PCA is ‘rabbit in the headlights’ over MRO, say operators

The letter, signed by 12 heavyweight operators, said the entire process was failing tenants and warned that delays on the part of the PCA were costing the parties involved large amounts in professional services fees.

It criticised the PCA for failing to regulate and adjudicate the MRO process in a fair and expeditious manner, adding that the MRO had been “made complicated by opaque, unintelligible regulations”.

“Neither the code nor the PCA have delivered so far and, after a year, we are not aware of a single case that has successfully navigated the PCA to arrive at an adjudication,” the signatories said.

The letter acknowledged the “natural commercial reaction” to the legislation from all parties, with pub-owning businesses duty bound to protect value for shareholders, and operators wishing to make their businesses more sustainable by gaining a fairer share of the ‘pub profit cake’.

However, it said the PCA has still not clarified its stance on “preliminary issues”, which are related to stocking policies, unreasonable clauses, alternatives to the MRO process within the confines of property law and other matters, that “require decisions so that we can all move forward”.

The letter said: “Some of these are basic issues that could be clarified by the PCA in an adjudicating capacity. Yet despite constant chasing and requests, there is no clarity, direction or urgency from PCA. Some of us lodged these issues with PCA in late summer 2016 and we are no nearer clarification.

“More worryingly, we are incurring substantial fees in the process of getting nowhere. We estimate informally that between three operators, we have collectively incurred professional fees to date of almost £50,000 and to complete the process may require as much again.”

Calling the situation “beyond ridiculous”, the signatories stated that, as it stands, the MRO process and the PCA’s adjudication of it “is a major deterrent to anyone entering the process”.

The signatories said: “We may simply be pushed out of the process because our pockets are not as deep as the other side.”

It rejected the view that a lack of MRO cases filed with the PCA represents a lack of desire on the part of the tenants, adding “the reality is that they are financially bullied out of the process whether by accident or design”.

If the average MRO review cycle is five years and one year has passed, it could mean that as many as 20% of tenants could have been “scared out of the process” and accepted tied rents that are less beneficial to them and hugely beneficial to the pub-owning businesses, the letter said.

“The inertia needs to end. The PCA is looking like a “rabbit in the headlights” and we have implored them to act,” the signatories said, adding that several of them had written to the PCA on numerous occasions since the start of 2017 but nothing has changed.

“Tenants and the pub-owning businesses both need action, direction, and decisions from PCA. Give us the rules and we will all play by those rules rather than wiping out value in legal and professional fees. Otherwise, this process will collapse at severe cost and embarrassment to the industry in general,” it said.

The PCA and the Department for Communities and Local Government were contacted for comment but had not responded by the time this article was published.

Commenting on the letter, Brigid Simmonds, chief executive of the British Beer & Pub Association, said: "We have always agreed that there was a need for clarity and guidance. However, the legislation is indeed complex; a new, statutory regime is inevitably going to lack the flexibility of the self-regulation systems that we and others in the trade have established in recent years. We have been working constructively with the adjudicator, and I am confident these issues are being considered very seriously and will be addressed."

Kate Nicholls, chief executive of the Association of Licenced Multiple Retailers, said: "There is no doubt that many small operators are confused and uncertain about the code processes and procedures. More could be done to help them navigate the process and understand what they can and should expect of it.

"The fact that has taken so long for the first cases to be fully heard - almost a year after implementation - is a clear and telling indication of the complexities of the issues. Something that has been exacerbated by a lack of clear guidance by the PCA. It is frustrating for smaller operators that the legal points weren't clarified at an earlier point in implementation."