ROB HASTIE TALKS ABOUT THE PUBS CODE
• Large landlords of tied pubs are subject to regulation under the Pubs Code.
• The Code is founded on two principles:
- Fair and lawful dealing.
- That a tied tenant should be no worse off than if they were not subject to a tie.
• Large landlords have to abide by a Code of Practice.
• Their tenants have the option to take a free of tie tenancy at various points.
• The Pubs Code Adjudicator decides disputes (or appoints someone to do so) and monitors compliance.
A bit more depth
A company is a ‘pub-owning business’ if it, or companies in its group, owns 500 or more tied pubs in England and Wales. There are presently six regulated businesses – Ei Group Ltd, Star Pubs & Bars, Greene King, Marstons, Punch and Admiral.
A smaller landlord company can also become subject to some of the rules in the Code if it buys a pub from one of the six pub-owning businesses.
A ‘tied pub’ is one that has to purchase some or all of its alcohol from the landlord or the landlord’s nominee.
The Code applies to most forms of tied tenancy and licence.
Campaigners and individual tied tenants convinced the Trade and Industry Select Committee and MPs that they were being treated unfairly by large pub companies and that free of tie tenants were better off.
Whether it was truly “evidence-based legislation” is a matter for debate.
There was never any proper analysis, for instance, of the free of tie tenancy market, and whether they were truly “better off” than tied tenants. It is not a straightforward comparison. For instance, in the Covid pandemic, tied tenants will get more support from their landlords, than free of tie tenants, because a tied landlord has a greater interest in the trading success of the pub.
Where and when
The rules are in the Pubs Code etc Regulations 2016, which was introduced by the Small Business Enterprise and Employment Act 2015.
It came into force on 21 July 2016.
The rules in the Code are supplemented by The Pubs Code (Fees, Costs and Financial Penalties) Regulations 2016 and also by Guidance and Advice issued by the Pubs Code Adjudicator. There are also published arbitration awards that attempt to interpret the rules and apply them to real life scenarios.
The Government will shortly be consulting on whether there should be changes to the Code.
The majority of the Code is based on the previous voluntary codes of practice that had developed in the pub industry in previous years. They deal with the information and advice that the tenant should be provided with on pre-entry, rent review, assignment, renewal or at expiry. They contain provisions for the recording of meeting minutes. Although there is an element of the Code “gold plating” sensible provisions by adding time consuming bureaucracy, these provisions of the Code have worked relatively well and seen few disputes referred to arbitration.
The right for a tenant to a free of tie tenancy at certain points of the tenancy (usually at rent review or expiry) have proved the most often disputed provision. The Code was not specific on the question of the form or content of the free of tie tenancy. Pub-owning businesses have looked to standard free of tie leases as a precedent. Tenants have sought to argue that their existing tenancies are more favourable than those free of tie leases and should only be changed to the limited extent required to make them free of tie. The awards received have been a spectrum between those two points.
The Pubs Code Adjudicator, Fiona Dickie, has two roles; arbitrator of individual disputes and regulator. In recent times the Pubs Code Adjudicator has on almost all arbitrations appointed external arbitrators, in order to concentrate on her regulatory role.
The arbitrations are private, but the expectation is that the awards will all eventually be published on the PCA’s website, potentially with redactions to maintain the anonymity of the tenants.
Previous arbitration awards may be persuasive to an arbitrator, but they do not bind them in the way a court would be bound by the decision of a higher court. There have been a few arbitration appeals taken to the High Court which have clarified a small range of issues.
In terms of regulatory action, the PCA is in regular correspondence with the pub-owning businesses, tenants’ groups and others. The PCA has conducted one investigation so far, which led to a £2m fine for one pub-owning business.
For even more depth.
The Pubs Code is a very complex and relatively new piece of legislation. I have been involved in over a hundred referrals, over the last 4 years and a half years. As a resource for myself and the solicitors that instruct me, I have collated the regulations, awards, advices and information into a “Handbook of the Pubs Code”, which at present stands at 658 pages.
If you have a question concerning the Code or any aspect of this article, please do not hesitate to contact me via my clerk, Wayne Stevens. I look forward to working with you soon.