GMB Welcome BIS Conclusion That Pubcos Will Overcharge For Rent Unless Prevented By New Draft Statutory Code
The test for tied tenants is whether this code is drafted in such a way that it will bring down rents to the same level as free of tie pubs says GMB.
GMB, the union for tied pub tenants, responded to the publication by BIS today of draft statutory code for tied pubs. See notes to editor 1 for copy of BIS press release.
Dave Mountford, GMB representative for tied pubs, said "GMB welcome the conclusion by BIS that pubcos will overcharge tied tenants for rents unless they are prevented from doing so. See notes to editors 2 for some examples of overcharging in East Midlands.
These pubcos charge sky high rents to pay interest on financially engineered debts which are held mainly by bondholders in offshore tax havens. To meet these unsustainable payments pubcos increased the price of a pint by £1 more than justified by inflation and tax increases. This has priced pubs out of the market and they have closed in droves.
The time has come to end this rigged market and replace it with an open free market. Short shrift should be given to the vested interests defending the bondholders who will brand this as “red tape”.
So the test for tied tenants is whether this code is drafted in such a way that it will bring down rents to the same level as free of tie pubs.
GMB want to ensure that pubcos are not allowed to put up rents by the backdoor by overcharging for products tenants are tied to buy from them.
GMB tied pub tenants will study the draft code and make a response to BIS.
GMB political department will also keep in touch with MPs to ensure that the code that emerges from the consultation does the job needed to stop pubs closing. GMB will also assess how the union should gear up to represent members at hearings with the powerful Adjudicator ".
Contact Steve Kemp GMB political department on 07730 898 102 Dave Mountford 07794 021 212 or 01629 258 083 or GMB press office 07921 289880
1 Copy of press release issued by BIS
Pubs struggling to pay rent or beer prices could save thousands of pounds a year each, thanks to a new Code of Practice and the backing of a powerful Adjudicator, under proposals announced today by Employment Relations and Consumer Minister Jo Swinson.
Ministers want to make sure that pub tenants are treated fairly by pub companies and hope that the new proposals will save tenants £100 million per year. The Code would contain mandatory rules for all pub companies who own a certain number of pubs. In particular it would stop pub companies abusing the beer tie, which obliges tenants to sell certain types of beers often at high prices.
Under the proposals a new Adjudicator would have the power to:
enforce the Code
investigate any breaches, and
deal with disputes through possible sanctions and fines
The proposals are contained in a consultation published today. The Code will apply to those pubs which own over 500 pubs, to focus on the part of the industry where almost 90 per cent of complaints are received. The consultation seeks views on whether this is a fair threshold.
Business Secretary Vince Cable said:
"We gave pub companies every chance to get their house in order. But despite four select committee reports over almost a decade highlighting the problems faced by publicans, it is clear the voluntary approach isn't working.
"Pubs are small businesses under a great deal of pressure, many of which have had to close. Much of that pressure has come from the powerful pub companies and our plans are designed to rebalance this relationship.
"Pubs play a valuable role at the heart of our communities and we urgently need a change to help them survive and become profitable. These plans will do just that and could save pub tenants £100million per year by making sure that pub companies charge their tenants fair rents and beer prices.
"The new proposals could also allow tied pubs to have independently picked guest beers and help the growth of small beer and ale manufacturers across the UK. The Government is committed to building a thriving pub sector. The industry represents many small businesses, employing hundreds of thousands of people across the country."
Employment Relations and Consumer Minister Jo Swinson said:
“We are committed to stamping out abuse of the beer tie and helping British pubs to thrive. It has been a huge concern of mine that pubs, often the hub of our communities, are closing down at an alarming rate. What is also shocking is that the figures show that almost half of tied pubs earn less than £15,000 a year, and struggle to make ends meet because of rising beer prices and rent.
“I have heard about a variety of unfair practices such as large unjustified increases in rent, and am clear that this sort of behaviour is not good enough.
“These proposals will put a fairer system in place and will make sure that tied pubs are no worse off than free-of-tie pubs. For the first time if pubs feel they are being treated unfairly by their landlords they will be able to complain to a powerful new body.
“This month is also Community Pubs Month with some great work going into helping community pubs. Alongside the recent beer duty discount announced in the Budget, these plans will support the pub industry and the role pubs play in building a stronger economy in our local communities.”
Under proposals the Code will make sure that:
pubs are fairly and lawfully treated by pub companies
tied pubs are no worse off than free-of-tie pubs
pub companies charge fair rents and beer prices, with the possibility of open market rent reviews
tied pubs could have the option of a guest beer, picked independently, which could help the growth of small beer and ale manufacturers in the community.
If pubs feel that they are being treated unfairly or there has been a breach of the Code, they will be able to complain to the Adjudicator who can investigate and arbitrate the dispute for them. They will have the power to enforce the Code and impose fines on pub companies if the breach is severe.
Notes to editors
1. The consultation is available to view online at https://www.gov.uk/government/consultations/pub-companies-and-tenants-consultation and will run until 14 June.
