Ei Group and Punch rulings unveiled by pubs code adjudicator

By Michelle Perrett

- Last updated on GMT

Arbitration decisions: the pubs code adjudicator has announced outcomes on three cases
Arbitration decisions: the pubs code adjudicator has announced outcomes on three cases
The first arbitrations to be made public by the pubs code adjudicator (PCA) have involved two pubs from pubco EI Group and a pub formerly owned by Punch Partnerships.

The published awards are in relation to both market-rent-only (MRO) option and non-MRO​ issues.

Two cases were ruled on by the arbitrator based on MRO.

In the case of Elizabeth Doyle, lessee of the Three Tuns, Heddon-on-the-Wall, Northumberland, versus Punch Partnerships (now Star Pubs & Bars) the adjudicator ruled for the licensee.

In the summary of the award, the PCA said that the proposed tenancy was not MRO-compliant because it was not shown to be on common terms, reasonable terms and because reasonable terms as to dilapidations under the existing tenancy were absent.

The ruling said: “The POB (pub-operating company) must therefore give a revised response which is MRO-compliant on terms to be determined by the arbitrator.”

Second ruling

The second ruling on MRO, was a preliminary ruling because the pubco and licensees are still in negotiation. Licensees John Clarke and Lesley Minett of the Ei Group-owned Pottery Hotel in Bournemouth, Dorset, argued that an MRO should be granted on a deed of variation (DOV) and not a new lease.

The PCA said that, according to the legislation, a DOV is not a “default option” but it does not mean that a change in terms will “always be reasonable”.

The final case brought about a ruling that was not based on MRO. Licensees Chris Hankins and Kelly Hankins of the Brunswick Arms in Worcester, saw the PCA rule in their favour over a rent assessment proposal.

On 6 December 2016, the licensees sent a letter requesting a rent assessment proposal under the pubs code. On 15 December 2016, Ei Group sent a letter rejecting the request, saying it was not obliged to provide a rent assessment.

The PCA ruled in favour of the licensees and instructed Ei Group to conduct a rent assessment.

According to the PCA, the rulings have clarified the terms of MRO proposals.

MRO proposal

It said that as MRO negotiations are not taking place in the open market, POBs should not take advantage of the more limited negotiating power that a tied tenant who requests a MRO proposal will usually have.

The PCA also added that the MRO proposal should constitute an accessible option for the individual tied tenant. A POB should not make a proposal on standard terms unless it has considered the particular circumstances of the tied tenant and is satisfied that the terms are compliant in that individual case.

Pubs code adjudicator Paul Newby said: “Our aim is to help tenants be more informed when negotiating with their pub companies. Publication of awards will also provide a greater incentive for pub companies to engage in effective negotiations with their tenants on the issues that have already been decided by the PCA.”

Deputy pubs code adjudicator Fiona Dickie said: “Of course, we will continue to consider each case on its own facts, keeping an open mind when making a decision. However, we do expect that where a decision on law has been made, that this is respected by both pub-owning businesses and tenants.”

The PCA has also published a document​ providing information for tenants who have received a pubs code award to help them consider whether there is personal or particularly commercially sensitive information they do not want to be published.

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