I want to help tenants and others better understand where the PCA’s remit starts and finishes. One stakeholder interviewed said this:
“I sometimes think where the trust breaks down in other parts of the sector is when they don’t understand the limitations of what a regulator can’t do and, therefore, get frustrated and/or want the regulator to be on their side. And that’s not what a regulator does...”
Responding to this need involves the PCA more clearly outlining, in easily digestible ways, the scope of the code, the PCA’s role and how it regulates. It is also important to identify where the pub companies’ code compliance officers and other organisations can help so tenants know where to turn.
The first step I’ve taken to reclarify my role and scope is to publish information explaining the PCA’s powers and approaches to regulation. In this, I have set out my legal powers to enforce the pubs code and how I use them to make sure the regulated pub companies comply with it. I also explain how I can work collaboratively with pub companies and others to address compliance issues and promote best practice.
When there is a suspected or admitted breach of the code by a pub company, my team will be looking for what action it is taking to prevent that breach happening again and put right the effects of that breach on tenants. That involves understanding whether the pub company has been transparent with affected tenants about the breach and carried out its own internal investigation to identify the root causes.
If a regulator is to trust those it regulates to comply with their duties, there must be evidence they can be trusted. Exercise of my power to investigate suspected breach of the code may become more likely if that trust breaks down. Pubs code regulation works more effectively where code compliance officers (CCOs) show the PCA they can and will enforce compliance within their pub company. I am seeing encouraging evidence of CCOs approaching their duties in a way that enables the PCA to take a more collaborative approach to regulation, where that is appropriate and in the interests of tenants.
Where the CCO identifies a code breach, the PCA expects to be notified as soon as possible. This self-report using a standard form ensures the PCA is made aware of the pub company’s understanding of the breach, how it happened and the impact on tenants. This should include the steps it has taken or intends to take to tell tenants about the breach, to identify affected tenants and, as far as reasonably possible, to put them back in the position they would have been had the breach not occurred. To ensure appropriate transparency, particularly for tied tenants, the PCA will publish details of breaches admitted from April 2022 on its breaches register, which will be periodically updated. In this way the industry can better understand how code breaches are dealt with.
Star and Stonegate admitted breaches
How trust-based approaches to regulation can work in practice may be seen by looking at how the PCA is handling pubs code breaches admitted by both Star Pubs & Bars and Stonegate.
Star is co-operating with the PCA after it reported breaches of the code in relation to information sent to tied tenants about premises insurance. The code requires the pub company to tell the tenant if the amount it charges them to insure the premises is more than it pays for the insurance premium and how much more that is. The pub company must also say whether it will receive any insurance commission or rebate.
Star took the view that due to its self-insurance arrangements through a company also owned by the Heineken group, it was not possible for it to comply with this code requirement. The PCA continues to work with Star to assess the extent of its breach to ensure it provides the correct information and to assess any impact on tenants from non-compliance. Enquiries are also being made with other pub companies to ensure compliance where there are similar self-insurance arrangements. I will publish further information about this as appropriate.
Stonegate has also admitted to the PCA historic pubs code breaches by Ei Group, before its acquisition. This relates to its duty to provide the tenant with a rent proposal where it proposes a new agreement and when in the process it must do this. The code says it must be before the tenant considers independent professional advice, such as business, legal, property and rental valuation advice, which the tenant must take before preparing their business plan. The rent proposal provides tenants with valuable information to understand how the rent has been calculated.
Stonegate is co-operating with the PCA and we are reviewing information to understand Ei Group’s legacy processes for providing rental information on new agreements since the start of the code. Again, I will publish further information in due course.
Star and Stonegate tenants with concerns about these issues can contact their CCO.
I wish all tenants a prosperous trading period and season’s greetings from the PCA.
To read the PCA’s three-year strategy, click here.
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.