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


Memorandum submitted by Association of Licensed Multiple Retailers (ALMR)

  Further to your e-mail of 7 January I have now had an opportunity to pull together the additional information you requested:

    — Update on ALMR Benchmarking Survey 2009-10.

    — Dialogue between IPC and BBPA.

    — Further information on the domestic property regulatory structure.

  I have also attached a copy of the letter referred to by Garry Mallen in respect of the Codes of Practice and our submission on the EU Block Exemption (not printed here), both referred to in oral evidence. I understand that Simon Clarke will be writing to you separately with a copy of the transcript of the court case, but please come back to me if this is not forthcoming.

ALMR BENCHMARKING

  I wanted to take this opportunity to update the Committee on developments with regard to the survey made since the publication of your report in May 2009 as well as providing the additional information in support of my response to Mr Clapham MP at the evidence session.

  As you will be aware, the ALMR Benchmarking Survey is carried out on an annual basis in October, with replies being received by the end of November. The current round was due to have been completed by the time of your follow up evidence session and we had hoped to have results available early this year. This timetable has been extended in order to allow any companies who may have reconsidered their position following the December evidence session to participate.

  Immediately following the December evidence session the ALMR announced it would extend the deadline for responses to 15 January and held a series of discussions with landlord representatives and individual companies to encourage participation and to discuss outstanding concerns. Disappointingly, no additional companies have confirmed their participation to date.

  Some large companies remain reluctant to take part for reasons that only they can explain but others have publicly expressed reservations about the use to which the data may be put. Landlord concerns appear to relate to the survey's limited scope ie restriction to managed house operators, confidentiality of results and perceived independence ie ownership of results by ALMR and potential spin or misuse of them. BBPA have confirmed in correspondence that they have done nothing to discourage participation, but equally they have done nothing to encourage it; they go on to note that "for obvious reasons some are not keen to work with you".

  Following publication of your report in May we significantly changed the scope of the survey in order to address these first two concerns. In particular we opened up participation to non-ALMR members and individual lessees and have structured it in such a way as to allow separate analysis of results for singleton and multiple operators, lessees and free of tie sites. All returns will now be collated by an independent research company and results analysed by an independent economic adviser, subject to peer group review. These points have been reiterated to landlord representatives and individual companies.

  We have now gone further and proposed that we will relinquish ownership of the survey and results and "gift" it to the industry. This is because ALMR ownership or badging of the survey appears to be the major sticking point for some. I have attached a press release announcing this move but in essence it would mean that data was interpreted and analysed by an editorial panel—comprising a cross-section of stakeholders—which RICS has agreed to chair.

  The response from landlord representatives has been a cautious welcome but is still non-committal. We understand that the issue of benchmarking will be discussed at the BBPA pubs group meeting in February and discussions about participation in the current survey round cannot progress until then. We would be willing to further postpone the deadline for responses until after then if we had any positive statements of intent; regrettably these have not been forthcoming to date. We believe that we have addressed all legitimate concerns about participation in the initiative and that it is now a matter of goodwill. Whilst this may be forthcoming from individual companies, it is clear that landlords are working collectively on all issues related to your enquiry.

  The ALMR remains committed to continue to refine and develop the survey to provide information which is of use to operators not only in respect of rent setting but also more widely. We have had a number of productive and substantive discussions with RICS over the course of the summer and post the December evidence session. They have agreed to work with us to develop the survey—which they agree is largely fit for purpose—and to chair any editorial board for analysis purposes.

DIALOGUE BETWEEN BBPA AND LESSEE REPRESENTATIVES

  Following the evidence session, the ALMR has had both a formal and informal meeting with the BBPA to discuss developments. In both instances, the BBPA has expressed its willingness to meet with the ALMR as a recognised representative body but is disinclined to meet IPC.

  A further meeting is planned at the end of January/early February once the revised BBPA Code is finalised and signed off by FLVA and BII. The BBPA will not, however, engage on discussion on the content of its Code in draft form ahead of that unless the ALMR agrees to sign the Industry Framework Agreement.

