MRO: Pubco 'investment exemption' rejected

By James Wallin

- Last updated on GMT

MRO: Pubco 'investment exemption' rejected

Related tags: Investment, Rate of return

A bid to exempt pubcos from having to offer the market rent only option if they agree to significantly invest in a tenant’s pub has been rejected by the Government.

Lord Hodgson, Conservative peer and former director at Marston’s, had tabled an amendment to the section of the Small Business Bill dealing with the pubs code calling for an exemption for “a mutually agreed period in return for a significant investment”.

Speaking during the last sitting of the committee stage last week, Lord Hodgson said: “The basic point is that integrated pubcos that wish to sell will not invest £100,000, or even £84,000, if there is no guarantee that they will be able to sell their beer and if, after the money has been accepted and an investment has transformed the pub, the tenant will be able to say that they want to change the basis of the contract.

'The amendment would permit—not require—a situation in which if significant investment has taken place, of the sort that I have just described, the two sides could agree a period during which the MRO option would not be available. Without this, pubco investment will be significantly reduced.”

However, Baroness Neville-Rolfe, Parliamentary Under-Secretary for the Department for Business, Innovation and Skills said: “We recognise that pub-owning companies have an important role, and the importance of investment.

"However, the Government do not support an exemption of that kind. We consider that the return on investment should not be any different if tied rents are fair and leave tenants no worse off than if they were free of tie.

"If the MRO is set at a fair market rent, that is likely to lead to the rent increasing, and that increase should allow the pub company to recoup income lost through the removal of the beer tie.”

Related topics: Legislation

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14 comments

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Robert

Posted by Interested Observer,

I think that OO has misread the 93% figure. I can't see anything about substantive leases in this year's EI report.

Purely on a matter of logic, though, I can have an estate of 100 pubs, all of which are on substantive leases.

50 of those leases expire in the next 6 months and the tenants have decided not to renew.

I thus have 50 advertised vacancies, but 100% on substantive agreements.

Consequently, I'd suggest the notion that the number of advertised vacancies is a direct function of properties not on substantive agreements is flawed.

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Mr Wakefield

Posted by Objective Observer,

Things change over years indications, if surveys are to be believed, tend to be showing relationships on the up.

Yes there will always be those who are not happy and will believe it's their Pubcos fault, and some will be right.

I problem I see from the campaigners is the want to believe it is all pubcos and establishment bodies.

Take the new article today. Camra are persona no grata because of who they gave an award to.

They were also in 2004 when they wished to retain the tie, but came back into the fold when they reversed that.

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Robert

Posted by Objective Observer,

Perhaps that is from October to now. The figures I quoted came from their 2014 annual report.

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