Written evidence from licensees Unite
the Union
With reference to the Business, Innovation and Skills
Committee's call for evidence, we are pleased to be able to submit
the following:
BACKGROUND
Unite is the largest trade union in
Britain and Ireland with 1.5 million members, it is a union which
stands up for equality and fairness for all. We are concerned
over the total lack of equality and fairness operated within the
pubco model, it is not acceptable and should not be tolerated
in a modern society, it appears archaic and dictatorial. Unite
is proud to be a part of the steering group for the Independent
Pub Confederation and fully supports the recommendations and findings
of the Business and Enterprise Committee report of 2008-09 and
the Business, Innovation and Skills Committee report of 2009-10.
SUMMARY
It is imperative that a mandatory, statutory code
now be enforced on this industry. The pubcos have consistently
failed to sufficiently address issues and recommendations. It
is evident that self regulation and self policing are not working
to the benefit of this industry. The mandatory, statutory code
must include:
— A genuine
free of tie option with an open market rent review, following
RICS guidance.
— Compliance
with RICS rental valuation guidance.
— A guest
ale right for those who choose to remain tied.
— Removal
of the AWP machine tie.
1. The pubcos were investigated in 2004 by the
Trade and Industry Select Committee, they were not given a clean
bill of health and were found to be wanting, recommendations were
made by the Committee. In particular we note:
— there
was a need for an inexpensive and efficient system of arbitration
or alternative dispute resolution to resolve disputes without
imposing legal costs on either side (21);
— pubcos
should advise their tenants of the average discounts they receive
when purchasing beer from the breweries, how this compares to
the free market discounts available and how much of their discount
they are passing on to their tenants (22);
— the
AWP tie should be removed (23);
— there
should be clear guidelines for the rental valuation process and
tenants should be provided with a comprehensive breakdown of how
their rent was calculated including detail of the profit assessment
and how the specific requirements of the lease conditions had
been interpreted by valuers (24);
— the
profit assessment should form an addendum to leases, with any
subsequent review, to ensure transparency (25);
— Upward
Only Rent Review (UORR) clauses should be removed from leases
(26);
— the
industry should develop a nation-wide register of rent reviews
(27); and
— pubcos
should support their tenants in attending training courses (28).
The main recommendation for an updated Code of Practice
(COP) was accepted by the industry. The BBPA drew up a revised
Framework Code of Practice which was published towards the end
of 2005.
CONCLUSIONS
21. PIRRS has been set up, albeit six years late,
for rental arbitrations, however considering that according to
the BBPA survey 56% of existing tenants and 56% of new tenants
were not even aware of PIRRS, this can hardly be called a resounding
success. BIIBAS is concerned with Code of Practice breaches, however
the COP's are weak and ineffectual and do not cover the myriad
of problems encountered by lessees, we are concerned that the
BII do not have the authority or teeth to deal with the pubcos.
There is no satisfactory or effective dispute resolution service
for other disputes which fall outside of rental or COP disputes.
22. some pubcos may advise their tenants of the
discounts they receive, however they have failed to advise of
the differentials between tied pricing and FOT pricing and how
much of their discount they pass onto their tenants. The pubcos
have claimed this would breach commercial sensitivity, we do not
agree with this and maintain that the difference between FOT and
tied pricing and the discounts earned by the pubcos and the discounts
received by the tenants remains one of the more important issues.
23. The AWP tie remains in place and remains
abused by the pubcos with the machine income still being taken
into account when rental bids are made, this is not an acceptable
practice.
24. Tenants are still not receiving a comprehensive
breakdown of rental calculations as highlighted in the BBPA survey.
25. Profit assessments and subsequent rent reviews
do not form an addendum to leases.
26. UORR clauses still form part of leases, whilst
they remain on the contract the pubcos can and will enforce them
to the naive or uninformed.
27. There is still no nation-wide register of
rent reviews and considering the NDA's in PIRRS rent reviews remain
shrouded in secrecy.
28. Considering 22% of new entrants did not partake
in PEAT shows a certain lack of willing on the training issues.
It is concerning that the BBPA drew up a revised
Framework Code of Practice in 2005 and in 2009 were having to
revisit and improve. The 2005 Framework Code of Practice clearly
failed miserably in addressing the imbalance in power between
landlord and tenant.
