The British Beer & Pub Association has today announced extensive reforms to the Pub Industry Framework Code of Practice and resolution procedures. The reforms reflect the industry’s own commitment to review and improve its codes and procedures and are in response to September’s report by the Business, Innovation & Skills Select Committee.
After discussions between the Government and industry partners, the industry has agreed binding principles that apply to companies operating tied tenancies and leases which enshrine the Industry Framework Code of Practice in law and provide low cost mediation and conciliation services to tied pub operators.
Key new commitments made by the BBPA and its pub company members are as follows:
• A more robust accreditation process for company codes of practice, which would require reaccreditation by the BII every three years.
• A new arbitration service, the Pub Independent Conciliation and Arbitration Service (PICAS) for disputes other than rent, with the ability to provide compensation, to which all tenants and lessees could appeal. Its establishment would be funded by BBPA members, and it would complement the existing low-cost PIRRS arbitration scheme which relates only to rents.
• A legally binding status for the industry framework code, which will be included in future primary lease and tenancy agreements by ‘reference’, and will be offered as a supplementary contract for incorporation into existing agreements.
• A strengthened industry framework code, following a review, undertaken with the BII and FLVA and involving other stakeholders.
• An enhanced provision of independent expert business advice and setting the highest standards of training.
These additional measures renew the sector’s commitment to meaningful reform and are the result of constructive dialogue between the BPPA, the Department of Business, Innovation & Skills, industry partners and campaign groups.
BBPA Chief Executive Brigid Simmonds comments:
“Small businesses are under immense pressure. There will always be a place for tied pubs as a low cost means of entry for self-employed pub entrepreneurs and we recognise that would-be and existing licensees need support and a clear understanding of what it takes to run a pub.
“Significant progress has been achieved by member companies operating tied tenancies and leases. In its first year, the Pub Industry Framework Code of Practice has improved the transparency and openness of the commercial relationship between pub companies and lessees. Independent research has demonstrated the new code’s rapid acceptance within the industry and is increasingly understood by licensees.
“Today’s announcement is a further sign of our commitment to work with our members and industry representatives to strengthen the self-regulatory framework and the health of the sector as a whole. We look forward to working with industry partners to improve the advice, financial assistance and security offered to new and existing publicans so they can continue to invest, grow and create jobs.”
Notes to editors:
New proposals put forward by the BBPA are as follows:
1. The BBPA will amend the Industry Framework Code (IFC) to clarify its legal status, making it clear that all new entrants and existing tenants and lessees can rely on the provisions of the IFC and that they can seek redress of non-compliance with the IFC either through the Pub Industry Conciliation & Arbitration Service (PICAS), PIRRS, or through the courts.
2. In line with legal advice, the IFC will be incorporated into all new agreements by way of a “Reference” in the primary lease/tenancy agreement. The same legal status will be conferred on existing agreements by way of a supplementary agreement.
3. In addition, the BBPA, in conjunction with BII and FLVA, its fellow signatories to the IFC, are undertaking an urgent review of the provisions of the IFC in collaboration with expert legal opinion to ensure that the IFC can be easily understood and that the Code is clear in its legal interpretation in the event of any legal action in respect of non-compliance.
4. The BBPA undertakes to complete the legal processes as soon as possible, compatible with due process and due diligence, with a view to implementation of this commitment by the end of 2011.
5. A conciliation service, the Pub Independent Conciliation & Advisory Service (PICAS) to be set up alongside the existing Rent Review Scheme (PIRRS), through a levy raised primarily from BBPA members. Tenants/lessees to be asked to pay a sum to initiate the process, £200 for example, with the pub company paying the balance of the adjudicator fee. Compensation will be available where it is deemed appropriate.
6. PICAS will be established by the end of the year and expects to have suitable professionals who are competent and willing to act as independent arbitrators/mediators to resolve disputes in place by the end of February 2012.
7. PICAS would have the ability to refer the results of the process to BIIBAS which informs the accreditation body in its audit of company codes. In circumstances where major breaches of the Code are identified, BIIBAS would have the ability to seek further resolution from the company as to its future behaviour with removal of accreditation being the ultimate sanction.
8. That the BII separates its advisory role from BIIBAS to a more general advice service to prospective and existing tenants/lessees. Administration costs to be met from the Corporate membership of the BII. Initial advice provided to the tenant/lessee for free and with fees thereafter from professional advisers vetted by the BII.
9. To introduce a three year re-accreditation process, based on an audit trail provided by the companies and evidence of ongoing management of code obligations assessed by the BIIBAS Benchmarking Committee.
