2020/NO.49 - The list of available Independent Assessors (IA) was only ever fourteen strong. That covers the whole of England and Wales. Five are in the North of England and nine located in Southern England. None are in Wales. Right from the start we complained to the then PCA Paul Newby that the list was both ways too small and it contained heavily compromised individuals whose firms and also themselves were recipients of significant income from some of the major Pubcos. He just batted the request into the long grass as if it didn’t matter. Like so many other decision-making opportunities this one passed him by. It has now been four years since the Pubs Code came into being which has allowed us to do some serious research as to how things have panned out. Badly it would seem.
We have worked with our own extensive records and a FOI request of the PCA to delve into the numbers. Top of the list by a country mile for IA referrals was the EI Group. Yes, they are have the largest estate of pubs but they are definitely the most aggressive and at times quite incapable of “doing a deal”. Contrast this with Admiral, albeit with a much smaller estate but there have been no IA referrals with them at all. In fact, our records show that we have never received an instruction over a disputed Admiral rent review. The findings of the various IAs are capable of scrutiny with the following interesting numbers.
We think our tally may be incomplete (low) but as a broad brush the number of IA referrals were EI 25, Star 5, Punch 3, Marston’ 2, Greene King 2. The strong likelihood is there will be many more IA referrals linked to EI than any other Pubco. Sad reflection from every aspect. Which brings us onto the “Perception of Conflict of Interest” as defined by the RICS. Very strict rules but almost universally air brushed out of sight. Of the fourteen IAs, eight have direct corporate links to EI, three to Greene King and two to Punch. Generally, they are the same individuals but not always. There have been a few post Covid-19 IA determinations which EI did not like one little bit. No Siree! Formal appeals have been launched which is all quite legal. The claim is that” the rent determined does not represent the market rent” (R 38 (4) (a). The first concerned a Determination handed down in mid-March. It still has not yet been resolved nearly six months later. Others followed on the grounds that EI could not get their head around the low rental levels as a direct result of the pandemic. The IA in the first case has now been deemed as “unsuitable” by EI to handle any other cases. A couple of upcoming cases from us have been turned away having asked for the self-same individual to accept an IA appointment.
The available list of IAs will continue to shrink as more Determinations surface and genuinely take into consideration the reality of current trading. Will EI continue to lodge appeals and effectively blacklist the IAs concerned? Well more than likely if the remarks made this week to one of our client’s holds solid. Small village, substantial drive to pub with a rent review due this winter. EI BRM was pressing for a significant rent uplift, based on last year’s accounts. Justification on the basis that “We are to ignore Covid-19 as if it does not exist as it will all be over all too soon. No point in taking it into consideration. Waste of time”. Inevitably the case will go to an IA. Our choice of IAs who have a good insight into the area concerned, probably two at best. Our real fear is that when they reflect reality EI are more than likely to lodge yet another appeal. Then another IA bites the dust as to subsequently not being "suitable” to EI.
Maybe, just maybe, there is more to this than swims on the surface. If as is likely rents will fall dramatically, and goodness knows we are trying to keep our client’s pubs financially viable striving for affordable rents, EI can see the writing on the wall. The sight of freehold book values and share values dropping off a cliff in a corporate sense is mighty dangerous. Sort of explains the knee jerk reaction to push matters to appeal and gum up the works for six months plus. Worrying side issue is that in two of the appeal cases, of which we have direct insight, the PCA chosen arbitrator is a dyed in the wool retail expert and not a forefront experienced pub expert. Oh dear!