APPENDIX 4
Supplementary memorandum by the British
Beer and Pub Association
Having reviewed the evidence given at the first
session on the Committee's inquiry we now realise that we should
have included the Association's "Code of Practice on the
Granting and Operation of Tied Tenancies and Leases" in our
written evidence to the Committee. This is a framework Code drawn
up in 1997 which commits our members to providing Company Codes,
available to prospective tenants when considering taking out leases.
A copy of the British Beer and Pub Association
(formerly the Brewers and Licensed Retailers Association) Guidance
on Codes of Practice on the Granting and Operation of Tied Tenancies
and Leases is attached.
The guidance makes recommendations to pub companies
on the elements they should include in any individual company
codes of practice relating to the granting of leases and their
operation.
We intend to make reference to the guidance
in our oral evidence and would appreciate if you would make the
framework Code available to the Members of the Committee.
Dr Martin Rawlings
Director, Pub and Leisure
2 July 2004
TABLE OF CONTENTS
Introduction and Purpose of the Recommendation
Guidelines on the Contents of Company Codes
of Practice:
General
On the Granting of Leases
On the Operation of Leases
Disputes Arising under the Application of Codes
Addendum to the Recommendation
CODES OF PRACTICE ON THE GRANTING AND OPERATION
OF TIED TENANCIES AND LEASES
INTRODUCTION AND
PURPOSE OF
THE RECOMMENDATION
During the years following the Monopolies and
Mergers Commission 1989 Report on the Supply of Beer, and the
Orders subsequently made by the Secretary of State for Trade and
Industry, the brewing and pub industry has experienced massive
upheaval. Major brewers have been forced to restructure their
businesses during a period of strong recessionary pressures in
the economy as a whole. Many new pub leases have been granted,
and some pubs have encountered very difficult trading conditions.
At the conclusion of the report of the Office of Fair Trading
on Brewers' Wholesale Pricing Policy in 1995, Sir Bryan Carsberg
said:
"Prospective tenants should be made fully
aware of the advantages and obligations imposed by a lease and
the support offered by a landlord before taking on a pub. I believe
that all landlords of tied tenants should be sure that clear information
is made available for tenants.
"Among the matters I have in mind are
the extent of repair and insurance obligations, the duration (and
whether or not a break clause is included), the possibility of
assignability, and rent review provisions, and how the opening
rent is determined and the assumptions upon which that is based.
It would also be helpful if prospective tenants were clear about
the support package which their landlord/brewer provides."
It is against this background that the BLRA
Council decided in December 1996 to recommend to all members that
they adopt their own company Codes of Practice for the granting
and operation of tied tenancies and leases, with the aim of ensuring
transparency and providing ways in which difficult trading conditions
experienced by individual tenants or lessees might be successfully
coped with. The aim is to achieve some greater consistency of
practice across the industry and to give tenants and lessees confidence
that they will be treated fairly.
This recommendation does not, however, constitute
a Code of Practice itself and none of its terms affect the relationships
between prospective or current lessees and tenants and BLRA members.
GUIDELINES ON
THE CONTENTS
OF COMPANY
CODES OF
PRACTICE
1. General
Codes adopted following this recommendation
should aim to provide for procedures enabling the reasonably competent
lessee to understand:
— The nature of the business transaction
embodied in the lease and trading conditions.
— The features of the lease and other
arrangements that are capable of realising the economic advantages
inherent in the exclusive purchase arrangements provided that
he conducts the business with competence and skill, and in particular
the range of support that the company is to make available.
— That he should take proper independent
professional advice prior to accepting a tenancy or lease, and
during the operation of the lease whenever the need arises.
It should be noted that not all of the recommendations
below will apply to all leases.
2. On the granting
of leases
Company Codes of Practice should, as far as
possible, provide for the making available to the tenant/lessee
of information relating to:
— The physical condition and trading
history of the pub, so far as such information is available for
communication by the company to the tenant/lessee, with such caveats
as to reliability as might be appropriate.
