Tied pubs - pubs code consultation: workshops with tenants

7. Research findings: Arbitration

Arbitration was deemed a lower priority for this research, so was only covered in the first workshop. No-one in the group had used an arbitration service, either PICAS (Pubs Independent Conciliation and Arbitration Service) or their own landlord's processes, so they were unable to comment from experience. Two of the three participants had heard of PICAS before.

7.1 General views about arbitration and what it should cover

It was seen as important to have access to independent arbitration in order to prevent rent and lease negotiations dragging on, as noted earlier in the report. Overall, the key things that tenants felt the Code should cover clearly was circumstances when arbitration was and was not appropriate, and costs to the publican.

However, some concerns emerged that tenants felt needed to be addressed in the Code. Firstly, fees for tenants needed to be capped, although fees were accepted as important to prevent the system from being abused for petty grievances, as long as they were not prohibitive.

"The tenant can be liable to pay fees and expenses, but that has to be capped. You don't want it becoming a moaning system. You can put fees in place, but not to put you off going for it." – Pub tenant

"£500 would be enough to stop petty things but not enough to put you off if you really wanted to go for it." – Pub tenant

Tenants did not see the need however for a cap on pub-owning companies' costs given the resources at their disposal.

"There's no need to cap the costs for the company, they have lawyers on rotation, we don't have that." – Pub tenant

The main challenge according to tenants would be how to prevent the arbitration process being used for frivolous complaints; for example, where a matter is clearly laid out in the lease but the tenant decides later that they don't like the provision.

"Say for example it's set out in the lease they've signed that the tenant is responsible for sorting the windows but they decide they don't want to do that and want to chance their luck and go to arbitration. Stuff like that would end up clogging up the system."– Pub tenant

While tenants were keen that disputes over repairs where the lease agreement was clear on responsibilities should be excluded from arbitration, they were keen to differentiate between repairs and dilapidations.

"We should exclude things to do with repairs, but dilapidations should be covered. They're often a source of dispute that need legal input." – Pub tenant

A Schedule of Dilapidations is a lengthy and often highly detailed legal document. Dilapidations are essentially exit costs for tenants which are attributed to putting the property back into its original pre-let state, and are indeed a common cause of disputes at the end of a tenancy. Tenants were of the opinion that arbitration must therefore be available for disputes over dilapidations.

"The Code needs to set out what arbitration won't deal with as much as what it will, and the thing it should definitely deal with is dilapidations, that's the biggest bone of contention in my experience."– Pub tenant

"It's the biggest cost… I've seen people bankrupt, lose their house and everything over dilapidations." – Pub tenant

7.2 Setting out the arbitration process in the Code

As detailed above, the main concern of tenants was that the things the process can and cannot cover should be set out clearly in the Code. Costs and fees should also be clearly detailed. Apart from that, tenants emphasised the need for the process to be set out clearly and in plain English. Case studies and practical examples of where arbitration has been used and what happened would also be useful to give tenants a feel for what the process would be like in 'real life'.

"Case studies, where they show you something and say this is what might happen, this is a scenario where you might ask for arbitration because a lot of people with a wee pub might not know what to expect." – Pub tenant

Tenants also stressed that the pub-owning company needed to be completely transparent with the Adjudicator in their workings in relation to the dispute. They also wanted more detail on the Adjudicator and whether their findings would be legally binding.

"Is the adjudicator going to be an individual or a panel, and are their findings legally binding on both parties or can [either party] go 'no, I'm going to law'?" – Pub tenant

The view was that the Adjudicator's decision should be binding, otherwise disputes could still end up in a protracted legal wrangle which would favour the party with the greater resources:

"My view is that arbitration should be final and both sides should accept the result. Otherwise whoever has the deepest pockets will take advantage of legal actions which could tie it up for ages without getting a result so both parties can move on." – Pub tenant