Examination of Witness (Question Numbers
160-179)
MRS KATE
NICHOLLS, MR
KARL HARRISON,
MR SIMON
CLARKE AND
MR GARRY
MALLEN
8 DECEMBER 2009
Q160 Chairman: Have you had any approaches
yet from RICS to be on the trade related valuation group?
Mr Clarke: Not yet.
Q161 Chairman: They could do much
worse.
Mr Mallen: My name is Garry Mallen.
I am a council member of the ALMR. I was part of the ALMR team
of mediation and also attended the RICS forum.
Q162 Chairman: I want to ask some
brief factual questions. Your confederation is made up of a large
number of organisations with quite a variety of views on some
of the key issues. How easy is it to provide a unified voice?
When we take evidence again in however many months from now on
this subject what are the chances that you will still be together
as a confederation?
Mrs Nicholls: The key point is
that we are a confederation. We are not a new trade body but an
umbrella grouping that seeks to bring together the national trade
bodies that represent publicans and we are a unified voice for
them. We believe that there is a very real democratic deficit
in vocalising the views of publicans and we speak where we can
on common points of interest with consensus. As an umbrella we
work alongside our component organisations in support of them;
we do not replace them. Each of them retains its own distinct
voice. We are a very broad church. You will appreciate that our
component members hold distinct positions. We do not try to hammer
home one position that must be held by all; we speak where we
can with a consensus and common position where we reach agreement.
Therefore, today we are presenting to you where we have reached
agreement. We will continue to present on all issues focusing
on publicans where we have reached agreement, not just on the
tie and the issues before the Committee today.
Q163 Chairman: You are not driven
by the need to reach a consensus on every issue, so you are not
an organisation that tries to find the lowest common denominator.
You speak only where you can genuinely agree?
Mrs Nicholls: When we came together
and felt there was a role for us to play we very much wanted to
avoid the allegation that we would be the lowest common denominator.
We want to speak where we can with a common voice and allow our
member organisations to speak freely on other issues where they
have distinct positions.
Q164 Chairman: You are not the only
ones who have been slagged off by the pubcos. I think Punch said
that you represented only a handful of licensees. How do you respond
to that allegation?
Mrs Nicholls: We bring together
all the national trade bodies currently representing the interests
of publicans: the Association of Licensed Multiple Retailers;
the Guild of Master Victuallers; campaigning groups such as Justice
for Licensees, Fair Pint and Unite; the Federation of Small Businesses,
which has over 4,000 individual publican members, and CAMRA and
SIBA. We are also supported in our work by the BII. Therefore,
between us as national trade bodies, leaving aside the campaign
groups who have many thousands of supporters, we alone directly
represent 25,000 publicans or just under half of all pubs in England
and Wales. About half of those will be leased and three-quarters
will be tied. Therefore, to dismiss us as being a disgruntled
minority is foolish in the extreme.
Q165 Chairman: It is a pretty large
handful, certainly. The FSB has said in relation to the concern
we pursued in our previous evidence session with the BBPA: "There
has been much activity by the pub companies but little delivery
of meaningful change." I would like to hear your observations
on that.
Mr Harrison: I was quite disappointed
by what I heard a short while ago in terms of what is supposed
to have happened since the Committee's previous report. Our experience
on the ground is that there has been little movement certainly
in the main pubcos which control many thousands of pubs. Initially,
there was criticism of your report and some legal threats; there
has been continuing pressure on tenants and churn in the large
pubco estates; there have been heavy-handed evictions, closures
and breaches of codes as confirmed by the BII; and there has been
a denial of problems in the sector generally in its formal reporting
and in the media. There has been some window-dressing. I give
just one piece of information that relates to Punch Taverns and
their existing code of practice. I refer to a court case that
took place as recently as 17 November.
Q166 Chairman: Is it a court case
that has concluded?
Mr Harrison: Yes. Their barrister
pointed out in strident terms—I can send you a copy of it—that
their retail charter was not binding in law and the tenant ought
not to seek to rely on it; furthermore, their commitment to upward
and downward rent reviews also was not appropriate and the court
could not rely on that either. That was said as recently as 17
November by those who otherwise hold themselves out as having
taken big strides.
Q167 Chairman: To what extent does
that conflict with the evidence we have just heard from BBPA about
the legal enforceability of the codes? If you cannot answer that
question now perhaps you can think about it and drop me a note.
