Pub companies: follow-up - Business, Innovation and Skills Committee Contents

5  The Pubs Independent Rent Review Scheme (PIRRS) and Dispute Resolution

133.  During the course of our 2009 inquiry we found that there was no low-cost independent way of resolving rent disputes. We concluded that "[…] some form of low-cost independent procedure for dealing with disputes over the rate of rent is needed and needed urgently."[200]

134.  We are therefore pleased that the Pubs Independent Rent Review Scheme (PIRRS) is now up and running. The scheme is supported by five of the industry's associations; the Association of Licensed Multiple Retailers (ALMR), the British Beer and Pub Association (BBPA), the BII, the Federation of Licensed Victuallers Association (FLVA), and the Guild of Master Victuallers. It is funded by an annual levy of £2.50 per pub on BBPA members and £5.00 on non BBPA Members. All BBPA members have to sign up to the PIRRS scheme.[201]

135.  Under the scheme, both parties in a dispute are required to opt out of any dispute procedures contained in their current contractual agreement and renounce any right to arbitration or referral to original final offers by signing a Deed of Variation.[202] PIRRS has capped fees, no higher than £2,000 for lessees. An independent valuer, who will oversee the dispute, is nominated by one of the Board organisations and approved by the Board as a whole. The valuer has to declare any potential conflict of interest with a landlord company.[203]

136.  The BII has informed us that since the launch of PIRRS on 1 December 2009 it has received 36 enquires. Of these, two cases are now underway, and a further nine had applied to use the scheme. At the time of writing none had reached a decision. Another nine cases which had originally explored the option of resolving their dispute via the PIRRS with their landlord have resolved their dispute.[204] The BII went on to inform us that evidence from alternative arbitration schemes indicated that an average of one in 30 enquires would fully enter into the scheme.[205]

137.  While the introduction of PIRRS is a welcome development, organisations representing lessees have been less enthusiastic. CAMRA believed that PIRRS was "open to manipulation by large pub owning companies who it seems will have clear power of veto over the surveyors that pub businesses can appoint".[206] Brigid Simmonds did not accept this argument and highlighted the fact that the lessee chose the surveyor to hear the case and that the pub company had "absolutely no say in who is chosen".[207]

138.  Justice for Licensees told us that the start of PIRRS was marred by problems over surveyors' declarations of interest on the BII website. It highlighted the fact that some surveyors had not declared interests despite close association with pub companies. It also noted that the PIRRS website went live for a couple of weeks and was then taken down because of this. Justice for Licensees believed that these issues had undermined the integrity of PIRRS.[208]

139.  The Fair Pint Campaign although acknowledging that PIRRS had the potential to reduce costs in a rent review dispute believed that unless the tenant had the expertise to represent themselves they would still have to engage professional advisers. This, it argued meant that despite the establishment of the PIRRS "most tied tenants will not be able to afford to challenge unfair rent reviews".[209] The BBPA disputed this assertion arguing that representation costs would not be necessary as most of the work would be done by correspondence. However, if additional costs became apparent the BBPA would review the system.[210]

140.  Mr Karl Harrison offered a wider perspective:

If Mr Rusholme and the RICS deliver their report properly and address that very seriously […] PIRRS ought not to be required at all because the system that should be in operation in most of those contracts ought to run properly.[211]

General dispute resolution

141.  PIRRS only covers disputes over rent reviews. Therefore it does not cover other areas of dispute between pub companies and their lessees. As Mrs Nicholls told us:

there are other forms of complaint where there is no method of independent redress. PIRRS does not deal with it.[212]

The new Framework Code provides very little more on dispute resolution than the existing Code. The new Framework Code has not changed in any substantial manner, it states:

Company Codes should explain the procedures to be adopted where either party feels that the provisions of the Code have not been followed. Where the tenant/lessee 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 than that at which the relevant decisions were initially taken.[213]

