The pubs code turns five

Timeline: Five years of the pubs code and PCA

By The Morning Advertiser

- Last updated on GMT

Legislative landmark: The Morning Advertiser reflects on some of the pubs code's major milestones ahead of its fifth anniversary on 21 July
Legislative landmark: The Morning Advertiser reflects on some of the pubs code's major milestones ahead of its fifth anniversary on 21 July

Related tags: Pubs code, Pubs code adjudicator, Legislation, Tenanted + leased, Pubco + head office, Paul newby, Fiona Dickie, Mro, Rent

The Morning Advertiser (MA) looks back on some of the pubs code's major milestones ahead of the fifth anniversary of its enforcement on 21 July.
Parliament

24 March 2015​ – As reported by The MA, ​the Small Business, Enterprise and Employment Bill – which included the statutory pubs code and market-rent-only (MRO) option clause – was passed by Parliament​.

The Government said it would use secondary legislation to introduce exemptions from MRO for pubcos willing to make “significant investments” and also to “genuine franchise agreements”.

Pubco reform campaigners hailed it as a victory.

2016

Paul Newby 2

March ​- The Government announced Fleurets director Paul Newby​ as the first pubs code adjudicator (PCA).

14 April ​– The Government's response to a consultation on the pubs code was published with the Department for Business, Innovation and Skills making a number of changes to the code​.

The main changes to the pubs code were around the MRO option – and around the issue of tenancy length and the right to exception of MRO through “significant investment” by the pubco in a tied business.

14 June ​- The Department for Business, Innovation and Skills released the revised pubs code​.

The code was delayed due to a supposed MRO loophole, and was originally due to come into force on 26 May. However, “drafting errors” forced the Government to delay​, much to the frustration of tenants and campaigners.

21 July - "New dawn" for industry as pubs code finally enforced

About 12,000 tied tenants of pubcos owning more than 500 pubs – Punch, Enterprise (became Ei), Greene King, Admiral, Star and Marston’s – were given new legal rights and protections such as increased transparency about tied deals available, a fair rent assessment and the right to move to a free-of-tie tenancy in certain circumstances.

Pubs Code
  • Read more about the journey to the pubs code here.

December ​– More than 100 tied tenants from across four of the six regulated pub companies were revealed to have pursued MRO in the first few months since the establishment of the pubs code and right to move to a free-of-tie tenancy.

As reported by The MA​, almost a third of Enterprise licensees that had an MRO trigger since the legislation came into force – some 94 individuals​ – requested a quote for the market rent-only option. 

Admiral

What’s more, Punch revealed that 40 licensees​ asked what the difference in costs would be if they decided to take the MRO option in roughly the same period, while Greene King received 24 requests​. 

Only four Admiral Taverns licensees​ took the option of MRO since the legislation became law in July according to the operator’s financial results.

On top of this, the first figures released by pubs code adjudicator showed that the office received 79 requests for arbitration in just the first four months of the pubs code being law – 77 of which were valid and pursued.

The most common topics for arbitration were around pubco responses to requests for MRO and the duties of pubcos in relation to rent assessment proposals.

2017

Greene King

February ​– Greene King's lawyers wrote to Greg Clark​, then secretary of state for Business, Energy and Industrial Strategy (BEIS) calling for an amendment on stocking rights in the pubs code. Pubcos and campaigners had been calling for clarification on how much beer should be stocked under the pubs code.

6 March ​– BEIS confirmed stocking rights can be imposed​ on tenants by pubcos, even if the tenant has taken on MRO.

23 April ​– Pubs code arbitrations hit 25​. Paul Newby revealed that a total of 25 arbitrations had been made since the pubs code came into force.

The number of judgements increased fivefold in a month as figures released in March showed that Newby had made five arbitrations​ since the pubs code came into force in June.

2 June ​– PCA examines claims pubcos ‘inhibit’ tenant access to MROs – Paul Newby approached industry bodies for evidence​ following concerns pubcos could be inhibiting tenant access to MRO. 

23 July ​– The pubs code adjudicator’s office revealed that it raised a total levy of £1.5m​ in 2016/17 from the six pubcos covered by the legislation.

25 July ​– Pubs code adjudicator receives more than 550 enquiries in its first year

Paul Crossman

26 September ​– Pubcos slammed for using Section 25 notices to block MRO​ – The issue came to the fore following the case of licensee Paul Crossman of the Swan in Bishopthorpe, York.  

