Government changes to pubs code welcomed but ‘chance missed on rent issue’

By Gary Lloyd contact

- Last updated on GMT

Positive amendments: approval was generally met on the Government's changes to pubs code (credit: Getty/FreshSplash)
Positive amendments: approval was generally met on the Government's changes to pubs code (credit: Getty/FreshSplash)

Related tags: Finance, Legislation, Licensing, Tenanted + leased

A government pledge to speed up the Market-Rent-Only (MRO) option in the pubs code has been welcomed but one trade body said a chance has been missed by not implementing ‘parallel rent assessments’ in its proposed changes.

The Campaign for Real Ale (CAMRA) made the statement after the Government announced its list of decisions of changes to the pubs code, which governs how the six biggest pub companies deal with tenants.

Both CAMRA and the British Beer & Pub Association (BBPA) welcomed the resolution from government to speed up the MRO process, which dictates the process when a tenant wishes to go free of tie from their pub company.

Among the government’s decisions at the conclusion of its consultation on how it could improve the practical operation of the pubs code, it said it would shorten the qualification period so that a business will come under the code if it owned 500 or more tied pubs in England and Wales for at least three months (rather than six months) in the previous financial year and would streamline the process, enabling a tied tenant to secure a compliant offer to change to a free-of-tie tenancy and create more time for negotiation to encourage agreement between the parties.

It added it would also require the inclusion of the proposed rent, along with the proposed terms, in a free-of-tie offer to ensure the offer can be considered in its entirety from early on in this process and it would amend the comparison period used to determine whether a significant price increase for a tied product or a tied service has occurred, so this does not compare prices more than 12 months apart.

The Government also said it had decided not to pursue some of the options in the consultation at this time because of insufficient evidence on whether or what changes are needed.

Missed an opportunity

CAMRA chairman Nik Antona said: “It is good to see that the Government is taking forward some changes to the pubs code that will bring tenants in England and Wales into the scope of the code protections more swiftly and make the MRO process faster. However, the Government has missed an opportunity in not taking up parallel rent assessments for prospective tied tenants. 

“Sadly, the pubs code is not working as intended and for as long as this is allowed to continue, licensees will suffer and consumers will suffer detriment through further price inflation and neglected pub stock. The changes the Government is taking forward are not far reaching enough to fix this. 

“With the second statutory review of the code commencing next year, we will be pressing the Government to make fundamental reforms that will actually balance the relationship between tenants and their pub companies, as the legislation was intended to do.”

Parallel rent assessments are a method to show transparency when demonstrating the costs of being a tied tenant. They are a breakdown of rents and earnings under tied and free-of-tie models, designed to show tenants whether they would be better off staying tied or taking the MRO option.

Meanwhile, a BBPA spokesperson, said: “We support these proposed changes to the pubs code, which recognise the value of the leased and tenanted model and the strong relationship between pub-owning companies and their tenants.

“In particular, the streamlining of the MRO process is welcome for tenants and pub-owning businesses alike and will facilitate negotiation and agreement.”

Reduced or cancelled rent

The spokesperson continued: “During the pandemic leased and tenanted pubs received £285m in reduced or cancelled rent and further additional support worth on average £27,000 per pub from pub-owning businesses.

“The partnership between tenant and pub-owning businesses provides balance, security and investment – and has secured community pubs for generations to come. Looking ahead to the launch of the next statutory review in 2022, we will again reiterate this message to ensure the code continues to support the relationship between tenants and pub-owning companies.”

The Government added it had received 22 responses to this eight-week consultation, mainly from representative organisations and other bodies with an interest in the pubs code, as well as a small number of individuals and tied tenants.

It added that while respondents’ views varied in respect of the different options set out in the consultation document, the changes the government determined to take forward are those that drew overall support, in particular around the need for a more streamlined MRO process, to allow more time for meaningful negotiations between parties.

The six pub-owning businesses that are governed by the pubs code are Admiral, Greene King, Marston’s, Punch, Star Pubs & Bars and Stonegate (trading name of Ei Group).

Related topics: Legislation

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