The JD Wetherspoons Conundrum


JD Wetherspoons (JDW) were in the lead position to shape development leases all those years ago in the many properties that they converted to highly successful trading outlets. These included redundant banks, furniture stores, supermarkets etc. The basis of future rent reviews for what were minimum twenty year leases was the requirement that the works of development should be totally disregarded in the future rent calculations.


The result was a “shell” assessment of potential rent as if the development (often at great initial expense) had never happened. A large number of those leases are now facing their last rent review prior to lease renewal.

The first major hurdle for rent valuation was the strict interpretation of the used clause contained in the newly granted lease. JDW’s lawyers were very savvy in being specific as to effectively pub use. Those who were less aware, and that included duly appointed Independent Experts as well, cross referenced with restaurant lettings. These are almost always on a related sq, ft basis.  This restaurant evidence is now to a large extent discounted and reliance ,certainly by the JDW appointed rent review people, wholly placed on comparable JDW shell pub evidence. But first let’s examine a few background principles which affect a non shell valuation,ie a profits test.

  • The lease rent review clause always assumes a “willing landlord and a willing tenant”. That means the willing tenant is content to take over the property as a shell being capable of development. No identity, either corporate or individual is conferred on the hypothetical tenant.

  • Next is the equated cost of the scheme if a profits test is to be applied and the cost of works is to be deducted from the calculation. The works are assumed to be in sympathy with the original JDW concept. RICS VPGA 4 ‘Valuation of individual trade related properties’ (2017) is instructive but vague. However the previous RICS Guidance Note 67/2010 paragraph 6.25 is more specific in that the cost of the developments/improvements is “at the valuation date” ie the current rent review date, NOT the date when the works were undertaken. Then the guesswork Number 1 goes into overdrive. None of the people involved either for JDW or the landlord are qualified Quantity Surveyors.

  • Having taken a guess at the relevant cost that should apply there is then how to apply the annual cost of the works and factor in an appropriate rate of interest. Guesswork Number 2 comes in to play as the JDW representatives will almost universally apply a simple interest rate of 10%. Going back to GN67/2010 paragraph 6.25 the requirement is to reflect the quantum of the investment and the hypothetical term. In simplicity, if say the estimate of cost is say £800,000 the money will have to be paid back if an individual is the hypothetical tenant. There is the need for a mortgage instalment rate which is generally cast over ten years. Big companies, just like JDW, have a rolling rate of interest or finance note which currently is about 4%. Big difference from the assumed 10% and huge effect on the profits test calculation.

  • There is every reason why a straight forward Profits Test valuation should apply. Guesswork Number 3. Skilled licensed property valuers should be quite capable of assessing the fair maintainable trade but the JDW brand (goodwill) must be set aside. Usually the ‘skilled guesswork’ is poles apart .

  • Finally we have the one influential piece of case law which everyone ignores. GREA Real Property Investments Ltd v Williams (1979) 250 EG.651 [1979] 1 EGLR 121. This concerned one floor of a modern steel and concrete building let for 21 years as a shell. The tenant had carried out considerable works at his expense to occupy. Amongst other observations Forbes J considered that the improvements had been paid for once and for all at the lease commencement. They were to be regarded as a wasting asset. At review the improvements would no longed be new and should be depreciated. No third party referral has ever followed this one judgement to it’s conclusion on pub premises. Why ? Because to do so would almost certainly invite legal challenge from the party that came off worst. Why take the risk of treading new ground.

Back to first base and shell comperables. The landlord’s representative has no access to the data on the JDW property register. For the tenant the only pub comperables to be offered are the cherry picked lowest JDW settlements in terms of rates per sq ft. Shops and restaurants rates per sq ft are of no influence because of the  (now) very strict interpretation of the user clause. Be under no misapprehension JDW are market dominant in this type of rent revue. Others follow but in nothing like the same quantity. The comperable pub evidence always proves nil increase and a profits test related rent assessment is generally held in low esteem even if validly based.

To our knowledge there has been no successful application for an Order for Specific Discovery levied against JDW to force non cherry picked evidence into the open forum of discussion. The grounds for refusal are always to disallow a ‘fishing trip’. The level of related guesswork as outlined above needs consummate skill to unravel but the odds are heavily stacked against the landlord until and if (amongst other variables) the GRA case is ever brought to the fore. The ultimate conundrum !

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