Award summary – February 2018 - 1

Award Issued: 2018

Publisher’s Note: The Pubs Code Adjudicator encourages openness and transparency in the operation of the Pubs Code etc. Regulations 2016. Publication of awards made in Pubs Code arbitrations, or summaries of those awards, enables the industry to better understand previous decisions and consider how the Pubs Code is being applied in individual cases. Neither the Pubs Code Adjudicator nor an arbitrator is bound to follow published awards in applying the law, but such awards can be used to support the industry’s consideration of the proper interpretation of the Pubs Code. Parties are encouraged to take independent professional advice about their situation.

The outcome of an arbitration is based on its own facts and the evidence produced in the case and is not binding in other cases where the landlord and tenant are not the same. The Pubs Code Adjudicator does expect a regulated pub-owning business to consider its understanding of the law in light of each award that makes a finding on the interpretation of the statutory framework and to adjust its behaviour towards tenants as appropriate. The publication of an arbitration award or an award summary does not mean the Pubs Code Adjudicator endorses the decision and it does not form legal advice about any issue.

This summary is provided to assist in understanding the arbitration decision. It does not form part of the decision or reasons for the decision.

Summary of the Findings

The arbitrator found the Tied Pub Tenant (TPT) was entitled to a rent assessment under regulation 19(1)(b) of the Pubs Code (“the Code”) in response to their request under regulation 19(2)(a), as no rent assessment or rent review had been concluded within the previous five years.

The arbitrator ordered the pub-owning business (“POB”) to provide a rent assessment within 21 days of the arbitration award.

1. Factual Background

The TPT had requested a rent assessment from the POB under regulation 19(2)(a) of the Code. This regulation allows a TPT to request a rent assessment from the POB if no rent assessment has ended within the previous five years ending with the date of the request. Regulation 19(1)(b) says a POB must conduct a rent assessment where a TPT requests this under regulation 19(2).

Regulation 66 provides that within the first five years after the Code came into force, a TPT can request a rent assessment if no such assessment and no rent review has been concluded within the past five years. For the purposes of regulation 66, a rent review is concluded when the rent is agreed in writing between the POB and TPT.

The POB argued that the TPT’s request for a RAP was invalid because:

• it had sent the TPT a rent review proposal within the previous two years (before the Code came into force) and the TPT had not yet signed the rent review memorandum in relation to this;
• a rent review process that started before the Code came into force prevented a TPT from requesting a separate rent assessment;
• the effect of the legislation could not be to set up “two rent assessments in tandem” and to allow the TPT to delay agreeing to a rent review until it had requested a rent assessment; and
• the Code did not have retrospective effect.

2. Arbitrator’s Findings

The central issue for the arbitrator to consider was whether the POB had breached the provisions of regulation 19 of the Code by refusing to conduct a rent assessment upon the TPT’s request.

2.1 Statutory right to a rent assessment

The arbitrator found that a TPT was entitled to request a rent assessment under regulation 19(2)(a) if no rent assessment or rent review had concluded within the previous five years ending with the date of the request.

The arbitrator disagreed with the POB that the five years would not include any period before the Code came into force. They found that where a period before the start of the Code should be excluded from the calculation of time, this was expressly stated in the regulations.

2.2 Rent review date before the Code came into force

Regulation 66(1)(a) says the reference in regulation 19(1)(a) to a rent review which is required under the terms of a tenancy or licence does not include a rent review where the rent review date falls before the commencement date.

Regulation 19(1)(a) requires the POB to conduct a rent assessment whenever it carries out a contractual rent review under the terms of the tenancy.

In agreement with the TPT, the arbitrator found that the references in regulation 66 to the exclusion of rent reviews where the rent review date fell before the Code came into force only applied to the POB’s obligations under regulation 19(1)(a). The arbitrator found that even though the rent review date was before the start of the Code - and the TPT would not therefore be entitled to a rent assessment under regulation 19(1)(a) – they were entitled to request a rent assessment under regulation 19(2)(a).

The arbitrator noted that a contractual obligation to carry out a rent review under the terms of a lease was separate and distinct from the statutory right of the TPT to request a rent assessment under the Code.

In summary, the arbitrator found that a TPT was able to request a rent assessment under regulation 19(2)(a) of the Code where they had:

• started a rent review process with their POB before the Code came into force but had not yet concluded it; and
• had not separately concluded a statutory rent assessment or contractual rent review within the previous five years.