Thursday, April 03, 2008

@ Tony. My experience mirrors yours about state of building and accommodation. I find it offensive that the accommodation above pubs is described as if it were a great luxury and a fabulous benefit in kind. The lessee pays for the domestic accommodation in the rent attached to the business which suggests to me it’s not a benefit in kind. Many of the living spaces above pubs that I’ve seen would be condemned as living accommodation by local authorities or housing associations because they simply are not fit to live in. Access is usually poor and health and safety issues above a trading business are serious considerable; fire regulations regarding any kind of occupancy come into effect and with fully repairing and insuring responsibilities sorting all this is a matter of expenditure for the lessee not the freeholder. When any of this is brought up with the freeholder it's said to be down to maintenance and repair and not their problem.

This attitude in my experience goes as as far as issues regarding basic services supply. Old pub buildings tend to have domestic water, gas, electricity and sewage supplies which simply are not up to the demands of contemporary business; legislation or, in the case of rainwater goods; even climate change and extreme weather conditions. Try getting a PubCo to bring these up to standard. No. It will be the tenant who coughs up under their fully repairing and insuring obligation. Will this sort of expenditure on a building be taken into account at rent review? Of course not - because keeping the building in good repair is just part of the lessee contract. None of the above are regarded as improvements - which theoretically cannot be rentalised.

Two small examples I came across in a schedule of dilapidations were a demand to reinstate a fireplace in domestic accommodation which had been removed by a previous occupant and to rebuild/replace a large double garage/shed which, when the lease was signed, was a rotten, falling down hut that should have been skipped.

I’d hope there should be some literal connection with REIT conversion with this thread taking this particular turn here because it’s about property and bricks and mortar responsibility.

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