Opinion

‘When a pub company is not transparent, tenants’ interests may be at risk’

By Fiona Dickie – pubs code adjudicator

- Last updated on GMT

Crucial transparency: 'The pubs code requires the pub companies to police themselves, and it gives me important powers if they don’t do so adequately'
Crucial transparency: 'The pubs code requires the pub companies to police themselves, and it gives me important powers if they don’t do so adequately'

Related tags: Pubs code, Pubs code adjudicator, Legal, Legislation, Pubco + head office, Rent, Finance, Tenanted + leased

Achieving a culture of fairness through transparency by pub companies towards their tied tenants is central to the change in the sector the pubs code was created to secure.

And this requirement goes beyond the many express duties on pub companies to provide information to tenants – such as before taking on or assigning a tenancy, dealing with repairs, conducting a rent review, charging for buildings insurance, selling the freehold or seeking independent assessment of the market-rent-only (MRO) option rent. 

Transparency is also a key component of the principle of fair dealing which sits at the heart of the code.

Imbalances of information

When a pub company is not transparent, tenants’ interests may be at risk. 

I witnessed examples of this when I investigated Star’s use of stocking terms in its MRO tenancies​. 

I saw evidence of Star offering to remove MRO terms as a concession, rather than telling tenants it was obliged to do so because they were not compliant. And when mistakes meant the wrong terms were issued, Star did not inform all affected tenants. 

Withholding information from tenants in this way can impact on a fair negotiating environment and increase their costs. 

Keeping tenants fully informed is crucial to the process for implementing my recommendations which Star is now following. The first tenants to receive new offers of improved stocking terms (to replace the non-compliant ones they were offered or had accepted) are at the point of completing their free of tie leases. 

I’ll talk more about how Star is following my recommendations in due course. But the fact that Star is removing non-compliant stocking terms from leases that are already in the market clearly demonstrates the reach of the regulator and the power of the Code. 

Good practice by code compliance officers

The code requires the pub companies to police themselves, and it gives me important powers if they don’t do so adequately. 

It is the role of each pub company’s code compliance officer (CCO) to verify compliance with the code, and transparency with their tenants should be their watchword. 

The CCO must be sufficiently independent within the business to do their job effectively and reduce the risk of regulatory action. 

I recognise the task the CCOs have to meet in bringing robust internal challenge to ensure compliance. Where I see positive examples, I will promote them.  

My latest pubs code action story about Greene King​ self-reporting a potential breach of the code is an example of openness with the regulator and with tenants. I welcome this good practice.

Pubs code action

Pubs code action stories give a clear picture to the industry of action the PCA has taken, and the issues my team has been working on. 

They inform tenants of changes to pub company practices. They also help me meet my objective of being a visible and assertive regulator.  

I want them to act as an encouragement to tenants to come forward if they have been affected by the issues or have relevant information to share with me.

All of this is consistent with the outcomes of the statutory review into the pubs code and with what tenants have told me in our research. They want the PCA to be clear about the action it takes.  

It is important that to be effective, tenants have trust and confidence in the PCA. By being more public facing, I aim to show tenants the meaningful change that the pubs code and the PCA can bring about.

Getting the word out

I know that being open about what I do is important for the industry too. I have to consider carefully what I should say about my regulatory work and when. I must balance the benefits of being open with any need for confidentiality. 

It might be that I cannot share information in case it prejudices any future regulatory steps I may need to take. Sometimes the law prevents me sharing commercially sensitive information. Finding that balance comes with challenges if I am to create a safe space for tenants and pub company leaders and their staff to have the confidence to talk to me. 

I always need to consider how to make the code most effective, listening and learning as I go. 

Being a public facing regulator also means being clear about what I can do and what I can’t do. 

The remit given to me by Parliament is limited to tied tenancies and does not cover free of tie tenancies – including where former tied tenants have taken the MRO option. I am fully focused on achieving fairness for those tied tenants and am striving to reach more of them in different ways to get these important messages across and hear what tenants think.

This month I’ve added Facebook​ to my social media channels, and there are more innovations to come. Please follow my Facebook page to keep up to date with developments and announcements.

This column is intended to aid industry understanding about the pubs code and its impact. Nothing in it should be understood as a substitute for the pubs code legal framework.​ 

Related topics: Legislation

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