Whether a tied operator will be liable for repairs will depend on the terms of their agreement. Typically, a lessee will have full insuring and repairing liability. For a tenant, usually with a three to five-year agreement, liability for repairs and maintenance will be shared with the pub company (which will likely be responsible for the structure of the building).
A franchisee will not usually be liable for repair. All these operators are ‘tenants’ under the pubs code and have code rights relating to the premises, repairs and dilapidations. There are too many rights to explain here, but I have published this factsheet setting out what tied pub tenants need to know about them.
Right from the start
Trade bodies BII, BBPA and UKH have published a best practice guide on repairs and dilapidations. Tenants should also know they have legal rights under the code.
The pubs code requires the pub company to set out in pre-contract information what its repairing and maintenance duties are, as well as those of the tenant. It must also explain its procedures for carrying out any repairs it is responsible for and how the tenant can report these and raise any complaints or concerns.
Importantly, the pub company must also provide a schedule of condition for the premises to record the state of repair and make it clear in what state of repair the pub must be at the end of the agreement.
The pub company has a pubs code duty to point out to the negotiating tenant any specific problems at the premises. Often, before entering into an agreement for a pub, certain works of maintenance, repair or improvement may need to be carried out. Where a pub company is aware of any which must be, it has to provide a list of the works and explain whose obligation they are. It must also be clear what works must be completed before the agreement is in force and what can be done afterwards and by when.
Once the agreement is in place, repairs - whether the tenant’s responsibility or those of the pub company – should be one of the matters regularly discussed with the Business Development Manager (BDM). The pubs code requires the BDM to give the tenant notes of those discussions within 14 days. The tenant then has the right to notify the BDM within 7 days if the record is not agreed. A clear and correct note can greatly help in avoiding disputes down the line.
If things go wrong
Though the pubs code places legal duties on the pub company to ensure that responsibilities, pub condition and plans for works are clear at the start, things can sometimes go wrong. Tied pub tenants have contractual rights under their tenancy, but it is important to note that there may be ways of resolving disputes under the Pubs Code which could help avoid the matter going to court.
If the tenant thinks the pub company didn’t comply with the Pubs Code duties, such as to provide all the required re-contract information or accurate BDM notes, that could be a breach of the pubs code. In that case, they can first talk to the BDM. The tenant can also use the pub company’s procedure for dealing with complaints over repairs. They can approach their Code Compliance Officer (CCO) regarding pubs code duties.
The CCO has to verify the pub company’s compliance and to report any code breaches to me, explaining the steps the pub company has taken to resolve the matter where a breach has occurred. My team pays close attention to these reports in considering if any regulatory steps are appropriate. The contact details for the CCOs can be found on my website.
Pubs code arbitration
If using these informal routes doesn’t resolve the matter, the tenant has the right to refer alleged code breaches to arbitration. My factsheet provides further information about Pubs Code arbitration, to which strict time limits apply.
The PCA expects the pub company to attempt to resolve the issue to avoid the need for arbitration. Even after arbitration has begun, wherever possible the tenant and the pub company should continue negotiations.
Pubs code arbitration referrals are managed by the Chartered Institute of Arbitrators. Suitable arbitrators who I appoint follow service standards to help ensure timely and consistent management of disputes. Published quarterly statistics on the number of disputes show the majority are completed within six months.
I don’t become involved in individual arbitrations where I have appointed an arbitrator, but as regulator I have powers to get copies of documents and decisions in the case. My team monitors these to see if there are general issues about the pub companies’ code compliance that I may need to raise with them.
Both the pubs code arbitration process and the award are confidential, but with appropriate consents or anonymisation my team publishes arbitration awards or summaries to help inform the industry how the code is being applied.
Before making an arbitration referral, the tenant must notify the pub company that they think there has been a code breach and wait 21 days to give the pub company time to resolve the matter. The referral must then be made within four months beginning with the first date on which the dispute could have been referred.
The rules for referring a dispute about the market-rent-only (MRO) option process are different. Special costs rules apply to pubs code arbitrations, meaning that the tenant usually only has limited liability for the pub company’s legal costs of the case even if they lose.
So it is important for the tenant, and their adviser, to check that pre-contract documents provided by the pub company and notes of BDM conversations, are what they were expecting, and to act promptly if they are not, rather than waiting until a disagreement over repairs arises.
This column is intended to aid industry understanding about the pubs code and its impact. Nothing in it should be understood to be a substitute for the pubs code legal framework.
