The Covid-19 pandemic, and the subsequent lockdowns and restrictions on businesses, have highlighted some of the hidden inequalities in the UK. There have been those who, as much as they may have missed their freedoms, have faced no loss of income, while others have lost their jobs, businesses and livelihoods.
One of the most startling and troubling inequalities in business is between those who charge rent for business premises and those who pay rent. With the hospitality sector one of the worst hit by the pandemic, the gulf is particularly stark in the case of pubs, where small independent tenant businesses, often just individuals and families, have long had to deal with huge faceless property owners – including large pub-owning companies, hard-nosed commercial landlords and huge investment funds.
There was outrage in the first lockdown, when it emerged that many pubs were being charged full rent, despite being forcibly closed, including by some of the large “pubcos” whose longstanding exploitative behaviour had already led to them being regulated in 2016 under the statutory pubs code. The powerful publican-led No Pub No Rent campaign during the first lockdown eventually led to some concessions. Yet often these were simply modest rent reductions or, worse still, deferrals, meaning that pubs continued racking up huge debts to somehow be paid off from already wafer-thin margins.
Despite ministers saying there has been “unprecedented support” for hospitality, the government has not provided anything more than a small proportion of the income lost due to forced closures or operation restrictions. That contribution has not even covered bills and ongoing costs, especially rent. These “rent arrears” are being demanded for a period when they could not legally trade. This is unethical and in the view of the Campaign for Pubs should be illegal. There is thought to be about £2.5bn in rent arrears in the hospitality sector as a whole, according to the trade body UK Hospitality. This is a threat to hundreds of thousands of families’ livelihoods, to already-struggling high streets, and to thousands of our beloved world-famous pubs. Without meaningful and decisive government intervention, many of these businesses – even those that were solidly profitable before the pandemic – will fail.
The Campaign for Pubs has raised the rent crisis repeatedly, yet so far this has fallen on deaf ears. All the government has done is introduce a weak, voluntary Covid rent code of practice (which has been routinely ignored by some pub-owning companies and commercial landlords) and introduce a moratorium on rent evictions, which is not a real solution to the problem.
Thankfully, the government has finally announced it will intervene to tackle the issue of rent arrears. This is essential, though it is too late for some hospitality businesses already forced to throw in the towel. It has announced it will legislate to introduce a binding arbitration process.
The devil, however, will be in the detail, and with the historical chronic failure of both the Royal Institution of Chartered Surveyors (RICS) and the pubs code adjudicator to tackle unreasonable rent practices in the pub sector, tenants will be sceptical unless the law is watertight and specific. It would make sense to specify a maximum proportion of chargeable rent for enforced closure (a percentage that itself should be low) in order to give both sides certainty, and also to avoid the system becoming choked by thousands of arbitrations – it isn’t clear who will be paying the costs for these.
Yet while it’s welcome that the government is doing something to stop publicans being charged clearly unreasonable levels of rent for periods of no trade and restricted trade, this doesn’t tackle the ongoing issue of the imbalance between pub owners and tenants. Many pub tenants and lessees are already being expected to pay full rent again, even though England has delayed the removing of restrictions and the Scottish government seems set to follow.
We also need to see some action from the perennially weak pubs code adjudicator. Outrageously, some of the six regulated pubcos have even used the Covid pandemic as an opportunity to openly discriminate against tenants who have exercised their legal right to free themselves from the onerous “beer tie”, under which pubs are charged inflated prices for beer. Despite the fact that this vindictive behaviour has been flagged up with the pubs code adjudicator, nothing has been done. The pubs code must be made to work as was promised in parliament.
In the longer term, we must see a change to UK law to forbid pub owners from charging rent on businesses legally unable to trade due to government edict. How can it possibly be justified to charge rent on a business that is entirely reliant on those premises in order to trade, when they are being prevented from trading by government?
In this situation, both the property owner and the renting business should face the loss of income and be compensated appropriately, from government and/or insurers, rather than the owners being allowed to continue demanding rent regardless.
We wish to see changes to the law that go much further, to stop the kind of outrageous, unfair behaviour we have seen from some property owners over the past year. If there’s one positive thing for pubs and hospitality to take from the awful pandemic, it’s that unfair rents must become a thing of the past. If the government is serious about “levelling up” it is time to tackle the clear power imbalance between pub owners and tenants.