Rent can be paid based on profit not size, says ruling
Hospitality properties based in unusual locations will be forced to pay rent based on potential profit rather than per square foot, following a landmark ruling.
St Albans District Council won an arbitration ruling against a nightclub situated in the middle of a golf course, after an independent expert decided the property's unique characteristics and location meant rent should be calculated based on turnover and profit. This resulted in an 8% increase for the tenant.
The property was an old Georgian building located in the middle of a golf course, which made it difficult to value, according to Dan Mackernan, senior surveyor at property agent Davis Coffer Lyons, which represented the council.
"The tenant argued for a floor area approach but the independent expert agreed with our profits-based approach due to a lack of comparables," he said. "I hope this will set a precedent for reviews of similar properties where there is a lack of comparable evidence."
Tenants might even see the valuation criteria on all properties change in the future to include turnover per square foot and per customer, according to Mackernan. "This would be a slow process as people resist change, but operators would bid for a property on profit potential not rate per square foot," he said.
A spokesman from the British Hospitality Association said: "Most restaurants are not in such a unique location as this and the vast majority of rent reviews will continue to be subject to the usual criteria."
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By Dee Rossi
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