Pub Companies - Business and Enterprise Committee Contents


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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