Tenant and lessee rights: What are the options if you just can’t agree?

By Michelle Perrett

- Last updated on GMT

Options available: What routes can you go down if rent negotiations reach an impasse or you need to redress a grievance?
Options available: What routes can you go down if rent negotiations reach an impasse or you need to redress a grievance?

Related tags: Pubs code, Renting, Leasehold estate, Pirrs, Pubs independent conciliation

The rent review or lease renewal is a difficult time for any licensee. But what are the options if you just can’t agree the rent or you feel that the pubco is acting unfairly?

Under the Landlord & Tenant Act 1954, tenants and lessees have certain protections such as the right to renew their lease, but any dispute will require legal advice and possibly even court action.

When it comes to a lease renewal or rent review, any surveyor will be able to negotiate on your behalf and in many circumstances a compromise can be reached on outstanding issues.

But there are some other options for dispute resolution that licensees can consider.

Much of the recent publicity has been around the terms of the pubs code, the pubs code adjudicator (PCA) and the larger pubcos with more than 500 sites.

But if you are a licensee with one of the smaller pubcos between one and 499 sites, there are still a range of organisations that can help and a number of options for dispute resolution.

Pubs Governing Body

The Pubs Governing Body (PGB) oversees both the Pubs Independent Rent Review Scheme (PIRRS) and the Pubs Independent Conciliation & Arbitration Service (PICA-Service).

The PGB consists of six of the industry’s leading associations representing both tenants and landlords: the Association of Licensed Multiple Retailers, Brighton & Hove Licensees Association, the British Beer & Pub Association (BBPA), the British Institute of Innkeeping, the Federation of Licensed Victuallers Associations, and the Guild of Master Victuallers.

It is an overall governance body responsible for establishing minimum standards of practice and is responsible for codes of practice.

Prior to July 2016, each pubco was responsible for producing its own code of practice on how it handles relationships with licensees. These had to meet the minimum requirements laid out in the independent framework code. This covered areas such as rent reviews, lease renewals and the pubco-tenant relationship.

Government intervention with a statutory code, under the terms of the Small Business, Enterprise & Employment Act 2015, saw pubcos with more than 500 sites covered by legislation. This meant that Punch, Ei, Greene King, Admiral Taverns, Marston’s and Star Pubs & Bars are now covered by the pubs code and the PCA that came into force in July 2016.

However, despite the new regulations, the industry voluntary scheme remains in place to cater for pubcos between 1 to 499 pubs.

When the regulations came into force, codes for both leased and tenanted pubs were published by the Independent Family Brewers of Britain (IFBB) in conjunction with the BBPA.

The codes for both leased and tenanted pubs cover conduct in the areas of letting, rent reviews, lease renewal, interaction with landlord, operation of AWP (amusement with prize) machines, use of beer-flow monitoring equipment and the surrender of a lease or tenancy.

Membership of both the IFBB and BBPA is dependent on pubcos agreeing to work within the voluntary scheme. In addition, Trust Inns and NewRiver, which are not members of these trade associations, have already signed up, meaning the scheme covers around 4,000 pubs.

PIRRS

For those disputing their tied rent, there is the option of PIRRS​. Its aim is to offer an independent, low-cost rent review resolution service for pub tenants and lessees in England, Wales and Scotland. It also cover rents with tenancy renewals, under circumstances where the terms of the new lease or tenancy agreement has been agreed between the parties.

Earlier this year, it was revealed by the PGB that the PIRRS option was still available to tenants and pub companies operating more than 500 pubs.

This means that an estimated 11,500 premises could be covered by the service, as long as both parties agree to its use.

Interestingly, it also means that licensees with agreements covered by the statutory code can still use PIRRS as an option if there are disagreements over tied rents. This is even if the market-rent-only (MRO) option has been initiated.

“We are pleased that the PIRRS procedure has been made available for those pubs, companies and operators that wish to use it, even if they are covered by the statutory code and are in the process of looking at a MRO option,” said PGB chairman Sir Peter Luff.

“We remind companies and tenants that this service remains available, and that PIRRS can be used to resolve tied rents on a case-by-case basis, if both parties mutually agree.

“We believe that this element of the PIRRS service is a positive step that will benefit both companies and tenants.”

The price of the PIRRS service starts from £1,000 for the licensee depending on the pre-rent review annual rental and location of the premises.

Timeline

December 2009 – Pubs Independent Rent Review Scheme (PIRRS) set up to offer low-cost arbitration

October 2010 – PIRRS said pubcos have changed their approach to rent reviews to avoid referrals

March 2012 – The Pubs Independent Conciliation & Arbitration Service (PICA-Service) is set up with chairman Rodger Vickers at the helm

May 2013 – The Pubs Governing Body (PGB) was created to oversee PIRRS and PICA-Service

July 2016 – Regulations implemented with the creation of a the pubs code adjudicator (PCA) covering the six companies with more than 500 pubs

Jan 2017 – PIRRS made available to pubs code tenants

PICA-Service

The other area where licensees can get help with arbitration is via the PICA-Service, which deals with any alleged code breaches subsequent to 30 June 2010. It offers a dispute resolution service covering the England and Wales Pub Sector Codes of Practice and the Pub Sector – Scotland Code.

The process is not available to tenancy-at-will tenants with a tenancy of less than 12 months, or any of the pubs owned by pubcos with more than 500 sites.

It is a condition of the use of the service that disputes must go through the pubcos’ own internal grievance procedure first. This means any pubco must conduct an internal investigation and if the tenant or lessee remains convinced it has broken the terms of the code they will be able to register the dispute with the PICA-Service.

The procedure means that the tenant will then be required to send a submission of the facts. Once this has been received, the pubco will be sent the information and has 21 days to respond. And the tenant or lessee is able to counter-respond but must do so within 14 days. All the paperwork will then be referred to the panel, which will convene a hearing.

The panel has a range of independent experts made up of a diverse group of individuals including a circuit judge, a member of the Chartered Institute of Arbitrators, accountants, solicitors, a barrister, a magistrate, chartered surveyors, licensed trainers, pub tenants and retired pub tenants, plus both current and retired pubco brewery executives.

Both parties attend the panel hearing, where each is given a 20-minute period to verbally summarise their case. The panel will deliberate on the case, make a conclusion and, in some cases, give an award to the licensee.

It costs £200 to register a complaint with the service.

Pubs code adjudicator

This covers the six pubcos with more than 500 pubs, which are bound by the terms of the statutory code.

The principles of the pubs code is to ensure fair and lawful procedures by pubcos in their dealings with tied tenants and to make sure that tied tenants are no worse off than if they were free of tie.

It covers issues such as what landlords must do before tenancies are agreed, ensures licensees have their rent reassessed if they haven’t had a review for five years and allows them to apply for MRO at certain trigger points such as rent review or renewal of tenancy.

There has been much controversy about how the legislation is being implemented and the actions of the PCA. There is also a backlog of cases set for arbitration with the PCA.

The PCA was created to ensure compliance and rule against any breaks of the code.

It has powers to resolve individual disputes, issue an award redress to a tied tenant if a breach of the code is found and investigate widespread abuses of the code.

The PCA is funded through a levy on the pub-owning businesses covered by the code.

Any applicant to the PCA must pay a fee of £200. 

Related topics: Property law

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