Mr Harrison: Yes.
Q168 Chairman: Enforceability lies
at the heart of the debate.
Mr Harrison: In relation to the
strides supposedly made on the codes we have seen what we believe
to be some ill-considered codes certainly in terms of enforceability.
All of it seems to have been hashed together at the last moment
in advance of this Committee's inquiry. Letters have arrived with
you from the BII and other people turn up. We have not seen a
draft code. I would have thought that if a great deal of collaboration
was going on we would have seen it but we have not; and we have
not been asked to comment on it. We do know from the heads of
terms that the code proposed is not independent and binding. As
of today it does not seem to be enforceable. There appear to be
no effective sanctions apart from forcing somebody out of the
BBPA possibly at the cost of a six-figure sum to that organisation.
That does not seem to me to be a sanction. ALMR as a member of
the IPC initiated the mediation process. Only one pubco turned
up to it. We formed the new confederation. It is great to see
it because no longer do we have to put up with the BBPA claiming
it represents publicans: you now have before you people who do.
We have been working with the RICS and have been instrumental
in encouraging them to report as they did. We have all been working
together with the ALMR on benchmarking and also with the BII to
look towards the future in terms of training.
Q169 Chairman: We shall go into detailed
questions about rents and so on in a minute or two, but that is
a helpful general picture. Mr Clarke, do you want to add anything?
Mr Clarke: The code we have just
heard about has been offered up as a solution to a multitude of
previous sins. It is almost as if there was never any code before
and this will now be the code. I remind the Committee that there
was a code before the TISC in 2004 and a code before the BESC
in 2008 and one after the BESC in 2008. This one really cannot
be any different in that it is not mandatory, not regulated and
independent.
Mr Mallen: There is further evidence
of this. Pubcos have stated that their code is non-contractual
and all deals done under the code are concessionary and wholly
discretionary. I received such correspondence in September.
Q170 Chairman: With one particular
pubco?
Mr Mallen: Yes.
Chairman: That makes the answers we are
to get from BBPA on that issue all the more important. I am sure
they are listening to this.
Q171 Mr Clapham: Mrs Nicholls, the
Confederation has welcomed the RICS forum report. Can you confirm
whether or not the Confederation will sign up to it? We would
also like to know whether you will provide information to the
benchmarking register following the RICS code of practice in providing
information for rent reviews et cetera.
Mrs Nicholls: I take those in
two parts. First, we very much welcome the RICS report which entirely
concurs with the analysis and some of the recommendations of this
Committee. It is a welcome recognition by an independent third
party of the problems that face the industry and our members.
Q172 Chairman: Initially, they were
not quite so inclined to change but there is more joy in heaven
over one sinner who repenteth.
Mrs Nicholls: Absolutely. I see
the role of a Select Committee as making observations on an industry
and for an industry to listen and respond positively where it
can. Undoubtedly RICS have done that and you have heard from them
today. We have worked collaboratively with them; both Mr Clarke
and Mr Mallen made presentations to the forum. We held meetings
with them subsequently about inputting into the trade related
valuation working group guidelines and their code, which incidentally
we agree with entirely. There are too many industry codes; there
should be one that is independent and RICS should have primacy.
If we are invited to do so we shall be very happy to work with
them and endorse it. Benchmarking falls entirely within my area
of responsibility at ALMR; I am the person who runs the survey
that we carry out at present. We shall be very happy to work with
them. We have already had meetings with them about how we can
take that forward. We have not been sitting still and waiting
to have a follow-up session or for somebody to come to us. As
lessee groups we have worked to refine the benchmarking study
so that now we split it out from multiples to lessees. RICS have
said that at present the study is limited by a lack of pan-industry
co-operation and that has been proved in spades when we have gone
out into the marketplace to ask people to input. Previously it
was limited to ALMR members; it has now been extended to anybody
in the industry who wants to participate in that study. We have
had lots and lots of responses from individual lessee groups but
not from the landlord groups. Landlords who previously participated
in the survey have pulled out.
Q173 Mr Clapham: Why do you think
that is?
Mrs Nicholls: I do not have to
guess; I have been told that it is because of ALMR's participation
in the IPC and before this Committee.
Q174 Mr Clapham: You expressed some
concerns about how and when the RICS code would be implemented.
