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tenancy & leasing

Updated code is step in the right direction

Would-be tenants are better informed before taking the plunge, BII chief executive Neil Robertson tells Scott Wright

NYONE thinking of leasing a pub for the first time will probably be able to access more information about the deals on offer and the risks involved than at any time before. A hard-hitting report into the lease model and beer tie by a House of Commons committee last year has forced the pubcos to adopt a strict code of practice.


Drawn up by the British Beer and Pub Association (BBPA), and accredited by the British Institute of Innkeeping (BII), it’s designed to remove the mystery from leases and make them fairer and more transparent. And according to BII boss Neil Robertson, the mandatory code has “reduced the level of mistrust” tenants previously felt towards their landlords. “There’s definitely been a culture change within [pub] companies,” he told SLTN.

“No one is saying that things are perfect, but practices have improved, particularly for those coming new to the trade. “They’re getting better advice and support, and, the thing I’m particularly excited about, pre-entry awareness training, or PEAT. “It’s now mandatory for new tenants, and outlines the financial risks of taking on a lease or tenancy. It’s the course that can save you £20,000 – that’s how I like to see it – the difference between understanding and not understanding what you’re doing.”

As well as better informing would- be tenants, Robertson said progress has been made on the issue of rent disputes, where again the BII is playing a central role.

In light of the Business, Innovation and Skills committee’s report, the BII devised a rent review scheme to save unhappy leaseholders going to the expense of arbitration.

Robertson said the Pubs Independent Rent Review Scheme (PIRRS), which allows the tenant to choose the surveyor (from an approved panel) to independently assess the rental, has already had a big impact. “[The review] process used to be very expensive, and also open-ended,” he said. “We’re not saying tenants were routinely threatened by this, but if you didn’t like the rent [before] you had

20 - SLTN - February 17, 2011

to undertake a semi-legal course of action, which could cost you anything up to £20,000 if you lost. “Tenants don’t have the resources to take that risk, so they ended up having to accept settlements they weren’t comfortable with. “There’s still a cost to it, but the costs are much less.”

Not that many lessees have had cause to use the scheme so far. Robertson said the arrival of the PIRRS has seen tenants and landlords increasingly reach agreement before the review process is instigated.

The committee will want to see competition for good operators – that’s the sign of a competitive market.

“If we have 100 serious enquiries, only five or so go through the process,” he explained.

“It saves both sides money, because it helps encourage landlord and tenant to have another go at agreeing before it goes to process, because the tenant is more likely to have a go at the process as it’s cheaper. “It’s only the most extreme cases that go to the panel now.”

The BII is also aiming to help pubcos and landlords resolve other disputes through a mediation service it’s currently piloting. In contrast to PIRRS, this does not involve an attempt to arrive at a “determined outcome”, but to “try and encourage people to talk to each other face to face”. “Sometimes those differences don’t seem as bad face to face as they do on paper,” Robertson said. But while the BII chief reckons positive progress is being made on some fronts, there are other aspects of the leasing model that remain controversial.

The BIS committee is due to re-open its enquiry in June, when big questions like the beer tie and whether pubcos can continue to justify it will be on the agenda.

Neil Robertson: more rent disputes are being settled before the review process begins.

Robertson said the committee could yet advise the government to refer the pubcos to the Competition Commission, or compel the industry to make further changes to its practices. It seems only time will tell whether the pubcos have gone far enough to address the BIS committee’s concerns. “On the question of has a lot been happening? The answer is yes,” Robertson said.

“Has enough been happening? That’s for the committee to decide. “The area where I think the industry will be able to point strongly to is the code of practice, which has reduced the capacity for fooling or mistreating – wittingly or unwittingly – of tenants. “And there is more protection for people entering the trade. “[But] have they [pubcos] improved the financial lot of many tenants? “Not necessarily, but that wasn’t

really their job. “The third and arguably more tricky

area is whether the industry is doing enough to try and compete for good operators. The two examples I’d point to there are a new lease agreement from Marston’s [Midlands-based brewer and pub firm], which is halfway between a managed house and a tenancy. That reduces the risk for those coming into the trade who might be less experienced.

“And Punch has a scheme where if you hit certain targets, you get incentivised with bonuses and certain discounts. Those are the kind of things the industry will point to ... and there may be other innovations in agreement over the next three or four months.” He added: “What the committee is

interested in are fair markets. “They will want to see competition for tenants, for good operators, because that’s the sign of a good market.” One thing that is clear to Robertson

There’s been a culture change. Practices have improved, particularly for those coming into the industry.

is that it’s become more difficult for pubcos to let premises since the enquiry began, chiefly because it’s clearer to prospective tenants whether a pub is viable or not. It’s a trend he welcomes. “It’s actually a good thing,” he said, “because people were being put into pubs without adequate preparation, in our view, and that was contributing to failure rates.”

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