Restrictive covenants 'no longer' an issue, say industry figures

16-Sep-2014 - Last updated on 17-Sep-2014 at 08:36 GMT

Related tags Restrictive covenants Public house

Brigid Simmonds said restrictive covenants are 'not widely applied'

The Government’s consultation on restrictive covenants on pub sales is ‘outdated and irrelevant’, leading industry figures have claimed.

Members of the trade say that the three-year delay on an announcement to the consultation means it is no longer a significant issue.

The consultation was designed to form “an accurate and up-to-date picture of the use of restrictive covenants in the pub industry”. Last week, new community pubs minister Kris Hopkins said the Government’s response to the consultation would be published “in the coming weeks”.

However, the British Beer & Pub Association said the measures “are not widely applied”.

“The Office of Fair Trading has already said that their potential adverse effects on competition are ‘not likely to be significant’ and the Government itself acknowledges that it may reach the same conclusion as a result of the current consultation,” said chief executive Brigid Simmonds.

Punch Taverns, Enterprise Inns and Greene King stopped using the measure in 2009.

'Very rare'

Everard Cole associate Chris Rogers said: “Clearly some pub sites hold a higher value for alternate use, but in our experience the imposition of restrictive covenants has been very rare.”

He said he had more often seen pub sales with clauses which outline that, in addition to the agreed sale figure, payment is due to the vendor if planning permission for an alternate use of the property is obtained by the new owner.

Robin Mence, managing director of Sidney Phillips, also said he hadn’t seen the measure being used recently.

However, Association of Licensed Multiple Retailers chief executive Kate Nicholls said greater safeguards to prevent inappropriate use
of the measure would be welcomed.

According to the Campaign for Real Ale (CAMRA), between 2004 and 2009, 572 pubs were “permanently lost” through being sold with restrictive covenants.

'Anti-pub' measure

CAMRA head of public affairs Jonathan Mail said while he welcomed the fact many pubcos had stopped using the covenants, the Government needed to ensure all businesses followed suit. “We regard restrictive covenants as anti-community, anti-pub and anti-market,” he said.

Save the Pub Group chairman and MP Greg Mulholland said he finds it "hard to understand why [a decision] has taken so long".

"There is no excuse for allowing any owner of a pub to legally declare it can never be a pub again. That is old fashioned, draconian, anti community and undemocratic as well as anti-pub.

"I hope that as his first act as Community Pubs Minister Kris Hopkins announces the right decision. People will be watching with interest and will judge his and DCLG's attitude to pubs from this," he said.

A Department of Communities & Local Government spokesman said: “The consultation on restrictive covenants received some strongly polarised responses, which the Government has been carefully considering.

“The Department will publish the Government’s response to the consultation in the coming weeks.”