We heard from RICS that it would happen in spring of next year
but we know that spring might turn into summer and summer into
autumn. Are you helped by what you have heard from RICS?
Mrs Nicholls: Yes.
Mr Mallen: I am very much encouraged
by the RICS report and the speed with which they have dealt with
it. They seem to have taken on board the comments in the Committee's
report earlier this year, dealt with it quickly and issued their
report promptly. I believe they have acted in the interests of
the industry. I am sure the IPC share their desire to see somebody
make the code mandatory because in that way it is enforceable
and we shall not end up with the same problems we had in 2004,
2008 and today.
Q175 Mr Clapham: Is there anything
missing from the RICS report that you feel ought to be included?
Mr Clarke: We are delighted to
hear that they intend to enshrine the recommendations of the report
in their revised guidance, particularly the issue of the tied
tenant being no worse off than the free of tie tenant that is
a principle for which all of us have been fighting for some time.
Q176 Chairman: You heard the earlier
discussion in this room. Are you happy about the way that crucial
issue was met?
Mr Clarke: That is exactly what
I am about to touch upon. We must be sure that the guidance will
be absolutely clear. Even the RICS would be the first to admit
that the misinterpretation of the guidance has been used to the
benefit of some surveyors. We must ensure that there is now no
muddying of the water. As to the issue of advantages and disadvantages
being valued I believe that is a perfectly valid comment. If those
benefits or onerous terms are contractual and are in the terms
of the lease they should be included in the valuation. If they
are discretionary—some would describe them as onerous—there
is no way that effectively they should be quantified and included
in the rental valuation.
Q177 Mr Clapham: Were you encouraged
by what was said this morning by RICS in relation to the Brooker
case and the ways in which they see it providing some flexibility?
Mr Harrison: To put it in a wider
context, since the RICS report came out there has not been a rush
to accept its findings. Earlier Mr Hoyle asked whether any pressure
had been brought to bear. We know that there are plenty of surveyors
working within the RICS and trade related valuation group on behalf
of the pubcos who will no doubt be lobbying in relation to that
report. The report has not been universally accepted. We have
seen correspondences to tenants of companies such as Greene King.
I know that the Chairman is meeting them later so perhaps he could
ask them why they are writing to tenants denying what that report
means or perhaps suggesting that the Brooker case does
not have significance. I use that word `significance' because
that was how Mr Rusholme described it earlier in his evidence.
Therefore, we are not seeing as we have been told by the BBPA
a rush to embrace this report. That is not our experience at the
moment. Brooker has been put in context by BBPA members
and large pubcos as being specific to that particular case but
it is not at all. That is why Mr Rusholme describes it as significant.
The judge in that case, Ian Hughes QC, was very specific about
making two general points. First, he conferred some credibility
on valuation information paper no.2, which is the guidance that
Mr Rusholme is looking to revise; second, he went on to include
a set of issues that hypothetical tenants could consider in rent
reviews, such as the general economy and the fact that a tied
lease is likely to be more onerous than a free of tie lease et
cetera. Therefore, in some ways he was already embracing the
prime principle in that judgment. I believe that is why the RICS
and their solicitors are interested in a general and not specific
set of principles. It has wider implications. We are in the process
of taking leading counsel's advice on that at the moment and perhaps
in due course we can come back to the Committee on that.
Q178 Mr Clapham: Mr Mallen, you are
not as encouraged by the BBPA's code of practice as you are by
some of the recommendations that RICS make in relation to their
code of practice. Is it that you are not happy with the implementation
of the BBPA code or what is contained in that code of practice?
Mr Mallen: I am sure I could bore
you for hours on the things in the code that do and do not suit
the industry. In one word the issue is enforceability. As long
as it is not possible to enforce it it is an issue. I do not see
the sanction of being thrown out of the BBPA as a matter of great
concern. The BBPA does not even represent all the landlords in
the country in any event, so if they are not members they do not
have to abide by it.
Q179 Mr Clapham: One point made earlier
by the previous witnesses was that the codes of practice established
a kind of contract and it might be possible to enforce it, but
you tend to disagree with that.
Mr Mallen: The evidence I have
in front of me is that a senior executive of one pubco says that
they are wholly discretionary. I believe that the lease is the
contract and a court would see it that way.
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