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: http://pirrscheme.com Back
202
PIRRS Website: http://pirrscheme.com Back
203
PIRRS Website: http://pirrscheme.com 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
| 