He told The MA​ that he had to negotiate his free-of-tie deal outside the pubs code, despite it subsequently being labelled MRO, initially by his own solicitor and his pubco, Punch.

Crossman said that because the notice he received from Punch said it would not be renewing the lease as the intention was for the pub to be taken into its own management, it removed him from the pubs code process.  

24 October ​– Deputy pubs code adjudicator appointed – Barrister Fiona Dickie was appointed deputy pubs code adjudicator​ to support Paul Newby in enforcing the pubs code. 

Announcing her appointment, then business secretary Greg Clark said her judicial experience, which would be the perfect foundation for her role.

Heineken

30 November ​– Heineken urged to end Falcon contracts​ – Campaigners called on Heineken to end the use of Falcon contracts, which the company was believed to be taking on as part of its deal to buy 1,900 Punch pubs.

These contracts, brought in by Punch, classified pub managers as self-employed and meant managers took an agreed percentage of all net weekly sales, from which they paid their own and staff wages. It also meant the pub operations were outside the pubs code.

15 December ​– PCA publishes compliance handbook for pub-owning businesses​ after 'deep concerns' – Paul Newby published a regulatory compliance handbook setting out how "he expects pub-owning businesses covered by the pubs code to act" in a number of important areas following concerns about the way "some pub-owning businesses were treating tied pub tenants when they request an MRO option proposal".

 

2018 

Ei Group

22 January ​– Ei appealed the PCA decision​ at High Court. The MA​ believed the case was based on the clarification of whether MRO tenancies should be a deed of variation or a brand-new lease. The appeal was dropped a month later following “helpful clarity”.

14 June ​– Greene King initiated judicial review proceedings​ over PCA advice note. Brewer and pub operator Greene King followed through on its threat to bring court action against the office of the PCA over the legality of an advice note published on the 2 March 2018.

The note offered advice to tied tenants and pub-owning businesses to ensure their MRO option proposals complied with the pubs code.

Greene King tenant, Gary Murphy licensee at Ye Olde Mitre Inne in Barnet, north London, who had an ongoing case lodged with the PCA at the time,​​ told The​ MA​​ the managing director of Greene King's Pub Partners division had called him on 13 June to confirm the pubco would be proceeding with its judicial review.

29 June​ – Pubcos waive confidentiality rights over MRO​ – The six regulated pub companies – Admiral Taverns, Ei Group, Greene King, Marston’s, Punch and Star Pubs & Bars – wrote to Richard Harrington MP, then business, energy and industrial strategy minister, agreeing to waive their right to confidentiality in decisions made by the pubs code adjudicator.

September​ – In an update on pubs code data​, the PCA revealed the total number of full responses to MRO notices issued between July 2016 and 2018 was 668.

The number of tied rent reviews concluded following MRO negotiations increased from 30 in 2016 to 181 in 2017.

What’s more, in a two-and-a-half-year period, Admiral Taverns only had three tied rent reviews concluded following MRO negotiations, while Ei Group had 162.

2 November​ – The pubs code adjudicator launched a statutory consultation​ aimed to provide clarity on beer and cider duty and waste for tenants when negotiating their tied rents.

Tolhurst

The decision to launch the consultation followed a review by Paul Newby and Fiona Dickie about how pub companies regulated by the pubs code revealed the quantity of alcohol on which duty has been paid and how they calculate the saleable volume of draught products supplied under tied agreements.

8 November​ - Kelly Tolhurst MP takes reins for the pubs code​ 

21 December​ – The first arbitrations to be made public​ by the PCA were revealed to have involved two pubs from EI Group and a pub formerly owned by Punch Partnerships. The published awards were in relation to both market-rent-only (MRO) option and non-MRO issues.

2019

Old Mitre

2 January​ – ‘A real life David and Goliath story’ – north London licensee Gary Murphy, of Ye Olde Mitre Inne, Barnet,​ launched a crowdfunding campaign to mount a High Court challenge to pubcos and the pubs code adjudicator over the beer tie.

Murphy’s campaign ​aimed to raise £10,000, although he estimates such legal action could cost up to £100,000.

Murphy believed the PCA misinterpreted the pubs code in its issuing of his arbitration award. According to the licensee, the process as it stood meant that pubcos benefited from elongating the MRO process as long as they can as cheaper MRO rents are only introduced from the date an agreement is signed.