— The identity of other pubs owned
by the company in the immediate locality.
— Any consent given by the licensing
justices under Section 20 of the Licensing Act 1964 for the alteration
of any directly managed pub owned by the company in the immediate
vicinity.
— Any restrictions contained in the
lease on the uses to which the premises may be put.
— The company's current policy on investment
in its tied estate and the basis upon which further investment
in the premises or the business might be made.
— The company's current price list
for tied and other products. how the initial rent will be agreed.
— The procedure for rent reviews, including
those matters that should be taken into account or disregarded
by both parties, whether reviews are upwards only, and how the
tenant/lessee can refer the review for determination by a third
party such as an arbitrator or an expert, together with the likely
costs.
— Any arrangements for the joint consideration
of the tenant's/lessee's business plan.
— Other important lease terms, for
example:
— Repairing covenants.
— Liability for maintaining and meeting
the cost of insurances.
— The tie and other significant trading
provisions, including the application of any minimum purchase
obligation and the applicability and scope of the "guest
beer" provision.
— Assignment clauses, including the implications
of privity of contract.
— Break clauses.
— Restrictions on sub-letting or shared
occupation.
— For premises in England and Wales, the
applicability of Part II of the Landlord and Tenant Act 1954;
for premises in Scotland, the provisions of the lease and the
company's policy in relation to lease expiry.
— The legal consequences that are likely
to arise if the tenant/lessee fails to comply with the terms of
the lease.
— A description of the range of support
programmes and advice which may be available through the company,
including, where appropriate:
— Training programmes for licensees or
their staff on matters such as:
— Beer quality and cellar service.
— Customer relations.
— Business management advice on, for example:
— Business development.
— Rating valuation.
— Licensing law.
— Brand promotion, merchandising, and dispense
equipment.
— Outlet promotion and marketing.
— Procurement benefits.
3. On the operation of leases
The Code of Practice should explain how the
relationship between the company and the tenant/lessee with be
conducted during the operation of the lease so that the business
opportunities presented by the outlet can be exploited to mutual
benefit. These procedures should deal with the situation where
the tenant/lessee identifies business opportunities or experiences
difficulties through no failure of his own, such as:
— a change in the local economy, for
example opening or closure of a major business in the locality;
— a major road development;
— a significant change in the circumstances
of local competition;
— brand range changes initiated by
the company.
These procedures should include discussions
with the tenant/lessee about:
— the current trading pattern of the
outlet;
— efficiencies that might be achieved
by the tenant/lessee;
— the quantified impact of the change
of circumstances which has led to the trading difficulties;
— new approaches to the exploitation
of the outlet designed to improve the trading situation.
— the potential for further viable
investment in the outlet to improve the trading position;
— the possibility of an early surrender
of assignment of the lease.[1]
4. Disputes arising under the application
of codes
Codes should explain the procedures to be adopted
where either party feels that the provisions of the Code have
not been followed. Where the tenantllessee believes that he is
the aggrieved party, the procedures should ensure that the matter
is properly considered at an appropriately high level of management
in the company concerned, and at a level of management higher
that that at which the relevant decisions were initially taken.
Where, following consideration by the company,
a tenant or lessee indicates to the company that he believes that
the company has not followed the procedures set out in the company's
code, the company should indicate to the tenant or lessee how
the question can be referred to an adjudicator for an independent
decision, indicating as far as possible the likely costs. The
independent adjudicator should be empowered to consider whether
the company has reasonably complied with the procedures set out
in its code, taking into account the conduct of the tenant or
lessee in relation to his management of the house to which his
complaint refers and to his dealings with the company under the
company's code. If the adjudicator finds that the company has
not reasonably complied with its code, the company should reopen
its procedures to remedy the failure.
1 An early assignment means an assignment during any
period when, in normal circumstances, the lease would be non-assignable. Back
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