Decision

Award Summary – June 2024 – 2

Published 28 August 2024

Applies to England and Wales

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

The tied-pub tenant (the TPT) referred a dispute to Arbitration in relation to alleged breaches of the Pubs Code Etc. Regulations 2016 (the Pubs Code) which took place during the course of a tied lease entered into between the parties in 2023 (the Tied Lease) that the TPT entered into with the Pub Owning Business (the POB). The Arbitrator found in favour of the POB on all counts having found the TPT’s claims to be without merit.  

2. Factual background

In May 2023, the TPT made several complaints against the POB including a breach of fair and lawful dealing, repairs and the wider duty to repair at the outset of the agreement, and that the business plan accepted by the POB was in breach of the Pubs Code.  

The TPT made a formal referral to the Pubs Code Adjudicator (the PCA) in June 2023. Thereafter, a statutory arbitration commenced under the Pubs Code and the Small Business Enterprise and Employment Act 2015 (the SBEEA).  

3. Issues

The TPT raised several issues in the arbitration: 

1. Whether the delay in dealing with the complaints raised by the TPT constitutes deliberate and tactical delays and was in breach of regulation 41(1)(c) of the Pubs Code, that is, that a POB must ensure that business development managers (BDM) deal with TPTs fairly and lawfully. 

2. Whether the TPT was obstructed in properly inspecting the premises prior to the start of the Tied Lease in contravention of regulation 41(1)(c). 

3. Whether the TPT was discouraged from meeting the outgoing tenant prior to the start of the Tied Lease in contravention of regulation 41(1)(c). 

4. Whether the TPT was not given a draft lease until shortly before taking possession and therefore did not have sufficient notice of the termination provisions in contravention of 41(1)(c). 

5. Whether the Business Development Manager (BDM) breached Reg 41(4)(a)(iii) of the Pubs Code by allegedly failing to provide the TPT with notes following meetings.  

6. Whether the POB breached Regs 13(5) and (6) of the Pubs Code by failing to take into account the Schedule of Condition and updating the Schedule of Conditions following works.  

7. Whether the POB had failed to provide the TPT with a fixtures and fittings report. 

8. Whether the POB had failed to credit the TPT for a repair to the bar glasswasher. 

4. Arbitrator’s Findings

After considering the parties’ pleadings, the Arbitrator found as follows: 

Issue 1 - Whether the delay in dealing with the complaints raised by the TPT constituted deliberate and tactical delays and a contravention of the principle of fair and lawful dealing by the POB pursuant to s42(3)(a) of SBEEA. 

When considering the extent of the scope of the principle of fair and lawful dealing, the Arbitrator held that it was useful to consider the wording of the parallel provision found at Part 2 of The Groceries Supply Code of Practice found at Schedule 1 to The Groceries (Supply Chain Practices) Market Investigation Order 2009, which provides that: “Fair and lawful dealing will be understood as requiring the Retailer to conduct its trading relationships with Suppliers in good faith, without distinction between formal or informal arrangements, without duress and in recognition of the Suppliers’ need for certainty as regards the risks and costs of trading, particularly in relation to production, delivery and payment issues.” 

Within this context, the Arbitrator held that whilst there had been some delays in carrying out an extensive programme of works at the premises, that the POB’s staff appeared to have kept the TPT updated, and consistently and promptly responded to all queries raised by the TPT. The Arbitrator found no evidence that the POB had deliberately or tactically delayed the works, and therefore held that the POB had not breached the principle of fair and lawful dealing.  

Issue 2 - Whether the TPT was obstructed in properly inspecting the premises before the commencement of the Tied Lease in contravention of the principle of fair and lawful dealing 

The Arbitrator held that on the facts the TPT had in fact visited the premises on several occasions prior to the commencement of the Tied Lease, and that there was no evidence that the POB had placed any restrictions on which parts of the premises the TPT could access. In addition, the Arbitrator noted that the POB had advised the TPT on several occasions to arrange a professional inspection of the premises. As such, the Arbitrator found no breach of the Code arising out of this allegation.  

Issue 3 – Whether the TPT was discouraged from meeting the outgoing tenant in contravention of the principle of fair and lawful dealing 

After considering all evidence, including evidence of several pieces of email correspondence in which the POB had suggested that the TPT speak to the outgoing tenant about various issues, and evidence that the TPT had visited the premises on several occasions when they could have interacted with the outgoing tenant, the Arbitrator found no breach of the Pubs Code arising out of this allegation.  

Issue 4 - Whether the TPT was not given a draft lease until shortly before taking possession. 