2. The beer tie refers to a condition in a lease which requires a tenant to buy beer through the pub owning company, rather than on the open market. Traditionally this involves a discounted property rent, the 'dry rent', and above market prices for the beer, the 'wet rent'. This means that tied tenants have less choice and flexibility with regard to how they run their pub. There are other ties in operation but beer accounts for the vast majority of sales.
3. The meaning of pub tenant in the consultation is the same as pub licensee - a term used in previous government publications on the topic.
4. There are approx 50,000 pubs in the UK and 48% of pubs are tied (as of September 2012).
5. If the proposed threshold for the Code remains the same, pub companies that have 500 or more pubs that will fall under the Code would be; Enterprise Inns; Punch Taverns; Green King; Admiral; Star; Marston’s; Wellington; Trust Inns and Spirit.
6. Self-regulation has been tried since 2004, including the introduction of an Industry Framework Code of Practice and an independent arbitrator and advisory service, but evidence suggests it has not worked. There have also been four BIS Select Committee reports on the matter since that time.
7. To strengthen the evidence of any action the Government might take, the Government will also commission independent research and analysis of the impacts on both gross and net pub closures and employment levels. This analysis will be based on as much robust evidence as is available.
8. Community pubs month was launched by CAMRA on 1 April, and follows the success for last year’s event in which 6000 pubs nationwide held events and promotions.
BIS Press Office Department for Business, Innovation & Skills are Henry Tanner 020 7215 5947
2 copy of recent GMB press release
FOUR GREENE KING TIED PUBS IN DERBYSHIRE AND NOTTINGHAMSHIRE IN DIFFICULTY DUE TO UNAFFORDABLE RENTS WITH ACTION ON ONE PENDING IN DERBY COUNTY COURT
For tied pubs in Derbyshire and Nottinghamshire statutory regulation for the pub industry on unaffordable rents cannot come soon enough says GMB
Redress is being sought in Derby County Court over alleged breaches of the Insolvency Act by pubco Greene King.
This action has come to light as GMB, the union for tied pub tenants, probes the activities of Greene King in the Derbyshire and Nottinghamshire area.
GMB plans to write again to Greene King Managing Director Simon Longbottom drawing his attention to problems for Greene King tied tenants at The Grouse Inn, Darley Dale, the Railway in Matlock, The Gardiners at Cossall and the White Hart in Lenton, Nottingham.
The Government are undergoing a consultation process regarding the planned implementation of statutory regulation for the Pub industry. This regulation may include a “free of tie option” to deal with unaffordable rents. GMB has been instrumental in forcing Government to take this action.
Dave Mountford, GMB Branch Secretary, said “Four Greene King pubs in the area are in trouble and the tenants cannot make a living. GMB first wrote to Mr Longbottom in January and 4 months later nothing has been done.
In February Simon Longbottom stated that he felt self- regulation had been given "not long enough to succeed"
Thankfully the Government has disagreed with Mr Longbottom.
The case of Tom Meehan from The Grouse Inn, Darley Dale will be the subject of action at Derby County Court.
Tom told me that he was coerced by Greene King to take on £11,759 debt despite the fact that the debt in question was written off as part of insolvency that happened two years before.
This £11,759 owing to Greene King arose at the Railway in Matlock where Tom and his father Tom Senior faced bankruptcy with debt to the amounting to
£75,000 after 5 years of trading.
Before the bankruptcy proceedings Tom was asked by Greene King to take on another pub close by, The Grouse at Darley Dale and seeing little option from 2011 he ran the Grouse on a Tenancy at Will.
Six months after he left the Railway both Tom and his father were declared bankrupt at Derby and Nottingham Court. Part of the bankruptcy figure was the £11,759 owed to Greene King which was written off.
Following the insolvency Tom met with Greene King who told him his license would have to be transferred to his wife as he was unable to continue to trade being insolvent.
Tom was told that this transfer would only be sanctioned by Greene King only if his wife agreed to repay the £11,759 that was owing from the Railway, despite this amount already being written off as part of both the Meehan’s bankruptcy arrangement. Tom was given 30 minutes to make up his mind otherwise face eviction from the pub along with his wife. This is coercion.
The £11,759 was paid off over nearly year by Mrs Meehan at £300 per week.
The Meehan’s who have struggled to maintain any sort of living from the business, despite it being a busy and vibrant pub have notified Greene King as to their intention to leave when their lease expires in October 2013.
This however is not the only case of failed business model in this area of Derbyshire.
A second case is Paul Attewel who took on the Railway Inn at Matlock following the departure of the Meehans in 2010 – last weekend Paul entered into receivership as a business closing The Railway.
Two other Greene King pubs, The Gardners at Cossall in Nottingham and the White Hart in Lenton, Nottingham are also in trouble.
For tied pubs in Derbyshire and Nottinghamshire planned implementation of statutory regulation for the pub industry to deal with unaffordable rents cannot come soon enough”.