Tuesday, December 02, 2008

Jusat discussing this situation today with Nicky at work and I don't know what it should be called but there's a revealing reverse analogy between the Employer / Employee and the Pubco / Lessee here:

Whereas an employee is protected by law - by society - from abuse or inappropriate behaviour by employers (as long as the employee know anything about personal human rights) they can simply go to the Industrial Tribunal Service and fill in a form and the rest is taken up by the Service and paid for by the taxpayer. Even an employee with no true grievance can create a lot of mischief because the default position is if an employee makes a claim, the employer must proive they are not culpable. If the employer wishes to defend their position and avoid punitive damages, the entire onus is quite simply up to the employer to prove the employee is wrong, has lied and so on - through proving they are a good employer and have all the necessary procedures in place to monitor employees' and their own - actions adequately.

Exactly the reverse of the above is true in the Pubco / Lessees scenario - when the pubcos abuse their position of strength over individuals our law actually PROTECTS the pubco from financial harm and isolates the lessee. And it's a lot more than the impossibly high costs an individual is faced with in fighting for justice against a corporation which has bottomless cheque book

It's very complicated to explain.

At whatever level you care to think of in a reationship between the tenant and the freeholder the freeholder has total control over how the relationship is conducted. Notionally if the freeholder is benevolent and forward thinking there should be no issue but freeholders rarely tend to be so; especially whgen the freeholder is a corporate body responsible to faceless expectant shareholders rather than a family run firm with tradition and a sense of patriarchal duty toward individuals behind it (see what's been happening to Youngs in recent years as the glamour of pubco club financial returns has beguiled the board as family influence has wained).

The cost of standing up to the corporation completely isolates individual lessees from justice and makes it practically impossible to get justice of any description at any level (i.e. it is THEORETICALLY possible to TRY to find justice but in the field it doesn't happen; generally anything a tenant might need to fight a freeholder against has not been tested so there is no precedent to work with. Basically every licensee who wishes to defend themselves against something they do not agree with that the freeholder decrees they must take on, whether it be a change in product, wholesale prices, days when the beer will be delivered or a surreal rent review, is faced with having to create precedent in law themselves). A disastrous consequence of this inequitous situation is that it leaves the corporation at liberty to continue, and typically to escalate, the abuse they routinely have applied in their dealings with any particualr individual who has had the audacity to stand up to them. It's a tragic analogy to be making at the age of fifty (that's me) in the 21st century but it is in essence this: the bully on the block has no Dixon of Dock Green to rein them in. The ananlogy is even more tragic when you sconsider that if plod were not around when you were a kid you might just lose your temper and give the bully a completely unexpected good kicking and subsequently gain their respect. NO. Here, in 2008, there is not even that chance; lessees are utterly impotent when faced with the liklihood of a pubco brawl. Kick up a fuss and you're completely om your own. With your family and life in tatters.

There is no legislation which protects the lessee from abuse (why do pubco employees always make a big thing of the landlord tenant act - as if it offers some benchmark of security for the tenant? That is just part of their act used to make you believe there is an ounce of objective 'partenrship' in the relationship. It does no such thing that will not be legally run rings around by pubcos). And at final furlong in rent review there is the arbitrator, the independent expert, the RICS trained objective 'expert' to tuck the lessee up like a kipper and serve them back to the pubco beaten and dispirited on the track to bankruptcy which finally, ultimately shuts them up.

The first barrier to justice for the lessee lies in finding a lawyer, a surveyor, anyone already involved in the pubco world, who is not already regulary working FOR the pubcos. Pubcos are the main source of income for EVERYONE who is involved in ALL of the ancilliary industries surrounding supply and service to pubcos. Pubcos are there for the long run; lessees come and go: the industry knows which side its bread is buttered on and that is long term income from pubco' activities of churn and the maximisation of profits at all cost. Who would you rather work for in a situation where one client is likely to be underfunded and likely not capable of paying the legal bills if it goes all the way, against one with a limitless chequebook and a rapacious need to win all the time?

So, having trawled the land to find advisors untainted by the pubco pound, the next barrier to justice is perhaps the most obvious: that of cost.

There is no conceivable situation of disagreement that could come up betweeen a lessee and a pubco where the lessee has any chance of getting a fair outcome. What the pubco says, goes. Faced with a completely unsustainable financial intrusion by the pubco, such as a huge rent increase or incremental erosion of profitablity because of wholesale price increases imposed by the pubco, which will ultimately lead to bankruptcy - the lessee is always in the position of having to consider the enormous cost of taking a pubco to task legally; the likelihood that they will not win, consideration of whether they will be able to afford to get to conclusion; lose; and pay the financial consequences AND still remain in business; against the thought: 'if the increased costs are imposed now I can work harder and make the business bring in more money and somehow I'll find the means to survive'. Everyone goes for the latter option; because there is no alternative. The game is rigged.

All this stuff used to be academic but having been through several costly brushes with pubcos, and having been utterly crushed psychologically in the process, and having had my father - who has closley followed my expeience with pubcos and their incredibly archaic and bullying approach to business (and he lost 45K in the process) - auggest that my descriptions of pubco employees' behaviour amounted to evidence of clinical paranoia because it does not make sense that a company should behave in the way I was describing. 'Listen to yourself, what you are saying isn't rational. No company would behave that way. Why would they WANT to put people out of business?'

Now I have to admit I took this to heart. I was shocked that my own father, who's been with me through thick and thin, albeit from a geographically long distance, seemed to have no idea about what really had been going on between me - the son he'd invested in and who had not been able to pay him back - and the pubco for over a decade

This is the nub of the Sociopath analogy being applied to pubcos' behaviour toward tenants. In a sense, no one is guilty of the power abuse pubcos exert over tenants. Pubcos don't 'WANT' to put people out of business; it's just they are set up to ensure it makes no difference to the pubco when someone does go out of business - and they do, in droves.

It makes no difference to the freeholder when a pubco lessee goes out of business, IT SIMPLY DOES NOT MATTER, because it does not affect the pubco financially; they are insured against this eventuality: 1) A tenant has three main obligations to the freeholder: To pay rent. To buy tied products. To pay the freeholder's building insurance premAny lessee could get equivalent buildings insurance cover for half the amount if they were free of tie as a stand alone business - this against the bulk buy it discounted status of the pubco. The reason the prmioms are so high is that, as well as buldings' cover, the premiums insure against business failure and loss os income to the pubco. The next line of security for the pubco is 2) there's always someone else to take over the property and put money into improving it; and insuring the pubco against their own future failure.

There is no downside for the pubco: lessees either survive and incrementally pay never increaseing costs to the pubco; or they will be replaced by those enthusiastic 'enreprenerus' eager to succeed in 'partnership' with a pubco where others have failed.

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