Opinion
Raising standards for tied pub tenants
Independent research company Ipsos is confidentially interviewing 1,200 tied tenants about their attitudes to their pub company and the pubs code adjudicator (PCA) and their understanding of their pubs code rights. This is a record number for this annual survey and will help the industry to compare the attitudes of tenants of the six regulated pub companies. So far Ipsos has interviewed more than half of the 1,200 tenants, and my thanks to all those who have been and will be taking part.
The survey is an important opportunity to understand how tenants really feel about a variety of issues. It provides me with valuable insights into any areas of tied tenant dissatisfaction where as regulator I need to take a closer look. For example, last year’s survey results showed that on average only 39% of tied tenants were satisfied with how their pub company dealt with repairs and dilapidations. I have been engaging with pub companies to understand the issues and their current practices and will be looking closely at this year’s results to see if there has been positive change.
Quality arbitration service
One area where we have seen great progress is with the number of disputes being referred for arbitration. Our latest published quarterly report shows there were 16 open arbitration cases at the end of December 2022. Comparing this with the 118 open arbitration cases in June 2018, when the number was at its peak, shows we are now in a very different place.
The PCA recently marked the first anniversary of our partnership with the Chartered Institute of Arbitrators (CIArb) to manage the administration of the pubs code arbitration service. This first year saw the development and successful delivery of mandatory specialist training for pubs code arbitrators. The code is a unique piece of law and it is important that the arbitrators I appoint to decide disputes between tenants and pub companies are familiar with it and understand what the PCA expects from them. All the arbitrators I now appoint from CIArb’s dedicated pubs code panel have proven their knowledge of the code by passing an assessment.
This training is a step which builds on the service standards I introduced in April 2021 for how arbitrations are conducted. It is all part of fulfilling my commitment to providing a quality arbitration service for tied tenants and pub companies.
The latest on MRO
Fewer arbitrations are in the most part because of a drop in the number of disputes being referred on the terms of the Market Rent Only (MRO) tenancy. We have not yet reached a full year since the April 2022 amendments to the pubs code which brought changes to the market-rent-only (MRO) option process. These changes included introducing a three-month period in which to try to resolve matters before arbitration, where previously the parties only had 14 days. This may of course be having a positive impact.
We also need to look at the figures in light of the number of tenants asking for MRO to begin with. The latest statistics published by the British Beer & Pub Association show overall there has been a gradual decline in the number of MRO notices pub companies have received since the start of the code. Last year, there were 136 accepted MRO notices, a clear reduction on the 191 accepted in 2021. But a higher percentage of those that go through the process are choosing to go free of tie at the end of it. Out of 198 MRO processes that ended last year, 42% of tenants chose to exercise their statutory right to break the tie and take the commercial free of tie tenancy on offer. This is an increase on 34% in 2021 and we have seen this rise year on year, except for 2020 when Covid first impacted on the industry.
I want to stress that where the right to serve a MRO notice arises, a tied tenant who has no interest in breaking the tie can still use the process. It can provide extra leverage in seeking to negotiate the best tied deal, by comparing it with the free of tie option on a commercial rent. In last year’s tenant survey, only six out of 10 tenants were aware of their right to MRO in certain circumstances so it is another area I will be watching closely when this year’s results come in. I will of course be publishing those results as soon as I can.
This column is intended to aid industry understanding about the pubs code and its impact. Nothing in it should be understood to be a substitute for the pubs code legal framework.
