WHAT TYPES OF PROPERTY DO WE AUCTION? (Back to Home Page)
WE AUCTION ALL FREEHOLD PROPERTIES & BUSINESSES
We sell freehold residential, commercial, trading or non trading property, agricultural and development land, farms, country estates and licensed property. Businesses are normally sold as going concerns and include city pubs, country pubs, village pubs, clubs, hotels, restaurants, wine bars, sports bars, leisure complexes including golf courses and entertainment centres etc.
WE AUCTION LEASEHOLD PROPERTIES & BUSINESSES
The purchaser of the lease, subject to being approved by the Landlord, has the right to occupy a property for a fixed term of years subject to conditions and in return for the payment of rent. Most leases are assignable, which means they can be sold in the open market almost like freehold.
WE DO NOT AUCTION TENANCY PROPERTIES & BUSINESSES
A tenancy is a short-term agreement (initially 1-3 years), often with the tenant having the right to continue as tenant from year to year. The only value in a tenancy is the fixtures and fittings.
GENERAL INFORMATION
Freehold
The purchaser can normally borrow between two thirds and three quarters of the purchase price on mortgage as freehold property offers a good security for a loan. A pub that is owned freehold is normally "free of tie" which means that the owner can buy beer and all other supplies from wherever he/she chooses. Being free of tie, the owner can negotiate substantial discounts with the suppliers when purchasing beers, soft drinks and wines and spirits at prices which are very substantially lower than those charged to tied lessees or tenants. The profitability of the business can be much higher than with leases and tenancies and this enables the freeholder to service quite a substantial mortgage interest repayment.
LEASEHOLD
There are effectively two markets in leasehold.
Leasehold licensed businesses are normally sold as a going concern to include trade furnishings and established trade, but the lessee (the occupier) holds the property for a fixed term of years in accordance with the conditions of a lease - which is generally a fairly lengthy and a complicated agreement from the lessor (often a freeholder). The lessee/tenant pays rent to the lessor and is obliged to comply with all the terms and conditions of the lease in order to stay in possession. The main terms and conditions are usually to pay the rent (!), insure the property, to keep the property in good repair and to trade in compliance with government/statutory regulations in order to remain within the law.
Additionally, although some pub leases are free of tie, many leases are granted by Brewers subject to a tie, whereby the lessee (tenant) is obliged to purchase a specified range of products (usually all or most of its beers, minerals and wines and spirits) from the lessor / landlord or its nominated supplier. In such cases, the lessee is generally obliged to buy beer at "list price" or with very little discount from this price.
Many pub leases are granted for initial terms of between 10 and 21 years, and the lessee is committed to pay the rent throughout the term unless he/she can sell the interest by assignment to another purchaser. The purchaser of the lease is obliged to comply with all the same terms and conditions as the original lessee for the remainder of the term. An assignable lease can be sold in the open market for whatever price the seller can obtain, and - where a business has been taken from a level of modest profitability to a much higher trade and high profitability - the lessee can sell for a much higher price than the original cost, to make a capital gain. Conversely, if a lessee takes on a successful business but then loses trade whereby little or no profit is being made, the business may have to be sold at a substantial loss or, at worst, surrendered back to the Landlord for little or no payment.
Leases change hands at prices that are much lower than equivalent freehold businesses, and the capital investment of the lessee / tenant is lower. Leases offer little or no security for a bank mortgage and it is generally very difficult to borrow more than half of the purchase price of a lease.
Brewers and private owners normally offer new leases. The majority are offered nowadays by brewers usually "without premium". This means that the new lessee / tenant does not make any payment for trade goodwill or "key money / premium" for the lease. Generally, the new lessee / tenant only purchases the trade furniture, fixtures, fittings and effects, plus stock and glassware, and is also sometimes required to pay a security deposit (equivalent to one to three months rent). New leases frequently contain a clause barring the sale or assignment of the lease within the first two years, but after that period the lessee can sell the business as above.
Tenancy
Brewers tenancies are fairly short term agreements, where the tenant buys only the fixtures and fittings, bar glassware and stock at the business and pays a rent for the property. A security deposit is also frequently paid, equivalent to one to three months rent as security against non - payment of rent and brewers trading accounts. It is very rare for any goodwill element to be included in the price of a tenancy. Tenancies are not assignable, so tenants cannot sell on any business interest at a profit. On deciding to leave, a tenant surrenders the tenancy to the Landlord and usually sells the trade furnishings, fittings, glassware and stock at valuation.
Tied or Free of Tie?
Freehold pubs are usually "Freehouses" meaning that they are free of tie and can buy products from any brewer or brewers they choose to deal with. They are free to negotiate terms with their suppliers to obtain very good discounts, especially on beers and lagers. Provided they can maintain their selling prices the discounts obtained can result in greatly improved "bottom line" profit.
To help fund the purchase or improvement of a pub, an owner might obtain a loan from a brewer and become "tied" for the duration of the loan. Normally such brewers' loans are at lower rates than bank interest rates, (sometimes, no interest is payable) but the pub owner does not obtain such large discounts as would be available without the loan from the brewer.
Some leases are also free of tie, whereby the lessee has the same freedom to negotiate terms with suppliers and obtain good discounts. As this should result in a greatly improved "bottom line" profit, the market value of the lease could also be higher.
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