Decision

Award Summary – September 2020 - 1

Published 29 September 2021

Applies to England and Wales

Award Issued: 2020

Publisher’s Note: The Pubs Code Adjudicator encourages openness and transparency in the operation of the Pubs Code etc. Regulations 2016. Publication of awards made in Pubs Code arbitrations, or summaries of those awards, enables the industry to better understand previous decisions and consider how the Pubs Code is being applied in individual cases. Neither the Pubs Code Adjudicator nor an arbitrator is bound to follow published awards in applying the law, but such awards can be used to support the industry’s consideration of the proper interpretation of the Pubs Code. Parties are encouraged to take independent professional advice about their situation.

The outcome of an arbitration is based on its own facts and the evidence produced in the case and is not binding in other cases where the landlord and tenant are not the same. The Pubs Code Adjudicator does expect a regulated pub-owning business to consider its understanding of the law in light of each award that makes a finding on the interpretation of the statutory framework and to adjust its behaviour towards tenants as appropriate. The publication of an arbitration award or an award summary does not mean the Pubs Code Adjudicator endorses the decision and it does not form legal advice about any issue.

This summary is provided to assist in understanding the arbitration decision. It does not form part of the decision or reasons for the decision.

1. Summary of the Findings

The arbitrator found that the tied pub tenant (“TPT”) had not given their Market Rent Only (“MRO”) notice to the pub owning business (“POB”) within the required 21-day period. Receipt of a section 25 notice under the Landlord and Tenant Act 1954 (“LTA 1954”) gives a TPT the right to seek the MRO option. The POB must receive the TPT’s MRO notice within 21-days of receiving the section 25 notice. The arbitrator accepted that the TPT in this case did not receive the section 25 notice until several months after it was served. But they decided the relevant date for receipt of the section 25 notice was the ‘deemed’ date of receipt and not when the TPT actually received it.

2. Factual Background

The POB served the TPT with a notice dated 16 August 2019 to end the tenancy in accordance with section 25 of the LTA 1954. The POB’s position was that it sent this notice by both recorded delivery and first-class post on 16 August 2019, although as far as it was aware, it had not been signed for. The TPT said they did not receive a copy of the section 25 notice until 12 November 2019. They then gave the POB their MRO notice on 19 November 2019.

On receipt of this notice, regulation 26(2)(a) of the Pubs Code gave the TPT the right to serve a notice requesting an MRO offer from the POB (an “MRO notice”).

The POB argued the section 25 notice was deemed to have been served on the TPT on 16 August 2019 for the purposes of the LTA 1954, and on 20 August 2019 for the purposes of the Pubs Code. The POB disputed the validity of the MRO notice, claiming it was not served within the 21-day period in accordance with regulation 23(2)(b) of the Pubs Code. It said the 21-day period started on 16 August 2019 or 20 August 2019 (depending on whether deemed service was calculated under the LTA 1954 or the Pubs Code) rather than 12 November 2019.

The TPT argued that the underlying principle of the Pubs Code is that TPTs should be “no worse off” than their free of tie counterparts. They added that if the POB’s interpretation of when the section 25 notice was served was correct, the TPT would be denied their right to consider an MRO option through no fault of their own. The TPT argued that this would be contrary to the “fair and lawful dealing” principle of the Pubs Code. The TPT also argued that even if the section 25 notice was deemed to be served by reference to the date it was posted, the provision of the document on 12 November 2019 amounted to a new MRO event to instigate a new 21-day window for the TPT to serve an MRO notice.

The POB argued with the TPT’s assertions and said that the TPT’s interpretation would render its section 25 notice invalid. The POB also argued that a statutory notice cannot be served or received multiple times.

3. Arbitrator’s Findings

3.1 Deemed service of section 25 notice under the LTA 1954

Section 66(4) of the LTA 1954 provides that section 23 of the Landlord and Tenant Act 1927 (which relates to the service of notices) applies to the LTA 1954.

The POB relied on the decision in CA Webber (Transport) Limited v Railtrack PLC [2003] EWCA 1167, in support of its position. In Webber, the Court of Appeal held that the effect of section 23 of the Landlord and Tenant Act 1927 was that where a landlord served a section 25 notice under the LTA 1954 by recorded delivery, it was deemed to have been served on the date the notice was put in the post and not the date of actual receipt.

3.2 Deemed service of section 25 notice under the Pubs Code

By contrast to the LTA 1954, regulation 8 of the Pubs Code says that if the first-class post method is used, service takes place the second day after posting.

Regulation 8 of the Pubs Code governs the time at which events occur. It applies where the Pubs Code refers to a ‘period of time’ between events and this period is calculated by reference to specified events occurring. One of these events is receiving notices. Regulation 26(2)(a) of the Pubs Code provides that, for the purpose of the MRO event, a protected LTA 54 tenancy is renewed on the day the TPT receives the section 25 notice. Where this renewal event occurs under regulation 26, a TPT may give an MRO notice (in accordance with regulation 23(1)(b)).

Regulation 23(2)(b) provides that the POB must receive the MRO notice within the period of 21 days beginning with the date the event in regulation 26 occurs (the event being the date the TPT received the section 25 notice). The arbitrator found that as regulation 23(2)(b) refers to a ‘period of time’, it follows that regulation 8 applies. For the purposes of the Pubs Code, the section 25 notice was therefore deemed to have been received by the TPT two days after it was posted.

The arbitrator observed that although deemed service under the Pubs Code is different from the date of deemed service pursuant to the LTA 1954, the section 25 notice would still be valid. This was because the POB’s notice was given not more than 12 nor less than 6 months before the date of the termination of the tenancy (in accordance with section 25(2) of the LTA 1954).

The arbitrator found that the section 25 notice had been deemed served in August 2019. Therefore, the 21-day time period for the TPT to serve an MRO notice had expired before the date the TPT was handed a copy of the section 25 notice on 12 November 2019. As such, the TPT’s MRO notice dated 19 November 2019 was out of time.

3.3 Code principle of fair and lawful dealing

The arbitrator had difficulty in accepting that, by applying the relevant provisions in the LTA 1954 and the Pubs Code, the POB had offended the principle of fair and lawful dealing. The arbitrator found that the relevant provisions in the Pubs Code and the LTA 1954 are in place to enable the calculation of periods of time and therefore to provide certainty. Although the decision in Weber, which the POB relied on, pre-dated the Pubs Code, the Pubs Code nevertheless includes deemed service provisions which assist with calculating the time for receipt and service. The arbitrator did not consider that, as a matter of law, the deemed service provisions could be disapplied in this case.