Landlord and tenant – Tied pub tenancies – Rent assessment proposal – Defendant tenant requesting RAP under regulation 19(2)(a) of Pubs Code etc Regulations 2016 – Claimant landlords disputing validity of request as defendant previously served market rent only notice out of time following service of section 25 notice – Arbitrator making award in favour of defendant – Claimants challenging award and/or seeking permission to appeal – Whether right to request RAP was discrete right under Code – Application dismissed – Permission to appeal refused
The claimants owned the Croham Arms, South Croydon, Surrey. The defendant was the tied pub tenant of the property within section 70(1) of the Small Business Enterprise and Employment Act 2015. His lease commenced on 19 March 2010 for a term of ten years and was protected by the Landlord and Tenant Act 1954. The rent was last reviewed on 19 March 2015.
On 16 August 2019, the claimants served a notice pursuant to section 25 of the 1954 Act proposing a new ten-year lease at an annual rent of £45,000. The section 25 notice was deemed to have been received two days after it was posted, although the defendant said that he did not actually receive it until 12 November 2019.
The defendant served a request for a market rent only (MRO) lease on 19 November 2019 which the claimants rejected because the request had not been served within 21 days of receipt of the section 25 notice as required by regulation 23(2)(b) of the Pubs Code etc. Regulations 2016. An arbitrator determined that the defendant had not served a valid MRO notice and his decision was conclusive.
On 19 May 2020, the defendant served a notice requesting a rent assessment proposal (RAP) pursuant to regulation 19(2)(a) of the Code. The claimants disputed its validity on the basis that the defendant had previously served an MRO notice out of time. Further, the defendant was not entitled to seek a RAP because that would trigger a right to make a further MRO request. The arbitrator accepted that the right to request a RAP was a discrete right and so the previous MRO request was irrelevant.
The claimants challenged the award under section 68 of the Arbitration Act 1996 and/or applied for permission to appeal under section 69.
Held: The application was dismissed. Permission to appeal was refused.
(1) Regulation 19 of the Code created the duty to conduct a rent assessment and regulation 19(2)(a) provided that a tied pub tenant might request a rent assessment or an assessment of money payable in lieu of rent if such an assessment had not ended within the period of five years ending with the date of the request.
The claimants had argued that, if a tenant was allowed to deploy any other procedure to make a request for an MRO compliant lease, that would have the effect of usurping the statutory scheme whereby the 1954 Act protection was preserved, subject to the limited right to apply for an MRO compliant lease within the specified time limits. However, the request for a RAP was to be looked at separately from a request for an MRO. It was no answer that a RAP would then trigger a right to request an MRO. Neither the 2015 Act nor the Code stipulated that the only request for an MRO following a section 25 notice was under regulation 27. A request for an MRO consequent upon a RAP was not excluded. It was noteworthy that the right to a rent assessment proposal arose under Part 4 and not subsequent parts of the Code. The power to request a RAP in events falling within regulation 19 was not limited by the fact that it might give rise to a right in respect of an MRO. The rights were to be construed severally. There was nothing within the Code to prevent a tied pub tenant exercising multiple rights and nothing in the scheme to prevent the service of a separate notice in line with a separate clause.
(2) The arbitrator had properly concluded that the new lease was not itself a rent assessment for the purposes of the Code since the document sent with the section 25 notice did not comply with the requirements of regulation 15(1) and (2) or regulation 20 as it did not include the information required by schedule 2 and a statement about compliance with the RICS guidance. Accordingly, the alleged assessment in 2019 could not be construed as an assessment within the five years prior to the RAP request and a rent assessment had not ended within that period.
Further, the fact that for the purposes of section 43(6) of the 2015 Act, a protected 1954 Act tenancy was renewed on the day on which the tenant received the claimant’s notice pursuant to section 25 of the 1954 Act did not lead to the rent assessment being concluded on the date of the new lease. The rent payable under the new lease fell to be either agreed between the parties or determined by the court. That had not occurred at the time of the request for a RAP. Until that concluded, the assessment had not been made. It was not irrelevant to whether the assessment had ended that the rent assessment under the new lease had not yet taken place. The date from which the rent assessment would take effect was separate from when and whether it had been made. It followed that the arbitrator was correct to conclude that no assessment had been concluded in the five-year period prior to 20 May 2020.
(3) The application failed under section 68 because no serious irregularity had been established. If the court were wrong in that regard, the outcome of the arbitration would have been the same regardless of the irregularity. Thus, no substantial injustice had been or would be caused to the claimants. It was apparent that even if the arbitrator had not expressed himself adequately, he would or ought to have reached the same decision.
(4) The application for permission to appeal on a point of law was refused. The claimants had failed to satisfy the limb under section 69(3)(c)(i) of the 1996 Act that the decision was obviously wrong. That was a very high hurdle and permission was rarely given. As regards section 69(3)(c)(ii), the claimants had failed to establish a question of law of general public importance. In any event, the decision of the arbitrator was not open to serious doubt.
Caroline Shea QC (instructed by DLA Piper) appeared for the claimants; Kerry Bretherton QC (instructed by Pannone Corporate LLP) appeared for the defendant.
Eileen O’Grady, barrister
Click here to read a transcript of Star Pubs & Bars Ltd and another v McGrath