Murphy argued that a correct interpretation of Regulation 28 on rent recovery would leave rent backdating open to negotiation.

30 April​ – Government launched the first pubs code review​ – spanning a 12-week period, the review examined how the code ensured that tied tenants had been treated fairly by large pub companies and whether it has operated effectively and proportionately in the period between its introduction in 2016 and 31 March 2019.

Mulholland

7 June​ – the PCA withdrew a statutory advice note​ on rent dispute clauses and Calderbank letters (offers of settlement) – an act the chair of the British Pub Confederation and former MP Greg Mulholland believed made PCA Paul Newby’s position “untenable”.

Mulholland argued that the withdrawn advice – initially published in July 2017 and backing pubcos to lawfully impose additional arbitration upon tenants seeking MRO – affected thousands of tenants and denied them legal rights after being issued erroneously.

10 July​ – PCA launches first investigation. As reported by The MA,​ Heineken’s pub arm Star Pubs & Bars was investigated by the office of the PCA after it believed the brewer and operator may have breached the pubs code.

Paul Newby

Paul Newby and his deputy Fiona Dickie claimed to have reasonable grounds to suspect the operator of near 3,000 pubs has used “unreasonable stocking terms” in proposed free-of-tie MRO tenancies, which is deemed a breach of the pubs code​.

22 August​ – It was revealed that PCA Paul Newby would not be seeking reappointment​ and would leave office in May 2020.

19 December​ – A survey conducted by the PCA​ highlighted “endemic issues” and served as a “stark reminder” of the challenges facing tied tenants according to commentators from the pub sector.

The Tied Tenant Survey ​​saw a representative sample of tenants from each of the six regulated pub-owning businesses quizzed on issues ranging from the viability of MRO to their relationship with their business development manager.

The survey, found that the proportion of tenants who had seen, heard or read about the pubs code was similar to that found by the office’s last survey conducted in 2017 at 78%. However, it found that only a third of tenants (33%) claimed to be “very aware” of the legislation.

Marstons

5 December​ – Brewer and pub operator Marston’s was judged​ to have broken pubs code legislation following what the PCA described as “significantly deficient” treatment of one of its licensees. 

The PCA published an arbitration decision that found the wastage allowance for cask beer that Marston’s – operator of 1,400 pubs and employer of 14,000 staff – used when calculating rent for Ed Anderson of the Railway Inn was “inappropriate and inadequate”.

2020

Fiona Dickie

24 February​ – The Government announced that it had appointed Fiona Dickie​ as the new PCA, taking up her appointment for a four-year term after Paul Newby stepped down in May.

2 April​ – Pubcos sign PCA declaration to preserve tenant rights during the Covid-19 pandemic​ – The businesses regulated by the pubs code signed a joint declaration to protect tenant rights after informing Paul Newby that they were unable to uphold duties during lockdown.

According to a statement released by the office of the PCA, the six businesses informed the industry regulator that they did not expect to be able to comply with crucial pubs code duties – including serving compliant rent proposals, rent assessment proposals and MRO option full responses – during the pandemic.

Star Pubs and Bars

15 October​ – PCA Fiona Dickie fined Heineken’s pub arm​, Star Pubs & Bars, £2m for “seriously and repeatedly” breaching the pubs code over nearly three years – a charge the operator said it was 'actively considering' appealing.

The industry regulator concluded that the nature and seriousness of the 12 breaches uncovered had “frustrated the principles of the pubs code” and merited a financial penalty, which would act as a deterrent to all regulated pub-owning businesses from future non-compliance.

4 November​ – A review of the pubs code resulted in the Government deciding to keep the threshold of 500 or more tied pubs for pub-owning businesses to be subject to code regulation​.

2021

23 March​ – MSPs pass Bill to reform Scotland's tied pubs – Members of Scottish Parliament passed The Tied Pubs (Scotland) Bill heralding the creation of a statutory pubs code and an independent adjudicator role.

11 June​ – Tribunal orders PCA to release withheld pubco letters and meeting notes​ – The PCA was ordered by an information appeals tribunal to release letters and meeting notes with regulated pub companies that led to what has been described as a “significant error” in a now withdrawn pubs code statutory advice note on rent dispute clauses and Calderbank letters.

The withdrawn advice – initially published in July 2017 – backed pubcos to lawfully impose additional arbitration upon tenants seeking to exercise their right to market rent only option.

Related topics: Legislation

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