142.  It appears to us that the main change in the dispute procedure process has been to replace the BBPA with the BII as the organisation to which information relating to a breach of a company code is passed.[214] In May 2009 we found that there had been no complaints to the BBPA because of its perceived bias to pub companies.[215] The BII had received three complaints[216] but lessees complained that the BII did not want to be involved in disputes.[217]

143.  In 2004 the Trade and Industry Committee found that lessees were experiencing problems with pub companies not fulfilling their repairing obligations and recommended that:

Pubcos would improve their reputation as landlords if they ensured that tenants' agreements contained an inexpensive and efficient system of arbitration or alternative dispute resolution with fully independent arbitrators or experts to resolve such disputes without imposing legal costs on either side.[218]

Our 2009 Report concluded that:

the small number of cases pursued to independent arbitration should not be taken as a sign that all is well. It could simply demonstrate that, even though they were dissatisfied, lessees did not consider the dispute resolution system appropriate.[219]

144.  The wider issue of dispute resolution has not been considered in the Framework Code and there has been no attempt to improve the complaints system or to form an independent body other than PIRRS, which deals only with rent. We note that the BII has been asked to accredit Codes, with the authority to investigate breaches and remove accreditation where necessary, but this does not address the need for a clear independent dispute mechanism.

145.  The BII does have a business support helpline which it described as "a member benefit."[220] It says it receives around 15 calls a month which cover "a wide variety of issues" with 65% in relation to rent debt issues but other areas are raised including buying out of tie issues, business rates, agreement renewals, repairs and buying a pub.[221] The BII said it currently signposts members to other sources of information or assistance and liaises with the pub company on the member's behalf which it believes "has been welcomed by both members and pub companies in resolving issues of contention."[222] However, this is far from adequate for the industry as a whole.

146.  Enterprise Inns offered to fund a body to advise lessees. This was welcome but the IPC seem reluctant to accept any body funded by pub companies at it would be perceived as having the same flaw as the BII, by virtue of similar funding. However, in the current financial climate it is difficult to see how any workable funding stream could exclude any funding from within the industry.

147.  We remain profoundly concerned that no effort has been made to create an independent dispute mechanism for general complaints about pub companies. The system still relies on complaints being made to managers within a company. This is a wholly inadequate response to a pressing need. Urgent consideration should be given to extending the work of the BII and PIRRS to cover this role. We recommend that the BII be recognised in the Company Codes of Practice as an independent dispute body and clear details of how a lessee can apply to the BII for help must be provided by the pub companies. The absence of such a mechanism may yet trigger regulatory intervention.

200   Business and Enterprise Committee, Seventh Report of Session 2008-09, Pub Companies, HC 26-I, para 149 Back

201   PIRRS Website: Back

202   PIRRS Website: Back

203   PIRRS Website: Back

204   Ev 47 Back

205   Ev 47 Back

206   Ev 58 Back

207   Q 134 Back

208   Ev 109 Back

209   Ev 81 Back

210   Q 135 Back

211   Q 185 Back

212   Q 185 Back

213   BBPA, Framework Code of Practice on the Granting of Tenancies and Leases, January 2010, p 15 Back

214   BBPA, Framework Code of Practice on the Granting of Tenancies and Leases, January 2010, para 39 Back

215   Business and Enterprise Committee, Seventh Report of Session 2008-09, Pub Companies, HC 26-I, para 150 Back

216   Business and Enterprise Committee, Seventh Report of Session 2008-09, Pub Companies, HC 26-II, Ev 192 Back

217   Business and Enterprise Committee, Seventh Report of Session 2008-09, Pub Companies, HC 26-I, para 150 Back

218   Trade and Industry Committee, Second Report of Session 2004-04, Pub Companies, HC128,para 90 Back

219   Business and Enterprise Committee, Seventh Report of Session 2008-09, Pub Companies, HC 26-I,para 142 Back

220   Ev 47 Back

221   Ev 47 Back

222   Ev 47 Back

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