Examination of Witnesses (Question Numbers
200-206)
MR ROB
HAYWARD, MR
NICK BISH
AND MR
JOHN MCNAMARA
9 DECEMBER 2008
Q200 Mr Bailey: Would it be fair
to say that there is a gap in the provision of help and assistance
for tenants in terms of dispute-resolution throughout the structure
of the industry?
Mr Hayward: I think, given the
instances which have been cited in the previous evidence, those
of which I am aware, there is clearly a gap in some form or another.
How that is addressed, and I know you are trying to grasp it,
there certainly does seem to be a gap in some cases, there is
no question about that.
Mr McNamara: We are not a trade
protection body, as I have made clear, but we are a professional
body. FLBA, Tony Payne does a remarkable job in terms of going
and representing people in various disputes and various issues
in his patch. Comment has already been made about the old LBAs
who fulfil some of that role. I think there is a gap there that
needs to be filled. Again, as a professional body, we try and
use our good offices where we can to make sure that tenants at
least and lessees have some instant guidance, support, help and
advice, and we need to spread that message to make that more widely
known.
Q201 Mr Bailey: Mr McNamara, it has
been put to the Committee that one of the reasons you do not seem
very proactive in dealing with tenants' complaints is that you
have a financial interest through the pubcos, an issue which I
think Mr Binley was trying to tease out earlier. Could you comment
on that?
Mr McNamara: I think we have been
as proactive as we possibly can be in terms of, number one, getting
involved in codes of practice, number two, offering a legal helpline
which is freely available to all members, number three, we, as
I have said before, Chair, are very interested in trying to arrive
at an independent expert determination service which is a low-cost
attempt to arbitrate between two parties in a dispute on a rental
agreement, for example. Those are all things that we would do
as a professional body and a membership organisation. We are a
charity, we are a professional body, we are governed by charitable
objects and we cannot get involved in trade disputes. Some of
our members are corporate members clearly and all of the money
that we raise from those sources, which is, I suppose, in total,
about between 1 and 2% of our income, goes directly back into
the industry for all the social responsibility initiatives we
organise, all the qualification development we do and all the
other things we do to support members, so we are very much there
as a support service for members within the terms of our charitable
objects, and I would argue that we have been very proactive in
trying to make those advances in support of members where we can.
Q202 Mr Bailey: I think everybody
would say that the development of a low-cost arbitration service
would be a benefit, but the fact that it does not seem to be used
seems to indicate that not many tenants either understand, or
appreciate, it.
Mr McNamara: To clarify, that
is work in progress at the moment. We are now taking legal advice
and we are going and talking to pubcos. Our national council and
our members are very much in support of it. It would mean a very
cheap, short, sharp resolution to some of those disputes. It would
not involve going to a full court or arbitration process and it
would be far cheaper for our members, tenants and lessees to use
that, and it could be non-members as well of course. That is something
that we hope to launch in the early part of next year, and clearly
we will report back to the Committee in terms of progress, but
that, I think, will be a real step forward and it would remove
the fear that some tenants and lessees have of, "If I go
to arbitration, if I do lose, it's possibly £50,000 or who
knows what that cost would be". With this independent service,
which we would sponsor and advocate, it will be a very short,
sharp, clear process with a set cost which could be easily resolved
between the two parties, and we think that will be a good step
forward and more would come forward for arbitration hopefully.
Q203 Mr Bailey: Can we just move
on to the pub leasing model, the Code of Practice. It would appear
that in certain circumstances the leasing model is rather out-of-date
and out-of-line with the Code of Practice. What should be done
within the industry to align them?
Mr Hayward: I am not sure that
I would agree with the actual model, although Nick disagrees with
me in relation to this. The process, the arrangement in relation
to a tie and lease has operated for a long time and, as I said
earlier, it has been reviewed on a number of occasions, and, although
the Fair Pint representatives at the previous session argued that
there might be an abolition of the tie, they then also said that
they thought that it would be reasonable below 500. Now, there
is no reason why and you either do away with the system or you
do not. There are clearly adjustments that have to be made over
periods of time because circumstances change and, arising from
the last sessions some four years ago, there were changes made.
I have no doubt that going forward, as John has indicated, the
process of arbitration will develop and there will be changes
in relation to the codes.
Q204 Mr Bailey: Would you like to
comment on that, Mr Bish?
Mr Bish: I think the particular
point is the leased business and the leased business is for a
longer period of time and I think it is the leased business that
needs the most addressing. Just to remind ourselves, a full repairing
lease, which is the distinction between really the tenancy of
the old days when the landlord, the brewer, probably looked after
the fabric of the building, a full repairing lease is this independent
nature of the building. It becomes a business that can be sold
on and historically, and we have seen it over the last ten or
15 years, that is sort of five times earnings, so that was a value
on the business and it could be taken on. Into that, profit, when
the business was sold on, could be absorbed some of the costs
that the lessee was liable to, but, if now in this current market
you can only sell it on at one or one and a half times earnings,
there is absolutely no money left over to exit the lease, to take
advantage, take a profit from, make a success of all the tenants'
and lessees' hard work over the previous years, so the way it
is constructed at the moment does not work for leases. We do not
like the FMT and we probably do not like the beer tie, as such,
for a long lease and those are the areas that we feel that we
can explore. The tenancies are different.
Q205 Mr Bailey: There does seem to
be a divergence of opinion between you two on this. What is being
done to resolve it?
Mr Bish: Well, I suppose, with
respect, you are doing a lot of that yourselves because these
points are aired, but we have a lot of research on the costs of
running a business which have gone up dramatically, and ALMR is
running the third of its benchmarking costs and proving conclusively
that the costs of doing business are much, much higher to the
disadvantage of the salary or the drawings that a lessee or tenant
can take for him or herself, and this information we can make
available to the Committee, but we need to understand the market
in its present form and it is being squeezed a lot.
Q206 Mr Bailey: We are dealing with
this because you have failed to do so and I just wanted reassurance
that you are making so much effort on your part to resolve this
situation.
Mr Bish: Well, ALMR talks to the
pubcos and we have a communications channel where we address multiple
lessees' issues with the pubcos. The channel exists, I would not
have said it was hugely productive, but it works on a tactical
basis and that is a route to address the major strategic issues
that we discuss, and of course the outcome of your recommendations
will undoubtedly move the argument further forwards, which is
why we are trying to help you with it.
Mr Hayward: In relation to this
inquiry, I have indicated previously that we made changes to our
Code, but I think there is a supposition in your question, and
I may be reading too much into it, that actually the lease agreement
is an unchanging model. Clearly, because of the nature of the
business, it is not an unchanging model. There are some serious
differences now from what there were previously and, if we sat
here in four years' time, I am sure that there would be further
changes because that is the nature of business and that is the
nature of the pub trade. Twenty years ago, everything was wet-led,
they did not serve food, they were owned by the brewers and there
were the Beer Orders and the like, and we now have a substantial
change and it is likely that in five or ten years' time the nature
of the pub will have changed again, and the nature of the leasehold
agreements will have changed because those who are negotiating
it on both sides will have come to an agreement that the nature
of that agreement has to be different.
Chairman: I fear we are really badly
out of time. We have not run quite so late before under my chairmanship
and I apologise for that and I apologise to the next witnesses
as well who have been kept waiting. There are many other questions
I would have liked to have asked, but there just is not the time
to do so. Perhaps you can reflect on what you have told us and,
if you think there are things that you would have liked to have
said and you did not say or you want to clarify, please send further
written submissions, and there are some things which, I think,
are promised between us which we will sort out later. Gentlemen,
thank you very much indeed. We are very grateful for your time
in coming.
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