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Campaign for Pubs

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Government must stop pubco discrimination of tenants who’ve exercised their rights under the Pubs Code

The Campaign for Pubs, the national grassroots campaign group representing pubs, publicans and pub-goers has written to the Secretary of State for BEIS, Kwasi Kwarteng, urging the Government to act to stop the clear and wilful discrimination by the regulated pub companies of tenants who’ve exercised their rights under the Pubs Code.

The letter explains how publicans who have taken the legal right to go free-of-tie, opting for a ‘market rent only’ (MRO) option, are being singled out and penalised by the regulated pubcos, who have been charging them FULL rent throughout the Covid-19 restrictions and enforced closures while (quite rightly) providing significant rent reductions to their tied tenants. This treatment is clearly profoundly discriminatory and places MRO tenants in a detrimental position, which is something the Government pledged to tackle when introducing the Pubs Code.

Tenants in this position have reported that they feel they are now being “punished” by their pub-owning companies for exercising their legal rights under the Pubs Code, but even worse than that, many believe that they are being subjected to an opportunistic attempt to force them out of their pubs so that their pub-owning company can regain the sites to replace them with a tied tenant or a manager, or in some cases, actually sell off the pub for alternative use.

Through the campaigning efforts of all those who backed the #NoPubNoRent campaign, including the Campaign for Pubs and the British Pub Confederation, the largest, regulated pub companies announced some rent concessions to most of their tenants, often linked to the level of Government grant, but tenants on MRO leases have been systematically excluded, and, outrageously, have mostly been billed in full for all rent since the very beginning of the crisis. This is especially unfair when tenants on MRO leases have generally had to agree to higher rents in the first place, as part of the negotiation whereby they opted out of the restrictive and costly beer tie.

Last summer the Government published a voluntary Code of Practice for commercial rents under the Covid crisis, as an attempt to deal with the issues faced by many businesses suffering from unreasonable rent demands. This Code lays down universal principles that are clearly supposed be applied equally fairly by commercial landlords to each of their tenants. Therefore, a pub-owning company treating one set of tenants in a wholly different and clearly discriminatory way is simply unacceptable. The Campaign for Pubs believes that the Government needs to take proper action to stop rent abuse, including making the rent Code of Practice mandatory and compelling redress for the excessive rent that has been charged to tenants on free-of-tie agreements.

The Pubs Code was supposed to outlaw discrimination against those who sought to take their legal rights to access their market rent only option, and Regulation 50 states that a pub tenant must not face any detriment on the ground that the tenant exercises or attempts to exercise, any right under the Code. However, absurdly, this only applies up to the point when that right has been exercised.

Giving in to lobbying by pubcos and their representatives, the Government decided to exclude non-tied tenants from the Pubs Code, creating the perverse situation where tenants who exercised their rights under the Pubs Code to go free-of-tie, immediately fall outside the Code and have no protection against discrimination. This decision, which is very similar to the way Beer Orders were disastrously watered down through corporate lobbying for a loophole, is documented on page 27 of the Government consultation to the Pubs Code consultation, published in June 2014.

The Fair Deal for Your Local Campaign, the British Pub Confederation and Campaign Director of the Campaign for Pubs, Greg Mulholland (who introduced the right to a market rent only potion to Parliament), specifically warned against restricting the Pubs Code to tied tenants, because it would leave free-of-tie tenants of the same regulated companies vulnerable to discrimination, exploitation and bullying. The Government were told that restricting the Pubs Code to tied tenants would create the absurd position in law that any tenant exercising their right to go free-of-tie (MRO) under the Pubs Code would, in so doing, immediately put themselves outside the same Pubs Code, with no protection against exploitation and discrimination from the same, ongoing, pub-owning company. What we are now seeing is precisely the kind of discrimination that the Government committed to tackle.

The Campaign for Pubs is calling on the Government to take action, first of all to introduce a mandatory Code of Practice for rent to replace the failed voluntary Code of Practice and to give it retrospective statutory weight, so that all commercial landlords are mandated by law to treat all their tenants fairly and consistently, and to offer fair rental discounts that can be backdated to the start of the crisis.

