As the Government conducts a review into the Pubs Code and the role of the Pubs Code Adjudicator, publican Dave Mountford considers how the hopes of tied tenants have yet to be met.
I was the landlord of the Rising Sun, a Punch Taverns tied pub from 2007 to 2012, which despite becoming an incredibly successful business turning over in excess of £500k per year, resulted in my bankruptcy in 2013. In 2012, one of my locals bought an ex-Punch pub in the neighbouring village of Cromford, which had been shut for three months. Seven years later it is a thriving and profitable free-of-tie pub, providing us with a living and the community a successful asset.
A Key Principle
One of the key principles underpinning the Pubs Code was that “The Tied Tenant should be no worse off than the Free-of-Tie Tenant” along with the principle of “fair and lawful dealing”. To all those courageous campaigners who pressed the Government for some oversight of the tied tenant relationship, this was to be the killer-blow to the deeply exploitative business model that
the tie had become. Application of these key principles, would, it was hoped, finally expose the obvious difference between being tied and being free-of-tie. This in turn ought to have shone a spotlight on the significant levels of profit Pubcos and brewers generally make from the tied tenant relationship.
The Myth of Scorfa
The principle that the “tied tenant shall be no worse off than the free-of-tie”, meant that the £44,928.00 that I had lost by being tied should have been compensated for by something that Punch would offer me in return, known as a “Special Commercialor Financial Advantage” (SCORFA). SCORFA first appeared in EU Regulation 1984/83 and is the block exemption which applied to brewer and pub company ties
prior to May 2000. It is this which allows the tie to exist in EU Law.
The problem is the SCORFA has never really existed, despite the best efforts of the British Beer and Pub Association (BBPA) to suggest otherwise.The BBPA is the industry body which represents some 20,000 of the country’s pubs. They include international companies, family brewers, managed locals and the nation’s largest tenanted pub estates.
Following my very celebrated and very public bust-up with Punch Taverns in 2008, Giles Thorley their then Managing Director, wrote to me challenging my point regarding the lack of support and referred to “free wine glasses and business development managers who visited me at the weekends”. Not bad for £44,928 per year!!! As the Business & Industry Select Committee noted in 2004, in the event of no SCORFA, or SCORFA of a token value, then the only way that the “no worse off principle can be achieved, is through a reduced rent”.
Yet this has not happened.
On the face of it , this would seem to be perfectly reasonable — the publican pays more for his beer but has a cheaper rent and the support of a large business partner which wants the publican’s business to succeed.
So, remembering that the average Pubco was making perhaps 5, 6, 7 or 8 times that of the publican as a result of the tie, how did all those RICS surveyors help those poor tenants tackle the issue of SCORFA? Simple … They ignored it.
Poachers & Gamekeepers?
The fact that the average tenant had absolutely no idea how rents were assessed was exploited firstly by the Pubco and then seemingly overlooked by any “independent” surveyor who may have been engaged to back the Pubco up. And, of course, Paul Newby was one of those surveyors.
The select group of “Independent Assessors” would seem to be far from independent, all having worked for Pubcos and brewers to a greater or lesser degree. Indeed, it seems highly unlikely that any of them have ever applied the “no-worse-off” principle. Because if the Independent Assessors had been following the “no-worse-off” principle, then rents ought to have fallen like a stone. This lack of objective independence seems oddly irrelevant to the PCA, despite it being flagged up by campaigners such as myself.
The PCA and the “No-Worse-Off” Principle
“tied Pub tenants should be no worse off than if they were not subject to any tie” (3)
However, in March 2017, Paul Newby was live on a radio programme for Radio 4’s “You and Yours” when he said: “I’m here to return to the fundamental principles to ensure that fair and lawful dealing and that a tenant electing to go into the free of tie channel, the MRO option, should be no worse off than a tied tenant” (4) This was of course completely wrong. The principle requires that tied tenants should be no worse off than if they were not subject to any tie. Mr Newby’s unfamiliarity with the no-worse-off principle was confirmed in March 2018, when a Press Release was issued in which the principle had somehow morphed into: