Pubs Code proves to be no panacea

In his article for this month’s Pub & Bar magazine (that can be downloaded below), David Clifton focuses on the Pubs Code that came into force in July 2016, commenting that far from it providing the panacea hoped for by pub companies and tenants alike, both the Code and the appointment of Paul Newby as the PCA continue to attract considerable controversy.

UPDATE: At the time writing this article, EI Group was awaiting to hear from the High Court whether it could appeal a decision made against it by the PCA that a contract offered by it to one of its tenants did not comply with the Pubs Code regulations. Since then:

  • at the end of February, EI Group has withdrawn its appeal, maintaining that further rulings from the PCA had given it “helpful clarity”. A spokesman for the PCA was quoted as saying: “We welcome EI Group’s decision not to pursue this case.  The PCA and deputy PCA are currently working on substantial advice regarding the form of vehicle for a MRO tenancy and intend to publish this shortly”
  • on 2 March 2018, the PCA published that advice (that can also be downloaded below), aimed at tied pub tenants, pub-owning businesses and their representatives, under section 60 of the Small Business Enterprise and Employment Act 2015 to provide clarity on the terms of Market Rent Only (“MRO”) tenancies following recent arbitration awards. The accompanying press release stated as follows:
    • The PCA and Deputy PCA have reiterated the important point that a MRO proposal does not have to be by way of a new agreement. The advice stresses that it is the content rather than the form that is important.
    • Whatever the form of the individual MRO proposal, the terms have to be reasonable and consistent with the core principles of the Pubs Code; that there should be fair and lawful dealing and tied pub tenants should be no worse off than they would be if they remained tied.
    • “MRO is not the same as a negotiation on the open market and the pub-owning business should not take advantage of the fact that a tied pub tenant has limited negotiating power. The PCA will be likely to find it unreasonable for the pub-owning business to offer unattractive MRO tenancy terms if the intention is to persuade the tenant to stay tied,” the advice states.
    • The PCA expects pub-owning businesses to have meaningful negotiations with their tenants seeking a MRO tenancy. Tenants should not need to rely on arbitration by the PCA to get their Code MRO rights. Referrals for arbitration should be the exception and not the norm in the future.
    • Paul Newby, Pubs Code Adjudicator, said: “I understand that both sides of the industry have been looking for clarity on this issue and I am very pleased that following arbitration awards made by the Deputy PCA and myself we can now provide this statutory advice. The ability for a tied tenant to go free of tie is an important right introduced by the Pubs Code. Tenants have been facing high costs in pursuing MRO and we need to ensure these unnecessary barriers are eliminated. This advice gives a strong yet simple steer on what pub-owning businesses can reasonably ask from their tenants in a MRO-compliant tenancy and is a major step forward in delivering the MRO rights that Parliament has given tenants. I expect it to lead to meaningful negotiations that mean arbitration becomes the exception in the future.”
    • Fiona Dickie, Deputy Pubs Code Adjudicator, said: “The Code is legally complex and uncertainty surrounding the meaning of the MRO process has caused frustration. This advice will be a useful tool in clarifying for the benefit of all what the Code requires and how its two core principles should be applied in practice to the MRO proposal. It is designed to support effective, balanced negotiation between tenants and pub-owning businesses, and reduce the number of cases that are referred for arbitration. I am confident that the arbitration process will now more efficiently and proportionately resolve any remaining MRO disputes where the parties cannot reach an agreement.”