and doing less work, results in a big problem

Come across it over and over again

 

[derna]

dead right there, he has been offered another free trade pub and needs £26000 to get in thats why he is trying to get money off me. live and learn

 

[Homshaw]

dead right there, he has been offered another free trade pub and needs £26000 to get in thats why he is trying to get money off me. live and learn

Of course this isn't all one sided

He has a lease in his name with a commitment to pay 120K over 10 years and needs money

You stand to lose 3 months work and 1500 and he has nothing in writing and if lawyers are involved he puts a lot of money at risk with no guarantee of sucess

Strange friend

 

[derna]

I fully understand that, have just spoken to him and he agrees the lease is half mine and he wants to sign it over to me fully, the bit I don,t understand is where this figure of £15000 has come from when this is a fledgling business that could as easily decrease as increase so projection figures are not really viable plus it is him that wants out not me ,as i understood partnership agreements, which we have, all on a 50/50 split, the business is as it stands on the day of dissolution not on projected possible profits.Ther is a clause in the partnership agreement that prevents either of us selling our share to anyone else without consent,so if I can,t raise this amount he is going to be stuck anyway.

 

[internetspaceships]

If all the paperwork and commitment is in his name then surely you could theoretically just walk away?

Doesn't this put you in the driving seat here?

 

[Homshaw]

Agree it should be based on things as they are. So its not worth 15k.

3k sounds right - 1500 in stock and a little for profits re-invested in alarms, improvements etc

 

[derna]

Yes I could just walk away, but the pub is doing well but only because myself and my partner(as in life partner not business partner) have put a lot into it adn drawn a lot of customers in ,my business partner is not popular at all with the customers and has in fact done a lot to damage the pubs reputation i.e. barring people for no reason ,causing arguments etc. it has taken considerable work to repair some of the damage he has done .We try and make sure at least one of us is there most of the time now so we can keep things running smoothly. Walking away would literally kill the pub and thats not something i want to happen, but if i have to then as a last resort i will.

 

[internetspaceships]

I should have worded that better.

What I meant to say was, that for all the grief he appears to be giving you, and the pressure he is putting you under, you are the one keeping his investment and lease commitments from defaulting.

As such, he needs to take a step back and listen to what YOU need to make it work, not the other way around.

 

[derna]

never thought of it like that thankyou

 

[oldeagleeye]

OK Derma lets take this back to the basics

1) There were no in-goings apart from stock which you funded jointly. In monetary terms your business partner then owns 50% of this. The transfer of lease was free. so you both own nothing there - on the books anyway.

2) What profits to date there have been have been reinvested in decor & cctv. That benefits you not him if you stay. It is a simple matter to check the bills and see how much this all came too. Then add it to his £1500 stock money.

Now in therory that is ALL you owe him and make no mistake - a verbal agreement is just as valid as a written one. If you agreed 50/50 as regards of the lease that would be your position in law.

We all know however that the law can be an ass at time and it is not always fair. You say that your partner has found another pub he wants to invest in. To me that would seem to imply that he may have found yours.

With no premium and a relatively modest rent for a city centre and a turnover of £4.500 on just wet sales - actually finding that pub has to be worth something and if that was the case I am going to have to disagree with the general viewpoint on this thread and say that his demand of £15K isn't too unreasonable.

It has after all only taken a few months to see a perfectly respectable turnover and a city centre pub like that would be worth a £50K premium in better times. He is then only asking for some 50% of that + his original stock money back.

Lets be realistic then and look at what is in it for your Derma. If this whole thing had gone pear shaped after 6 weeks you could have simply walked away. As another member pointed out however you business parner would have been stuck with a bloody big white elephant and a debt of £12OK over 10 years.

You can't just sit back now then and say that all he put in was £1500 quid and I don't think your stupid Derma. You gladly accepted his protection if the business had failed. Now it seems your on a winner you don't seem to want to take account of this.

Fair play doen't work that way. With a little luck your and your life partner are going to be on about £40K a year tax free. Igf it were me then I would compromise. Offer the guy £10K and at that as your already up and running you really have got a good deal and you can part friends.

BTW. You can protect you private properrty and limited any liabilities with just a £30 quid Limited Company.

Rob.

Quote. Th law ia an ass. It is not about what is legal or not but who has the biggest ball- and the best briefs.

Big AL Fayad during a dispute with Tiny Rowland.

 

[internetspaceships]

I agree with Eagle here, however as per my previous posts it needs to be a joint discussion as opposed to one person making demands.

Otherwise it's not going to work and it'll end in tears.

 

[Homshaw]

Is it not usually for the landlord to ask for a personal guarantee from the directors if they rent to a limited company? However at that level of profit it is worth being limited for tax purposes alone

I see lots of pubs up for rent and landlords going under. If he has found a genuine undervalued and profitable location then yes it is worth something.

However I would be suspicious of a partner/friend with whom I'd made a deal and he moved the goal posts after such a short period and demanded such a large and unexpected sum of money

I'd definitely go to an accountant and work out how much money I was making and I'd pay a solicitor for a watertight written agreement if I did agree to buy him out