The Campaign for Pubs is also calling for all pub tenants be given the statutory right to a Covid rent review, with recourse to a binding independent rent assessment, and in addition (and crucially) to rule any existing “upward only” rent review clauses as unenforceable in all cases, in order to allow a sensible resetting of the commercial rental market in the post-Covid age.

In order to prevent future such detrimental treatment, the Campaign for Pubs and the Fair Deal for Your Local campaign will continue to call for the rights and protections of the Pubs Code to be applied to ALL tenants of regulated companies, and not just tied tenants as is currently the case.

Greg Mulholland, Campaign Director for the Campaign for Pubs said:

“The regulated pubcos are clearly and deliberately discriminating against tenants who have exercised their legal right to go free-of-tie. This is shameful and also sinister, as it is undermining the right given to tenants by Parliament.

“It also exposes the ongoing way the large pubcos are desperate to get away with charging hugely inflated above market prices for beer wherever they can and penalising those tenants who have the courage to challenge that.

“The Government made a big mistake giving in to corporate lobbying to water down the Pubs Code legislation and to exclude non-tied tenants from statutory protection, something I specifically warned against. This way MRO tenant are being treated in the Covid pandemic shows why all tenants of the larger pub-owning companies should be covered by the Pubs Code.

“In the short term, there also needs to be a mandatory Covid rent Code of Practice to stop any pub or other business owners charging full rent on closed businesses, something which is simply immoral and which if not stopped will destroy pubs and other rented businesses. The law must be changed in the future so that any forced closure of a business by Government sees those renting out business premises made to share the burden of any such closure”.

Paul Crossman, Chair of the Campaign for Pubs and a licensee of an MRO pub and two freehold pubs said:

“The discrimination in the level of rent support offered by the largest pub companies speaks volumes about the endemic misbehaviour that continues to afflict the leased pub sector. Whilst many pub-owning companies are rightly giving their tied tenants significant rent cuts during this pandemic, the very same companies have almost universally refused any reductions at all to those tenants who have exercised their legal right under the Pubs Code to opt out of the beer tie by choosing the Market Rent Only (MRO) option. This clearly breaches the spirit and intent of the Code by placing those MRO tenants at huge detriment, with many now facing enormous rent arrears that constitute an existential threat to their business.

“The Government must now acknowledge the chronic failure of last summer’s voluntary Code of Conduct on commercial rents during Covid. In line with strong warnings issued at the time, this Code has been widely ignored by commercial landlords throughout the economy because of its voluntary status. Within the terribly hard-hit pub sector, regulated pub-owning companies have been at liberty interpret the Code selectively by completely excluding MRO tenants from the support they have extended to tied tenants (whose lease contracts of course constitute a highly profitable guaranteed extra income stream and route to market post-pandemic).

“If, as looks likely, some MRO tenants end up losing their business and livelihood under the huge weight of these mounting rent arrears, they will be ruined while their pubs will simply be reclaimed by their pub-owning company for whichever most profitable use they see fit. Any gains under the Pubs Code will be immediately undone. A perfectly viable local independent small business will be destroyed, and choice for customers will very likely be reduced. If no action is taken to prevent this detrimental treatment of free-of-tie tenants, then the Government and the Pubs Code Adjudicator will have allowed the Pubs Code to be not only flouted but positively defiled in broad daylight”.

ENDS 

Notes to editors

  1. The six regulated pub companies covered by the Pubs Code are The pub companies covered by the Code are Admiral Taverns, EI Group (owned by Stonegate), Greene King, Marston’s, Punch Pubs, Star Pubs & Bars.
  2. Originally the Government, when first proposing the Pubs Code, had intended for it to apply to all tenants of pub companies with 500 or more pubs, but due to corporate lobbying, this was changed so that the Pubs Code would only apply to tied tenants of pub companies with 500 or more tied pubs, which meant tenants exercising their right to go free-of-tie would not be covered. See page 27 of the Government response to the consultation published in June 2014. Greg Mulholland, the Fair Deal for Your Local campaign and then the British Pub Confederation argued strongly for all tenants of the large pubcos to be covered by the Code (and have the right to an independent rent assessment and a genuine Market Rent Only option; that is the right to be free-of-tie and pay only an independently assessed rent to the pub-owning company). The Government alas listened to the pubcos and hence allowed discrimination against free-of-tie tenants of the regulated companies.
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