The TPT claimed that they were not provided a full draft of the lease until shortly before taking possession of the premises, and that they were not aware that the lease could be terminated on 9 months’ notice after 27 months rather than being offered on an uninterruptable 5-year term. However, the Arbitrator held that the POB had in fact sent a link to the TPT which summarised the terms of the draft lease and stated that the POB would “be able to end the Tenancy on 9 months’ notice for any reason from the 27th month of the Term”. The Arbitrator also held that, on the evidence, a draft lease had been made available to the TPT on several occasions prior to the commencement of the Tied Lease. The Arbitrator found no breach of the Pubs Code arising out of this allegation.  

Issue 5 - Whether the BDM breached reg 41(4)(a)(iii) of the Pubs Code by allegedly failing to provide the TPT with notes following meetings.  

Under Reg 41(4)(a)(iii) of the Pubs Code a BDM must make appropriate notes of any discussions with TPT in connection with repairs to the premises. The Arbitrator rejected the TPT’s complaint that the BDM had in breach of the Pubs Code failed to provide meeting notes of all such meetings. 

Issue 6 – Whether the POB breached Regs 13(5) and (6) of the Pubs Code by not rectifying the building defects.  

Reg 13(5) of the Pubs Code provides, in summary, that before entering into a new agreement or renewing an existing protected tenancy, a POB must take into account the Schedule of Condition (defined as being the provision in a tenancy or licence which sets out the prior condition of the premises) when assessing any maintenance or repairs required to the premises, or before any obligations or liabilities are agreed between the parties about the condition of the premises. Reg 13(6) of the Pubs Code then provides, in summary, and as far as is relevant, that the POB must update the Schedule of Condition as and when required by the tenancy/licence, and/or following any significant alterations to the premises.  

The TPT, firstly, claimed that he had not seen the Schedule of Condition before entering into the Tied Lease, but having assessed the evidence, the Arbitrator held that the TPT had in fact been provided with a copy of the Schedule of Condition by the POB, and that the POB had also advised the TPT to arrange their own inspection of the premises as well.  

The TPT, secondly, claimed that the POB had failed to update the Schedule of Condition after works were undertaken to the fire doors at the premises, in breach of Reg 13(6) of the Pubs Code. The Arbitrator held that fire door works did not constitute significant alterations which would trigger the need for an update of the Schedule of Condition. 

Thirdly, the TPT also attempted to raise various repairs and maintenance issues when had arisen after entering into the Tied Lease with the POB as part of the Arbitration. However, the Arbitrator held that the relevant provisions of Reg 13 of the Pubs Code only related to pre-lease issues, and the Arbitrator was not aware of anything in the Pubs Code which was designed to deal with post-lease building defects. As such, the Arbitrator held that he did not have jurisdiction to consider any such complaints.  

Finally, the TPT also latterly attempted to raise more recent issues with the content and suitability of the Schedule of Condition. However, as these issues had not been raised when the TPT made their referral to Arbitration, the Arbitrator held that the TPT was now out of time to raise such issues during the course of this Arbitration.  

Issue 7 - Whether the POB had failed to provide the TPT with a fixtures and fittings report.  

The TPT claimed that the POB had failed to provide them with a fixtures and fittings report with a full breakdown of costs upon the commencement of the Tied Lease. However, the Arbitrator held on the evidence that a report had in fact been provided to the TPT at the commencement of the Tied Lease, which valued the fixtures and fittings as a lump sum with no breakdown for individual items. The POB’s evidence was that it was their standard practice to provide a lump sum valuation for all fixtures and fittings and to only give tenants the option to buy the fixtures and fittings outright, buy them over 3 years, or rent them. As such, the Arbitrator held that a price breakdown was not reasonably necessary, and as such he did not find any breach of the Pubs Code in relation to this issue.  

Issue 8 - Whether the POB had failed to credit the TPT for a repair the TPT paid for to the bar glasswasher. 

The TPT’s final claim was that they had reached an agreement with the POB that the TPT would be repaid for works they had carried out to the glasswasher machine at the premises. However, the TPT was not able to provide any particulars of the alleged agreement, and by contrast the POB claimed that whilst they had discussed the bar glasswasher with the TPT when the fixture and fittings schedule was prepared, the parties had agreed to exclude this item from the valuation. On that basis, the Arbitrator held that the bar glasswasher was not an item which the TPT was asked to buy or rent from the POB when taking the Tied Lease, and that therefore the POB had not breached the Pubs Code in this regard.   

5. Decision

The Arbitrator found in favour of the POB in connection with all issues in this dispute. In particular, the Arbitrator found that none of the alleged breaches of the Pubs Code within the scope of the Referral had been proved, and that the TPT was not entitled to any of the relief sought.