THE GOVERNMENT has confirmed in a report published this morning that it will introduce a statutory code to help govern the relationship between pub owning companies and their tenants.
The new code has been drawn up by the Department for Business Innovation & Skills, following a consultation held last year, and approved by business secretary Vince Cable. It aims to ensure fairness across the industry by introducing a number of measures such as providing tenants with the right to request an open market rent review.
The ‘Core Code’ has been designed to protect all tied tenants, providing them with “increased transparency, fair treatment, the right to request an open market rent review if they have not had one for five years, and the right to take disputes to an independent Adjudicator”
A further ‘Enhanced Code’ will also be introduced requiring “pub owning companies with 500 or more tied pubs to offer parallel tied and free-of-tie rent assessments to potential or existing tenants if they request them when they are considering taking on a pub tenancy or at the time of their regular tied rent review.”
Business secretary, Vince Cable commented: “The Government is committed to bringing about this step change in the relationship between pub owning companies and their tied tenants. A Statutory Code, supported and enforced by an independent Adjudicator, is the best way to ensure that tied tenants are treated fairly and that they are no worse off than their free-of-tie counterparts.”
The independent adjudicator will be funded by an industry levy, which will be set in proportion to the number of tied pubs each company owns, and will enforce “both the core and enhanced provisions of the code with powers to arbitrate disputes, investigate systemic breaches and provide guidance.”
The new statutory code does not, however, include a mandatory free-of-tie or market-rent only option and has ruled out a guest beer option, which would see pub owning companies with more than 500 tied pubs having to contribute to an independent adjudicator.
In the report, the government’s reasoning for this is because a market-rent only option “would have been likely to cause a high degree of uncertainty in the industry, with a likely negative impact on investment and the possibility that several pub owning companies would abandon the tied market. It would also have unnecessarily risked leading to higher levels of closures and job losses.”
The code will initially be reviewed after the first two years and then every three years thereafter with the Government planning to legislate at the “earliest opportunity”.
To read the full report with further details click here