Fair Rents In Tied Pubs

10 Jan 2013

There is need for vigilance of the grave danger that the pubco landlords will again try to ensure the small print is vague to wreck the plan says GMB
GMB, the union for tied pub tenants, responded to the announcement by Vince Cable of an independent adjudicator and a statutory code to deal with disputes over tied pub rents. See proposals in notes to editors below.
GMB members briefed MPs yesterday in advance of a debate about pubco rents in Parliament on 9th January.
Dave Mountford,  pub landlord and GMB branch secretary and spokesperson for tied tenants said “If Vince Cable sticks to this plan this is a welcome step forward. It is a tribute to the hard work by GMB tied tenants who did not give up their demands for a fair deal. GMB will be vigilant of the grave danger that the British Beer and Pub Association (BBPA) will again try to ensure the small print is vague to wreck the plan or some other ways to escape the rules.
The pubcos have “pulled to wool” for years as they priced pubs out of the market with sky high rents to pay interest to bondholders in offshore tax havens. GMB welcome the recognition by Government that tenants on pubco rents should no worse off than free of tie rents. A free of tie option is essential to achieve this. That is why a free of tie option for pubco rents must be enshrined in the statutory code.
GMB is pleased that the independent adjudicator will have wide ranging powers to address day to day abuses inflicted by pubcos in their desperate attempts to protect the tie and high wholesale prices. GMB also consider that BIS recognition of the constant mis-representation by pubcos of rental negotiations is a big step forward.
GMB want to see immediate Government action on the guest beer provision which would offer immediate support to tenants who are still suffering today until the new arrangement come into place.”
Contact: Dave Mountford pub landlord and GMB branch secretary and spokesperson for tied tenants on 07916 154 359 or 07794 021212 who is available for interview.
Notes to Editors
Struggling pub landlords were promised help today with Business Secretary Vince Cable announcing plans for an independent Adjudicator to address unfair practices in the industry.
As well as the new Adjudicator, Dr Cable also wants to establish a new statutory Code to look at the relationship between large pub companies and publicans, which will be enforced by the Adjudicator. This new Code will ensure fair practices for a number of issues including rents and the prices publicans pay for beer. It would also have the power to investigate and deal with disputes between pub companies (pubcos) and publicans, and in some cases have the power to fine.
In particular, the proposed Code would prevent abuses of the beer tie, which oblige publicans to sell particular types of beer. It would enshrine the fundamental principle that ‘a tied licensee should be no worse off than a free-of-tie-licensee’ which will ensure a level playing field is maintained in the pub sector.
Business Secretary Vince Cable said:
“There is some real hardship in the pubs sector, with many pubs going to the wall as publicans struggle to survive on tiny margins.  Some of this is due to pubcos exploiting and squeezing their tenants by unfair practices and a focus on short-term profits.  The Labour government oversaw three Select Committee reviews into these problems but only acknowledged the need for action in their last few months in office.
“Last year we gave the pubcos one last chance to change their behaviour but it is clear that the self-regulation approach was not enough. A change in the law is now needed.
“I hope these measures mean publicans are given a fairer chance at running their pub, which in turn will help them grow their businesses instead of losing them.”
The formal consultation on these proposed measures will be launched the spring.
    *  The proposed Code will be based on the existing Industry Framework Code but will be strengthened to include an overarching ‘fair dealing’ provision, and also the principle referring to the beer tie which states that ‘a tied licensee should be no worse off than a free-of-tie-licensee’. This will be particularly important for rents, as the consultation will propose that guidance issued by the Royal Institute of Chartered Surveyors be interpreted in light of this principle.

2.    The proposed Adjudicator will be based on the model of the widely-welcomed Groceries Code Adjudicator, and will have the power and function to:
*    arbitrate individual disputes between large pub companies and publicans;
1     carry out investigations based on complaints that have been received, during which they could require information from pub companies;
2     impose sanctions where an investigation finds that a pub company has breached the Code - including, in the case of severe breaches, financial penalties;
3     publish guidance on when and how investigations will proceed and how these enforcement powers will be used;
4     advise pub companies and publicans on the Code;
5     report annually on his or her work; and
6     recommend changes to the Code.
3.    The Code is expected to apply to all pub companies which own more than 500 tied leases, exempting smaller companies so that only those with the greatest market power are targeted. This is due to evidence indicating that smaller companies have been behaving responsibly, although this will be explored further during the consultation.
4.    Concerns about the relationship between pubcos and publicans have been raised by the pub industry for many years, with BIS Select Committee Reports highlighting the issue continuously since 2009. In 2011 the Committee recommended that the Government implement a binding industry Code and establish a Code Adjudicator. In November 2011 the Government announced a self regulatory approach, with the Code being brought into legal contracts and the industry establishing an independent arbitrator and advisory services.
5.    The independent arbitration service appears to be working well, with two of the three cases heard so far finding against the pubcos. Version 5 of the Industry Framework Code was incorporated into contracts by the end of 2011.
6.    Following further concerns raised by the BIS Select Committee the Secretary of State wrote to the industry to ask for evidence on how well the self-regulatory approach was working. Many responses showed some improvements had been made, but that much more was needed and that the necessary culture change had not taken place.
The Code will not mandate, as some campaigners have suggested, a ‘free of tie option with open market rent review.’ Neither will it abolish the beer tie. Evidence strongly suggests that the tie itself is not the issue- it is in fact a valid business model and its removal would significantly harm the British brewing industry. It is the abuse of the tie in certain circumstances that is causing the problem. The Code will ensure that pub companies use the tie responsibly.