Decision

Award summary – June 2017 - 1

Published 17 December 2020

Applies to England and Wales

Award Issued: 2017

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.

In this case the arbitrator found that a pub-owning business (“POB”) had not provided a rent assessment proposal (“RAP”) when required by regulation 19(1) of the Pubs Code etc Regulations 2016 (“Pubs Code”), and ordered the POB to provide a RAP to the tied pub tenant (“TPT”).

1. Factual Background

A representative acting on behalf of the TPT had written to the POB requesting a RAP on the grounds that no rent review had been concluded within the last five years.

Regulation 19(1) of the Pubs Code provides that a POB must conduct a rent assessment, and therefore provide a RAP to the TPT, in connection with a rent review required under the contractual terms of the tenancy or if the TPT requests one when the right to do so arises under the Pubs Code. Regulation 19(2) makes clear that such a request can be made if an assessment ‘has not ended within the period of 5 years ending with the date of the request’. Regulation 66 provides that within the first five years after the Pubs Code came into force, a TPT can request a rent assessment if no such assessment and no rent review has been concluded within the past five years. For the purposes of regulation 66, a rent review is concluded when the rent is agreed in writing between the POB and TPT.

Four days after the TPT’s request for a RAP, an outstanding contractual rent review (where the review date had fallen before the Pubs Code came into force) was concluded following receipt of a determination of the rent by an independent expert. The POB argued that the TPT’s request for a RAP was invalid because:

• either a Deed of Variation entered into by the parties six months prior to the RAP request, or annual RPI increases under the lease, had already ended the rent review process thereby meaning that a rent review had taken place in the past five years, or
• if not, the conclusion of the contractual rent review made the TPT’s request for a RAP invalid, and/or
• the TPT had not made its RAP request correctly because it had been made by a representative acting for the TPT rather than the TPT themselves and the request contained an error when referring to numbering of a regulation of the Pubs Code.

2. Arbitrator’s Findings

2.1 Findings on the right to request a RAP

Contractual RPI increases

The arbitrator rejected the POB’s argument that the exclusion of annual reviews from the definition of rent reviews did not apply to requests for rent reviews under Regulation 19(1)(b), stating that such a position would be ‘nonsensical’ and ‘inconsistent with the purpose of the Pubs Code as a whole’. The arbitrator found that RPI indexation was excluded from the definition of a rent review and that the rent review process had not been concluded by way of the annual RPI increases.

Provisions of the Deed of Variation

Regulation 66 entitles a TPT to request a RAP within the first five years of the Pubs Code where no rent review has concluded within the previous five years, and for these purposes a rent review is concluded when the rent is agreed in writing between the parties. Six months prior to the RAP request the POB and TPT had entered into a Deed of Variation which said that the outstanding contractual rent review would be determined by the Pubs Independent Rent Review Scheme (PIRRS) and that this would be binding on the parties with no further agreement required. The POB argued that this meant the provisions of the Deed of Variation to submit to the PIRRS process was the “agreement in writing” to conclude the rent review in accordance with regulation 66.

The arbitrator considered it clear that a rent review is concluded under the Pubs Code when the rent is agreed in writing between the POB and TPT, and when that actually occurs is matter of fact in each case. The arbitrator determined that in this case the provisions in the earlier Deed of Variation did not remove the requirement to agree the new level of rent in writing. A publication of the determination of rent was not sufficient in the absence of a written agreement. In any event, the rent had been determined four days after the TPT’s representative had submitted the RAP request. Therefore, it was not determined at the time the request was made. Submission to PIRRS was in itself not sufficient to conclude the rent review process in writing, particularly in the event that no actual rental figure was known. If this was not the position, the procedure for requesting further information during the PIRRS process would be redundant and no account would be taken of unforeseen or ‘force majeure’ events occurring during the process. The arbitrator also noted that the parties could not agree in a separate deed to exclude the statutory provisions in the Pub Code when these had only come into force months after the conclusion of the deed.

Ongoing rent review

The arbitrator considered that a rent assessment could be requested while a rent review was ongoing and that the setting of the rent by the PIRRS process in this case did not mean that the TPT was not entitled to receive the requested RAP. The relevant factors to consider were the position at the time the RAP request was made and whether a rent review had been concluded in the five years ending on the date the RAP request was made. A subsequent rent determination did not alter the tenant’s right to receive a RAP.

2.2 Findings on technical points in respect of the request

The arbitrator dismissed the POB’s argument that the request was required to be served personally by the TPT itself and not by a representative acting on its behalf. It did not matter that no express reference was made in Regulation 19 for a representative to act. There was also no requirement in the Pubs Code for the TPT to personally sign the request.

The conduct of the POB had also prevented it from making the argument that the RAP had been invalidly served: the POB had engaged substantively with the notice, sent all correspondence to both the TPT and its representative, not sought to ratify the representative’s authority and, in the absence of such confirmation, had continued to correspond with the representative.

The arbitrator ruled that the TPT’s request had been validly served but noted for future reference that it would have been better practice for the representative to have stated in the request the authority upon which they were acting on behalf of the tenant.

In relation to incorrect references to the Pubs Code in the RAP request, the arbitrator considered that the key question was how a reasonable person would have understood the request. In this case, details of the parties’ correspondence demonstrated that the meaning of the notice would have been clear to a reader with reasonable knowledge of the Pubs Code and, in any event, the POB had made no request for further clarification.