Statutory Pubs Code and Pubs Code Adjudicator

Laurence Robertson Excerpts

Thursday 26th January 2017 Commons Chamber

[Mr Laurence Robertson (Tewkesbury) (Con)]

I congratulate the hon. Member for Leeds North West (Greg Mulholland) on his energy in securing this debate. I thank him for the constant help he certainly gives me, as he perhaps gives other hon. Members, when I encounter certain issues or problems with tenants and leaseholders of pubcos in my constituency

I declare a non-registered interest in that my sister is the tenant of a pubco. Some of my remarks have been generated by my experience in that respect, but not exclusively so, because I have a large number of pubs in my constituency. One or two of them are now closed and are being changed into housing or car parking. The concern about pub closures and about the lack of profitability of many pubs is my motivation for taking part in this debate.

Let me say from the outset that I am not instinctively opposed to the pubco model as such. It has a number of advantages. It allows people with very little capital to go into the pub trade in the first place. In ordinary circumstances, the pubco takes responsibility for the building and exterior work, which can be very expensive, as we all know. When the system works well, the pubco can provide some professional back-up. The model provides access to a wide range of beers. It does not insist that wines and spirits are included in the tie, although I may come back to that point. It provides an opportunity for the landlord to run a restaurant on the premises, and it provides accommodation where the landlord can live. There are some good aspects of the pubco model, in theory at least, so I am not out to attack pubcos as such.

In practice, however, there have been a lot of problems. For example, rents have been very unfairly assessed in many cases. They are based not only on the profit that the pub makes from the tied beer, but on the anticipated profit that it might get, in certain circumstances, from food. The pubco benefits from the sale of its own beer, but when the business does better, the rent is quite often increased, even though the pubco has benefited from the extra beer sales, which seems quite unfair. Pubcos sometimes insist that landlords go on educational courses—it really stretches the imagination to believe that someone who has been in the trade for a long time actually needs to go on such courses—and the pubco benefits from the cost of the courses.

On many occasions, pubcos insist that landlords use the pubco’s own insurance policies, which are enormously more expensive than those that can be found elsewhere in the market. They will not allow another product to be used unless the wording of the alternative insurance policy is identical, which seems very unfair. This costs landlords an awful lot of money. I have even known cases in which the tenant or leaseholder has been told that he must take out an insurance policy that covers the building, even though they are not responsible for the building. Tenants are charged for cover for fixtures and fittings that is not necessary in many cases, and in which the assessed value of the fixtures and fittings is far greater than their actual value, so the landlord again loses out in such cases.

So there are all those problems and the rate of pub closures persuaded Parliament to change the law, but as the hon. Member for Leeds North West accurately and comprehensively showed, the legislation is not working as it should. For example, confusion surrounds who is entitled to the free-of-tie option. Some landlords feel that only leaseholders or protected tenants are eligible. That needs clarifying and I hope that the Minister can do that for us today.

Some tenants are not protected under the clause in the Landlord and Tenant Acts that provides that a tenancy or a lease has to be renewed unless the organisation that owns the building wants to take it back for its own use. Many tenants or leaseholders have that clause struck out in the agreement that they reach. That is all well and good until they get to the point when they need a new tenancy or a new lease and they ask the pubco for a free-of-tie option. Because they are not protected, the pubco can simply refuse to renew the tenancy. Is that fair? I suggest that it certainly is not. Again, I would appreciate some clarification of the exact position. It is an important matter. In answer to a recent written question, I was told that around 11,500 tenants are protected by the code, but there are many more pubs than that in the UK. It is not always easy to get a new tenancy if tenants ask for a free-of-tie arrangement.

The pubcos also often use outside agencies to negotiate the new tenancies, including chartered surveyors, who probably do not understand the local trade, if they understand the trade at all. I have also received complaints that pubcos’ business development managers do not properly discuss the available options with tenants. Tenants are told that even if the pubco is prepared to offer them a new tenancy, the rent might go up considerably. Of course, that is when the adjudicator is supposed to be brought in. Two points arise from that. First, that system makes for bad relations between the tenant and the pubco, and that is not a good situation to be in. Secondly, it poses the question of whether the adjudicator effectively and efficiently engages with pubs and landlords who take cases to them. My experience so far is that that is not happening.

Another tenant told me that the start of his new tenancy—I emphasise “new tenancy”; he has already had one—means effectively having to apply for his own pub as if he is a new tenant, filling in CVs and application forms, having to submit a new business plan and going on training courses, which I mentioned earlier, that he had to attend when he entered the trade. He has been running a pub or a similar establishment for nearly 20 years, so where is the sense and fairness in that?

All that causes a great deal of stress and problems. It is worth pointing out that tenants could fear—and end up—being not only out of work and out of business, but out of a home, because the pub is their home. It is unlikely that, in the course of being a pubco tenant, they have been able to build up sufficient capital to buy a new home or a new business. They are in a precarious position, and the House of Commons did not intend that when it passed the legislation.

The value of pubs to their communities, particularly in rural areas, is enormous. They are often meeting places, and places where people can dine together, clubs and societies can be formed and friendships can be made. Pubs also raise a lot of money for charities—that is often forgotten. Pubs are valuable community assets. I ask the Minister, as far she can today or following the debate, to try to answer some of the questions and consider whether anything else can be done, as the hon. Member for Leeds North West said, to give effect to the law and to what the House of Commons intended when it introduced the changes.