Why the Pubs Code isn’t working part 1

Question: When is an “Award” not an “Award” ?

Answer : When its a Pub’s Code “Award”

Back in Autumn 2016, after Paul Newby was busy undertaking some ALMR/ BII/ FLVA road shows the PAS members that attended those events gave us some slightly worrying feedback.

Firstly, Mr Newby appeared to be very reluctant to answer any questions of substance (and for the record nothing’s changed) — Malaki Keane, a Punch tied tenant asked him about why MRO couldn’t be delivered via a Deed of Variation rather than a new agreement (no answer) — why Stamp Duty requirements came into the equation, (no answer), how come the Pubco’s were allowed to use terminal dilapidations as a way of putting off tenants from going MRO (no answer). However, perhaps but more importantly than this, was the tone of the sessions, which appeared to be contrary to the intent of the legislation.

The impression, given to both Malaki and another EI tenant (who has asked for confidentiality due to the fear of reprisals — clearly the Pubs Code hasn’t given him any comfort !!!) was that MRO was going to be difficult to achieve, but the legislation offered a good opportunity to get a better tied deal !!!. Now to the seasoned campaigner, this sort of message was no surprise coming from the ALMR, BII and FLVA all being champions of failed self regulation, but the problem was that according to our PAS members who witnessed it, Paul Newby agreed with the sentiment.

Now obviously anyone would want 10 or 20 grand knocked off their tied rent — if your making 10 grand a year then doubling that shouldn’t be sneezed at but as MRO was designed to transfer the lost (on average) 20% GP to your profit line and, as this could be, and often is 60 or 70 thousand pounds a year, perhaps the tied deal isn’t really the best one in town. So therefore the suggestion that it was probably going to be easier to get a reduction in your tied rent than going down that “terribly difficult” MRO route might be seen by many to be at odds with making the “tied tenant no worse off”.

Of course this was still in the days when all we had to go on was the fact that Mr Newby was deeply conflicted and had been part of the symbiotic surveyor/ Pubco relationship that had proved so financially beneficial (to surveyors and Pubco’s) over the years — we were judging him on our fears rather than his performance.

However in March the picture changed in a slightly unexpected way.

The announcement on the PCA website that the first 5 cases had been successfully resolved came as a surprise to many of those who were representing tenants. As we were dealing with a PCA office that seemed to be doing everything in its power NOT to make a decision, this statement made little sense. After some cross checking and evaluation of the cases we were all handling, it quickly became apparent that far from successful “awards” demonstrating a legislative process that was working as Parliament intended, the first 5 awards were in fact a combination of tenants simply giving up, accepting a tied deal in desperation or running out of money and time, as in the case of Colin Yates.

Colin Yates had a trigger under the code just after it went live, the pubco (Stars) proposed back then that even under a FOT/MRO situation Colin would still have to stock their products to around 85 % of his total. With no clarity in sight, Colin had to refer that point before he could even consider the ridiculous terms on offer under his “new agreement” rather than the Deed of variation we all knew could have been offered. As for the “double the rent” MRO, Colin was a million miles away from challenging that having to deal with (1) stocking and then (2) unreasonable terms at potentially £200 referral each time.

If the clarity had existed on these 2 clear points, then the pubco would have had it’s knuckles rapped and Colin could have got on with negotiating the rent instead.

Colin objected to Mr Newby on grounds of conflict and perceptions of bias, he being a former estate agent selling pubco pubs and acting for the big pubco’s. This was rebutted by the PCA as being overly “sensitive” and the parties went on for a while to-ing and fro-ing over Newby’s creeping disclosures and answers to his massive shareholding and opaque background. If Newby hadn’t stood as arbitrator Colin could have progressed his case much earlier but instead the clock ticked on with all the foot-dragging and after a bad Xmas period Colin finally shut the pub. The Yates arbitration was finally brought to a close by the PCA after confirmation from Stars to them that Colin had left the pub / handed the keys back.

The PCA then sent Colin the “award” letter at the end of March some 6 months after it / Mr Yates had started the process and 6 weeks after the pub was boarded up.

Whilst Colin was happy to go Public, after all he had nothing further to lose, others have been forced to do a deal without, which, they would otherwise not have lasted to the end (even if an end really exists) to the process.

By April we had seen a monumental jump in award’s, leaping to 25 cases being successfully “arbitrated” — again we had no clarity on the individual cases and more importantly we had no clarity on the individual issues that have been resolved although Newby hoped that he could (in future) identify general principles on Code enforcement !!! — Presumably so that tenant’s wouldn’t have to continue to pay £200 a go to spend an average of 9 Months waiting to run out of money whilst the PCA avoided making a single concrete decision.

It is of course much more likely that the inability for the PCA’s office to “identify general principles on code enforcement”, lie with the fact that no one has actually set a precedent yet and therefore no “general principle” has yet to be seen, as no one has made it to the end without desperately agreeing terms that will (in all likelihood) send them bust in a matter of years rather than months.

David Morgan of Morgan and Clarke has stated that he is aware that 3 of the 25 cases announced as arbitration awards, are in fact examples of cases whereby the tenant has abandoned the cases out of frustration at Newby’s slowness and pubco intransigence. We are willing to bet the other 22 are similar.

So with hindsight, it could be argued that the meetings of Autumn last year demonstrate an advanced knowledge of how the “industry” was expecting the PCA office to work, with delay after delay, no precedents set to follow and consequently nothing that looked remotely like MRO. In fact it has become so clear to the campaign team that a poorly drafted code overseen by a deeply conflicted adjudicator, is completely broken, that we may even consider the example set by Greene King, who after threatening a judicial review forced the PCA into a modicum of clarity regarding stocking requirements although in reality this “clarification” was anything but.

Until that decision is made we can only continue to amass the evidence of obstruction and stumbling blocks that are continually placed in the way of what should have been a piece of legislation that provided a lifeline for tenants, Pubs and the communities they serve.

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