Written evidence submitted by the Royal
Institution of Chartered Surveyors (RICS)
RICS—Royal Institution of Chartered Surveyors—is
pleased to respond to the Select Committee's inquiry into pub
companies.
RICS is the leading organisation of its kind in the
world for professionals in property, construction, land and related
environmental issues. As an independent and chartered organisation,
RICS regulates and maintains the professional standards of over
91,000 qualified members (FRICS, MRICS and AssocRICS) and over
50,000 trainee and student members. It regulates and promotes
the work of these property professionals throughout 146 countries
and is governed by a Royal Charter approved by Parliament which
requires it to act in the public interest.
GENERAL COMMENTS
As an independent professional organisation, governed
by Royal Charter to act in the public interest, RICS is not a
market participant in the public house sector or any other part
of the property market.
Many of the questions posed by the Committee relate
to matters that are not in the remit of RICS and nor, in many
cases, practising Chartered Surveyors. RICS' involvement has solely
been to provide updated guidance on rental valuation and to facilitate
where possible in the development of a benchmarking survey relating
to the costs of operating a public house. This guidance was developed
utilising a working group drawn from all parts of the industry
representing all the key stakeholders. Over the past two years,
RICS has allocated significant time and resource to engage with
this relatively small part of the property market to ensure that
rents are set at a fair level for all. This engagement has been
acknowledged by the key organisations in the pubco sector.
Our responses to your questions are as follows:
1. If the BBPA and IPC are now in dialogue
and if so how this is progressing
Not within the remit of RICS.
2. Whether the Pub Companies' individual Codes
of Practice are robust enough and whether the major pub companies
have built upon the de-minimus requirements of the BBPA's Framework
Code
Not within the remit of RICS. Other than to note
that compliance with RICS guidance on setting rents is a BBPA
code requirement, which RICS welcomes.
3. If the Codes of Practice are being complied
with
Not within the remit of RICS.
4. How the BII is policing the codes and whether
this is effective
Not within the remit of RICS.
5. The enforceability of the codes
Not within the remit of RICS.
6. If AWP machines are now being treated more
fairly and tenants are being given a genuinely free of tie option
Not within the remit of RICS.
7. The treatment of flow monitoring equipment
Not within the remit of RICS.
8. The advice being provided by BBPA to prospective
publicans
RICS encourages all trade and similar organisations
to inform prospective publicans and potential lessees to take
professional advice from a Chartered Valuation Surveyor.
9. The effectiveness of the new RICS guidance
on pub rental valuations and whether it provides clarity on the
principle that a tied tenant should be no worse off than a free
of tie tenant by defining what constitutes a countervailing benefit
RICS published revised guidance on the valuation
of public houses in December 2010 (RICS Practice Standards, UK:
The capital and rental valuation of public houses, bars, restaurants
and nightclubs in England and Wales). The guidance was formulated
by a cross industry working group including representatives of
BII, IPC and BBPA. The new guidance has been enthusiastically
received by the industry. The revised guidance has been upgraded
from information paper to full Guidance Note status within RICS
Valuation Standards.
In October 2010, RICS introduced the Valuer Registration
Scheme (VRS) through RICS Regulation which is a monitoring and
regulation scheme for all RICS members undertaking work in accordance
with RICS Valuation Standards. The scheme was made mandatory in
April 2011.
RICS Regulation acts at arm's length from RICS. They
investigate any complaint of non compliance with RICS Valuation
Standards and breaches of the RICS Code of Conduct.
The new guidance gives detailed and specific advice
on the principle that a tied tenant should be no worse off than
a free of tie tenant and also defines what constitutes a countervailing
benefit.
The guidance states firmly that:
"Comparability between public houses held
on different lease terms and with different supply terms is problematic,
particularly between the tied and non-tied sectors. There is nothing
within this guidance that should result in rents in one sector
being set at any advantage or disadvantage to another."
The issue of countervailing benefits also known as
SCORFA is dealt with in section 7 of the new guidance.
10. The creation of an industry benchmarking
survey
After the previous Select Committee hearing, RICS
undertook to work with others in the industry to encourage the
creation of an industry wide benchmarking survey to assist rental
valuations. RICS worked with CBRE, a leading real estate consultancy
and the industry for over a year to encourage the publication
of a database. Ultimately the parties have yet been able to find
a practicable and cost effective way of gathering and publishing
information, in a way that provides sufficient information in
terms of inputs to be credible and that preserve the commercial
sensitivity of the data. RICS has also engaged with several other
research providers none of who have been persuaded to provide
benchmarking.
RICS understand there are moves from some market
participants who are currently examining this issue and we believe
the industry is moving towards a solution. RICS will continue
to encourage and offer support to this process.
11. The availability and effectiveness of
complaints procedures and an independent disputes mechanism
RICS has no involvement with the PIRRS independent
expert appointment scheme. RICS runs the largest property Dispute
Resolution Service (DRS) in the world. Our position is that this
service provides the premier service of its kind and regularly
appoints, highly skilled and trained Chartered Surveyors as both
arbitrators and independent experts to deal with pub rent review
disputes.
12. The availability of genuine free of tie
options ie an open market rent review under RICS new guidelines,
ability to buy beer from any source
Not within the remit of RICS. This is for the industry
and the market place.
13. The guidance from BII on the type of pub
leases available and what the options mean in reality to prospective
lessees. This includes free of tie, tied pricing and discounts
as well as the business support countervailing benefits available
Not within the remit of RICS.
20 June 2011
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