The Campaign for Pubs has written to the BEIS (Department for Business, Energy, and Industrial Strategy) select committee, urging it to investigate the endemic use of hostile Section 25 eviction notices by regulated pub-owning companies.
Campaign chair Paul Crossman has written to committee chair Darren Jones MP detailing the way in which hostile Section 25 notices are now regularly used in order to take pubs back from good quality, long-term tenants. This removes their pubs from the scope of Pubs Code protection in the process.
The letter makes reference to the current high-profile case of the Britons Protection pub, in Manchester, where the long-standing tenant is fighting eviction from his unique and iconic pub by owner Star Pubs and Bars. This is the pub operating arm of brewing giant Heineken.
The letter warns that the regulated pub companies have been given the time to restructure their operations in such a way as to game and avoid the spirit and intent of the Pubs Code regulations, which came into effect in 2016. The Code was intended to address the chronic imbalance of risk and reward that had come to characterise the tied tenanted model of pub operation.
Four successive business committees have flagged the failings of the tied model since 2008, and their critical reports were instrumental in securing the statutory regulation that eventually came into effect.
The Campaign for Pubs is now urging the current BEIS committee to consider how that legislation is now being openly gamed and avoided by the cynical misuse of Section 25 notices. It condemns the way that companies can so easily abuse the spirit of one Act — The Landlords and Tenant (L&T) Act — to negate their own legal responsibilities, and the rights of their tenants under another — The Pubs Code regulations of the Small Business and Enterprise Act.
Crossman is highly critical of the Pubs Code Adjudicator’s (PCA) office for failing to address the growing problem of hostile Section 25 notices, as well as the fact that the regulated companies are openly developing new business models which are clearly designed to allow them to evade the Pubs Code regulations.
The letter points out that certain pub companies have developed a new ‘quasi-managed’ form of tenancy which they are attempting to pass off as a management scenario in order to justify a claim for occupation.
However, the new ‘manager’ is not directly employed by the pub company and receives none of the benefits and securities to which a genuine employee would be entitled. Instead, they are a self-employed person with their own tax liability, and responsibility for employing their own team.
‘Uber’ pubs
The letter questions the validity of this new type of tenancy when it comes to justifying a hostile Section 25 notice. It argues that these models may fail to meet the legal criteria that would reasonably enable a pub-owning company to claim that a pub is being taken back under grounds G of Section 25 of the L&T Act because it is the “landlord’s intention to occupy the holding for his own business or as a residence”.
The letter likens these quasi-managed agreements to ‘Uber’ pubs. It urges the Committee to scrutinise such deals and to press for their efficacy to be assessed.
In Manchester, there is local outrage that long-serving Britons Protection tenant Mark West should now face eveiction through no fault of his own.
Crossman said: “When I heard of the current predicament of Mark West at the Britons Protection in Manchester I felt compelled to raise this long-standing problem with the BEIS Select Committee.
“Mark’s experience mirrors my own from 2017, and also that of hundreds of other leaseholders who have faced hostile Section 25 notices since the Pubs Code came into force. The tactic is nothing but a cynical, co-ordinated attempt by the regulated pub-owning companies to undermine and circumvent the Pubs Code.
“It is perverse and unacceptable that these companies can so easily abuse the spirit of one Parliamentary Act to evade their legal responsibilities, and the rights of their tenants, under another.
“I and other campaigners have tried to raise the matter many times over the years with the Pubs Code Adjudicator, but our calls have been met with extremely limited engagement and with no effective action whatsoever.”
The campaign’s demands
The Campaign for Pubs is calling on the BEIS select committee to:
- Take a keen interest in the destructive effect that predatory Section 25 notices are having on the pub infrastructure of the UK, and to conduct an enquiry into the matter, which can ideally take in the broader question of Pubs Code failures and avoidance.
- Challenge the PCA as to why they have not acted, if only by flagging up the clear proliferation of hostile Section 25 notices and new quasi-managed agreements to the secretary of state at BEIS as a matter of urgency, needing further action. It is clearly an issue that is of direct relevance to the PCA because it involves the circumvention of the Code.
- Address the issue of statutory compensation payable under the L&T Act so that it is not a cheap option for pub companies to evict blameless, good quality, long-standing tenants. Such tenants should receive a level of compensation that truly reflects the value of the business that they have built up.
- Urge the government to investigate and rule on the efficacy of these new quasi-managed models and decide whether they can be legally used to justify the eviction of good quality, long term tenants. Such tenants should not simply be left to fight a David and Goliath legal battle against a global giant like Heineken. This is exactly the kind of imbalanced struggle that the Pubs Code was intended to remedy.
- Advocate legal recourse for any former leaseholder who has been forced out of their pub if it is decided that these new models fail to meet the necessary criteria to satisfy grounds G.
- Require the PCA to collate, analyse, and clearly report the data they have amassed regarding hostile Section 25 notices served since the Pubs Code came into effect, and obtain further details from the pub companies to complete the picture.
- Require the pub companies to disclose the failure rates of tenants that have attempted to run pubs under their new quasi-managed models. The committee should hold a consultation, inviting tenants to give their experience of these business models, and should test the assertions of the pub companies that these new models represent a fair and reasonable business opportunity.
- Request that HMRC take a close look at these models and hold the pub companies (not the tenants) entirely and directly responsible for any irregularities they uncover. This situation was entirely created by the pub companies, and then knowingly sold as an opportunity to largely unsuspecting incoming operators.
- Call for a review of the Landlord and Tenant Act. The issue of Section 25 abuse urgently needs to be addressed, along with many other flaws in the Act, such as the continued permissibility of upward-only rent reviews.
- Support calls for another full competition review to address the endemic anti-competitive practices which continue to limit consumer choice in both pubs and beer. It has been 33 years since the last competition review of the beer and pub market (the 1989 Beer Orders).