10. Re-accreditation would be introduced from June 2013.
11. All current members of the BBPA and Greene King agree to submit their company codes for re-accreditation as above.
12. The BBPA is reviewing the Industry Framework Code with its current signatories, who are the BII and FLVA. We will consult with other associations to widen the ownership and acceptance of the Code and have already commenced this process. The new enhanced Framework Code could come into effect in January 2012.
13. A series of proposals to enhance the Framework Code which are defined and could be agreed quickly are included in this consultation, with a particular focus on FRI leases. This would bring about immediate improvements in areas such as the transparency of how rent is calculated, insurance, business development manager (BDM) training, dilapidations and pre-entry training. This is combined with a commitment to discuss further improvements with industry partners. Most would apply to leases under the FRI model, which are typically operated by larger companies. These should be agreed by the end of November 2011.
14. There are a range of further issues to be discussed and explored with partners which address some sensitive commercial issues. BBPA will use our best endeavours to agree these by the end of the year.
15. An annual compliance report is proposed for large companies with FRI leases, with BIIBAS invited to conduct spot checks in areas of greatest risk.
16. The BBPA Cost Benchmarking 2010 has been published on the BBPA website (from September 2011) and has been made freely available to all prospective tenants through the website. It will be updated every year. Companies have been advised that all prospective tenants be directed to this and ALMR benchmarking data in accordance with the Framework Code.
Robert Howe QC has made clear that both new agreements and existing agreements are enforceable:
New Agreements: “The IFC can therefore be validly incorporated into leases/tenancies by reference, and will then be enforceable under the lease/tenancy agreement.”
Existing Agreements: “Where a Pub Company offers to agree the terms of the IFC and a leaseholder/tenant signs, confirming that he accepts, then the agreement to comply with the IFC takes effect as a contract between the parties in the usual way.”
A full summary note on enforceability from Robert Howe QC follows below:
SUMMARY NOTE ON THE ENFORCEABILITY AND LEGAL STATUS OF THE
UK PUB INDUSTRY FRAMEWORK CODE OF PRACTICE
FOR TIED TENANTED AND LEASED PUBS
For the purposes of this analysis, it is necessary first to consider the position of
(a) New Leases/Tenancies, and then
(b) Existing Leases/Tenancies.
New Leases/Tenancies (L/T)
New agreements do not present a problem in principle:
• The IFC can be incorporated into the L/T agreement by way of ‘reference’
• It is possible that L/Ts may include a “disposition of an interest in land”, in which case they would need to satisfy s 2 of the Law of Property (Misc. Provisions Act), 1989.
• S 2(1) requires that such contracts “can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each”.
• But s 2(2) states that the terms may be incorporated in a document either by being set out in it “or by reference to some other document”.
• The IFC can therefore be validly incorporated into L/T’s by reference, and will then be enforceable under the L/T agreement.
• In order to ensure that there is a mechanism to enable the IFC to be updated without the need for individual variations of each L/T, the relevant clause should also refer to the ability to change/modify the IFC and the contractual mechanism by which it is to be achieved i.e. agreement and sign off by the relevant parties.
• Existing L/T do not make reference to the IFC. Incorporation of the IFC into existing L/T’s would therefore require individual variations of each and every L/T, which would be extremely onerous, inconvenient and expensive (for all parties).
• To avoid this, the easiest way to give the IFC contractual effect with existing L/Ts would be by way of a Supplementary Agreement
• Ideally, to be signed off by both parties. Where a PubCo offers to agree the terms of the IFC, and an L/T signs, confirming that he accepts, then that agreement to comply with the IFC takes effect as a contract between the parties in the usual way.
• However, even where the L/T does not sign immediately, the offer from the PubCo is a “Unilateral Offer” or ‘Standing Offer’, which can be taken up by the L/T at any time (Common Law – the ‘Carbolic Smoke Ball Company’).
• The adoption of the ‘Supplementary Agreement’ does not necessarily have to be signed by the T/L – if by his actions he is ‘deemed to accept’.
• A complaint/reference to PICAS on the basis of non-compliance with the Code would signify acceptance of the TIC by the Courts, because by invoking and relying on the Code, the L/T was indicating that he accepted the offer by PubCo to comply with it (You could not make a complaint by relying on something you did not accept).
• Similarly, if in Court proceedings an L/T chose to invoke and rely on the IFC, that would also constitute acceptance, giving the IFC contractual force.
• In short: The Company makes an ‘UNLIMITED STANDING OFFER’ to its L/Ts to comply with the IFC. This ‘Offer’ can be taken up at any time, so it is always open to the L/Ts to rely on the IFC if they wish to do so.
Robert Howe, QC
20th October 2011
Further information on the current framework code is available on the BBPA website here:
The British Beer & Pub Association is the UK’s leading organisation representing the brewing and pub sector. Its members account for 96 per cent of the beer brewed in the UK and around half of Britain’s 51,000 pubs.