Award summary – December 2021 – 2

1. Summary of Findings

The arbitrator held that the notice served by a Pub Owning Business (“POB”) terminating a tenancy and proposing terms for a new lease to a Tied Pub Tenant (“TPT”) did not constitute a compliant Rent Assessment Proposal (“RAP”) in accordance with the Pubs Code etc. Regulations 2016 (“the Pubs Code”).

2. Background

Pursuant to s.25 of the Landlord and Tenant Act 1954 (“the 1954 Act”), the POB served a notice proposing to end the tenancy between itself and the TPT and setting out the proposed terms for a new lease. The TPT made a request for a Market Rent Only (“MRO”) option, but did so outside of the 21-day time limit which starts from the day that the POB’s s.25 notice is received by the TPT.

Before the deadline by which the TPT could make an application to court under the 1954 Act the TPT served a notice on the POB requesting that the POB provide a RAP in accordance with regulation 19(2)(a) of the Pubs Code, on the basis that a rent assessment had not been concluded within the preceding 5-year period.

3. Relevant Legislation

Under regulation 23 of the Pubs Code a TPT can request that the POB provide the option of a MRO-compliant tenancy by serving a MRO notice on the POB within 21 days of certain specified MRO events. These MRO events include renewal of a pub arrangement (with the 21-day period beginning at receipt of a s.25 notice) and receipt by the TPT of a RAP sent as part of a rent assessment.

Regulation 19(1) of the Pubs Code provides that a POB must:

a) conduct a rent assessment in connection with any rent review that is required under a tenancy agreement; and b) conduct a rent assessment when one is validly requested by a TPT in the circumstances set out in regulation 19(2). This includes that a rent assessment has not ended within the period of 5 years ending with the date of the request (regulation 19(2)(a)).

Under regulation 20 of the Pubs Code, a RAP must contain:

• a proposal for a new level of rent (or money payable in lieu of rent) under the tenancy or licence agreement;
• all information prescribed by Schedule 2 of the Pubs Code; and
• any other information that is required that will enable the TPT to negotiate in an informed manner

4. Arguments

The TPT argued that its RAP request was valid as the last cyclical rent review under the terms of the lease had taken place over 5 years prior. As such, it had therefore been more than five years since a rent assessment had been concluded and it therefore had the right to request a RAP under regulation 19(2)(a) of the Pubs Code. The TPT contended that the request for a RAP pursuant to regulation19(2)(a) of the Pubs Code and the serving of a MRO notice were distinct matters and that there was nothing in the Pubs Code that says if a TPT is out of time serving a MRO notice they are then prevented from serving a separate notice in line with a separate provision since otherwise the TPT would be denied their statutory rights.

The POB argued that the Pubs Code needed to be understood in light of the 1954 Act. It submitted that the Pubs Code had made adequate provision for TPTs to request a MRO option upon termination of a tenancy protected under the 1954 Act by allowing TPTs to serve a MRO notice following receipt of a s.25 notice, but that in this case the TPT had failed to serve a MRO notice within the statutory 21-day time limit. The POB argued that if the TPT were allowed to deploy any other procedure to make a request for a MRO compliant lease at renewal, that would have the effect of usurping the statutory scheme whereby the 1954 Act was intentionally preserved, subject only to the limited right to apply for an MRO compliant lease within the specified time limits.

Further, the POB argued that the lease renewal is itself a rent assessment for the purposes of the Pubs Code and therefore it cannot be the case that the Pubs Code both provides for a rent assessment on lease renewal and at the same time allows the TPT to request a further rent assessment to take place on a different basis. The POB submitted that the fact that the rent assessment under the new lease had not yet taken place was irrelevant: stating that the renewal had already occurred as at the date of receipt of the s.25 notice. That rent will be payable as from the date of the new lease. Therefore, the POB argued there is no scope for the TPT to request a RAP under regulation 19(2)(a) on the basis of there being no rent assessment for the prior 5 years following service of a notice pursuant to section 25 of the 1954 Act.

5. Decision

The arbitrator noted that in order for a POB to have conducted a valid rent assessment the POB must have sent the TPT a RAP containing all of the information specified in regulation 20 of the Pubs Code. The arbitrator considered that a renewal may be a rent assessment for the purposes of the Pubs Code, however upon reviewing the evidence in this case, the Arbitrator held that the s.25 notice served by the POB on the TPT in this instance did not contain all of the relevant information required for a compliant RAP as set out in regulation 20 of the Pubs Code. Therefore, a valid rent assessment had not been concluded within the preceding 5 years prior to the TPT’s RAP request.

The arbitrator found in favour of the TPT and held that the POB should honour the TPT’s RAP request. The POB was given 21 days from the date of the award to provide a RAP to the TPT.