DOMESTIC PROPERTY REGULATORY STRUCTURE

  I mentioned at the evidence session that I sit on the Board of the Property Codes Compliance Board in a personal capacity related to my other consultancy work. You asked for more information on this structure.

  The PCCB was established in 2006 independently to monitor compliance with industry codes of practice—the Search Code and the HIP Code. The Board sprang directly from government legislation to introduce Home Information Packs and a decision by the industry that it should introduce a system of self-regulation. This decision was taken on the basis that the domestic property sector involves a high proportion of regulated professionals—lawyers, solicitors and surveyors—as well as statutory licensing arrangements for estate agents.

  Whilst the HIP and Search Codes were drawn up by the two trade bodies representing companies in the two sectors, the decision was taken to place compliance and enforcement activity at arms length. The PCCB is fully independent and is funded by means of a subscription on companies wishing to exploit the Code logos, which act as kitemarks of quality and standards. The PCCB carries out pre-registration assessment of terms and conditions, practice and procedure as well as full compliance inspections and spot enforcement checks.

  Any breaches of the Codes are referred to a Compliance Committee and can result in removal of subscription. This has a very real financial penalty as the HIP Code requires pack providers to only use Search Code subscribers. Conveyancers, lawyers estate agents and ultimately end users are recommended to only use code subscribers as well. Complaints about subscribers or operation of the Code can also be referred to The Property Ombudsman, who also provides independent redress for estate agents.

  The key points of difference between this regulatory structure and that proposed by the BBPA are the independence of the regulatory structure and "regulator" itself and the existence of a separate means of independent redress. The PCCB Board has only two industry representatives on it out of a Board of eight members. Public interest and consumer groups dominate and exclusively make up the Compliance Committee.

  In addition, RICS has recently helped to establish a Property Standards Board bringing together all stakeholders, professional bodies and independent regulators in the residential property sector. The PS will develop codes of practice for estate agents and property managers and again is characterised by independent standard setting, assessment and redress.

  You can obtain further information on the PCCB and TPO at www.propertycodes.org.uk and PSB at www.propertystandardsboard.org.uk. I should be happy to provide any additional details if you require them.

CONCLUSION

  Our key concern about any proposed Industry Code is that it should be independent from the companies and bodies whose behaviour it seeks to regulate. There must be a mechanism for proactive enforcement and compliance, independent complaint and redress. Above all else, however, it must be legally enforceable and carry equal weight with and form part of the contractual arrangements.

  We remain to be convinced that the BBPA proposals will deliver this. We very much hope that they will do so and that the commitments given to the Committee in this respect are fully realised. If so then the proposed Industry Code may well deliver real results. Unfortunately, it is impossible to confirm whether this is the case at present as we have still to see a copy of any revised Code.

  In all of these issues, the concern remains that there are no concrete deliverables which could be pointed to to demonstrate good will. It is telling that we are still talking about a revised draft Code of Practice some eight months after the publication of the Committee's report and five years after the TISC Report first outlined what would constitute an adequate Code of Practice. This is in stark contrast to the activity undertaken by RICS over the same period.

APPENDIX

Letter to Garry Mallen from Enterprise Inns, as referred to in Oral Evidence given to the Committee

  Please recognise that your client's application for the Ox Row was REFUSED months ago.

  That is the end of the Code of Practice process for that pub. The claim has been handled exactly in line with every other claim which, following investigation of the financial evidence and market comparables, were adjudged by us not to have merit when they were made. Your client has not been treated exceptionally.

  You also say in your e-mail that "they are entitled to the same rights that other tenants are being afforded". This is a misunderstanding of the status of the Code of Practice—it sets out no "rights" at all. The Code of Practice is non-contractual (the leases are the contracts) and all the deals done under this Code are concessionary and wholly discretionary.

  On the two Reigate pubs I am aware that a subject to contract and subject to approval rent proposal has been agreed with your client on both, but absent the usual financial disclosures from your client neither I nor the regional team have authority to settle them with you within our Code of Practice. We have escalated the problem to try to get approval at a higher level, but you and your client could solve this problem immediately if you would complete the financial disclosures including monthly results and stock results during the time that the Bar Group has been managing them on your client's behalf.

10 January 2010






 
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