2. In 2008 the Business and Enterprise Committee
re visited the 2004 TISC hearing, it is clear that they did not
expect to have to examine the industry from first principles rather
than a simple check on the implementation of the TISC recommendations.
— Transparency—The
Committee found that it was unacceptable that tenants were not
being shown a breakdown of how their rent was being calculated
(Para 45), they also recommended that there should be industry
guidelines on the average costs of running a pub (Para 47).
— Trading
History—Pubcos entering a commercial relationship with a
new lessee should be required to share all the information on
a pub's trading history with them (Para 54).
— Comparables—A
system must be put in place to allow lessees to assess whether
their rent is fair and in line with similar businesses (Para 58).
— Rent
reviews—If rental is linked to RPI it should be done in
a way which enables reductions when appropriate (Para 75).
— The
Beer Tie—If the interests of the pubcos operating a tied
system and their lessees were truly aligned, one would expect
that pubcos would want a system in which the combination of rental
costs and beer costs enabled their lessees to supply beer at a
price which was competitive with other pubs. This does not seem
to be the case (Para 87).
— Enforcing
the tie—However we believe that where a measurement device
is used to police this, it should be properly calibrated and subject
to external verification. If necessary the Weights and Measures
Act 1985 should be amended to ensure this (Para 98).
— AWP
Tie—In 2004 the TISC concluded that "in our opinion,
pubcos do not add sufficient extra value from their deals to justify
their claims to 50% of taking from AWP machines. We remain unconvinced
that the benefits of the AWP machine tie outweigh the income the
tenants forgo and we recommend that the AWP machine tie be removed".
That conclusion remains valid (Para 103).
— Benefits
of the pubco tied model—Moreover the attraction of low cost
entry should not be overstated (Para 115).
— Business
support—TISC found that "the performance of business
development managers (BDM) varied across the industry from excellent
to dire". That conclusion remains valid. Moreover, some of
our evidence suggests that this culture is not limited to BDM's
but can reach further up a company (Para 120).
The BBPA have re-written their Framework Code of
Practice.
CONCLUSIONS
Para 45—It is clear that this has not been
sufficiently addressed.
Para 47—There is still no industry guidelines
acceptable to both parties.
Para 54—It is clear from the BBPA survey that
the pubcos are still failing to supply trading information.
Para 58—There is no system in place.
Para 75—There is no system which allows for
reductions in RPI rents.
Para 87—It is clear that the pubcos and their
tenants remain unaligned.
Para 98—It remains clear that there is not
sufficient or quantifiable proper calibration or external verification.
Para 103—the AWP tie remains in situ for a
substantial number of tenants and remains abused by the pubcos
with the AWP income being taken into account in rental bids.
Para 115—The attraction of low cost entry remains
over stated.
Para 120—Bullying and intimidation remain rife
and still is not restricted to just the BDM's and does reach further
up the companies. Financial support is still not being offered
to those who need it.
We maintain that the 2010 BBPA Framework Code of
Practice does not address the core issues of contention between
landlord and tenant and completely fails to address the imbalance
in monetary gain for input. The Framework Code of Practice will
not produce an equitable, fair and balanced relationship between
landlord and tenant. It is
imperative that a mandatory, statutory code now be enforced on
this industry. The pubcos have consistently failed to sufficiently
address issues and recommendations. It is evident that self regulation
and self policing are not working to the benefit of this industry.
RECOMMENDATIONS:
Mandatory, statutory code to
include but not be restricted to:
— A genuine
free of tie option with an open market rent review, following
RICS guidance. This would ensure that the industry does police
itself.
— Compliance
with RICS rental valuation guidance. To prevent circumnavigation
by the pubcos.
— A
guest ale right for those who choose to remain tied.
To help the small and microbrewers and to aid competition.
— Removal
of the AWP machine tie.
FURTHER RECOMMENDATIONS
An independent dispute resolution service to tackle
disputes between landlord and tenant, these disputes should not
be restricted to rental or COP disputes.
The Weights and Measurements Act 1985
requires amendment to include beer monitoring equipment.
The industry must ensure that it agrees on and delivers
guidelines on the average costs of running a pub.
The industry must ensure that it delivers a nationwide
register on rent reviews and rental levels, to ensure honesty
and transparency.
The removal of UORR clauses to prevent abuse.
20 June 2011
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