Scottish Pubs Code and adjudicator roles: overview

About the Scottish Pubs Code

The Scottish Pubs Code (“the Code”) governs the relationship between tied pub tenants and their landlords in Scotland, ensuring fair treatment and transparency in their dealings.  

The Code is contained in the Scottish Pubs Code Regulations 2024 (as amended by the Tied Pubs (Miscellaneous Amendment) (Scotland) Regulations 2024) and comes into effect on 31 March 2025. Compliance with the Code will be enforced by the Scottish Pubs Code Adjudicator (“the Adjudicator”).

About the Scottish Pubs Code Adjudicator

It is the responsibility of the Adjudicator to, amongst other things, oversee and enforce the Code. The Adjudicator may: 

• investigate non-compliance with the Code; 
• give advice and guidance on the Code, carry out enforcement actions (which include financial penalties); and 
• arbitrate in disputes between pub-owning businesses and tenants.

Ahead of the Code coming into force at the end of March 2025, all pub-owning businesses must inform the Adjudicator (in terms of regulation 6 in the Code) of their status as a pub-owning business by the latter date of 

(i) 3 months of the Code coming into force (i.e. 30/6/25) or

(ii) 3 months after becoming a pub-owning business. Thereafter, the pub-owning business has to keep the Adjudicator informed of the matters referenced in reg 6(b) and (c). The Adjudicator will work with the sector and raise awareness of this requirement ahead of the Code coming into force.  

Tied pubs 

A tied pub is a pub that is leased to a tenant who is subject to a contractual obligation which:

(a) requires that some or all of the alcohol to be sold in the pub be supplied by—
(i) the landlord of the pub, or
(ii) a person nominated by the landlord, and
(b) is not a stocking requirement.

A stocking requirement is a contractual obligation which:

(a) requires that some of the beer or cider (or both) that is to be sold in the pub is produced by the landlord,
(b) does not require the tenant to procure that beer or cider from a particular supplier, and
(c) neither prevents the tenant from, nor penalises the tenant for, selling in the pub beer or cider that is produced by a person other than the landlord (although a contract term may impose restrictions on such sales).

The agreements between landlord and tenant (“the Tie”) can include provision as to how the tenant is to pay for products and services provided by the landlord. In some circumstances, this means that the tenant may face charges for products and services at a higher cost than on the open market. In return, tenants sometimes pay lower rent and receive other support from the pub-owning business.

Under the Code, tied pub tenants have rights to, amongst other things, fair rent assessments and the option to request a Market Rent Only (MRO) lease*. Tied pubs can also sell guest beers from other suppliers under certain conditions as specified in the Code.

*A Market Rent Only (MRO) lease is a lease where the rent is set at an amount agreed between the tenant and the landlord per the Code or, failing agreement between them, at the market rate for the property and which does not include any product or service ties, complies with any requirements of the Code and contains no unreasonable terms.

Breaches of Code

If a tied pub tenant breaches the Code, the consequences can vary depending on the nature and severity of the breach. The following are some potential outcomes:

• Dispute resolution: The pub-owning business may seek to resolve the issue through informal discussions or mediation to address the breach and find a mutually agreeable solution.
• Formal complaints: The pub-owning business can file a formal complaint with the Adjudicator, who may investigate the matter.
• Remedial actions: The Adjudicator may require the tenant to take specific actions to remedy the breach, such as adhering to the terms of the lease or making necessary changes to business practices.
• Termination of agreement: In severe cases, the pub-owning business may have the right to terminate the lease or agreement with the tenant, depending on the terms outlined in their contract.
• Financial penalties: While the primary focus of the Code is on ensuring fair treatment and transparency, financial penalties may also be imposed if deemed appropriate by the Adjudicator.

These measures are designed to ensure that both pub-owning businesses and tenants adhere to the principles of fair dealing and transparency outlined in the Tied Pubs (Scotland) Act 2021.

Compliance with the Code and penalties for non-compliance

The Adjudicator may investigate a pub-owning business’s compliance with the Code if they have reasonable grounds to suspect that the business has failed to comply.

The penalties for non-compliance with the Code include:

• Investigations and enforcement: The Adjudicator has the authority to investigate breaches of the Code. If a pub-owning business is found to be non-compliant, the Adjudicator may take enforcement action.
• Financial penalties: The Adjudicator can impose financial penalties on pub-owning businesses that fail to comply with the Code. These penalties are intended to deter non-compliance and ensure adherence to the Code’s provisions. The details are set out in the financial penalties regulations.
• Remedial orders: The Adjudicator can issue orders requiring pub-owning businesses to take specific actions to remedy any breaches of the Code. This can include changes to business practices or compensation to affected tenants.
• Public reporting: The Adjudicator can publish reports on investigations and enforcement actions, which can impact the reputation of non-compliant businesses.

Enforcement 

Failure to comply with the Code may result in one or more enforcement actions. The adjudicator may:

a) direct the business to do, or stop doing, something in order to comply with the Code;
b) direct the business to publish specified information relating to the investigation in a specified manner by a specified deadline; 
c) impose a financial penalty on the business. (Financial penalties would only impact on pub-owning businesses, not tenants.)

Financial penalties

The Adjudicator aims to ensure that penalties are fair, proportionate and effective in promoting compliance with the Code. Financial penalties for non-compliance are determined by the Adjudicator based on several factors:

• Severity of the Breach: The seriousness of the violation and its impact on the tied pub tenant.
• Frequency of Breaches: Whether the pub-owning business has a history of non-compliance or if this is a repeated offence.
• Intent and Cooperation: The intent behind the breach and the level of cooperation shown by the pub-owning business during the investigation.
• Financial Gain: Any financial benefit the pub-owning business gained from the breach.
• Mitigating Circumstances: Any mitigating factors that might reduce the severity of the penalty, such as efforts to rectify the breach promptly.  
• Any other information reasonably considered to be relevant by the Adjudicator.

The maximum permitted financial penalty that the Adjudicator can impose on a pub-owning business for failing to comply with the Code is 1% of the pub-owning business’s annual turnover, as determined by The Tied Pubs (Fees and Financial Penalties) (Scotland) Regulations 2024. 

Where the business is part of a wider pub-owning group, the percentage will apply to the combined annual turnover of the group in the UK. This may represent a significant penalty.

Public reporting

Following an investigation into a pub-owning business’s compliance with the Code, the Adjudicator must publish a report on the investigation. The investigation report must state:

a) the Adjudicator’s findings and the reasons for them; and
b) what enforcement action (if any) the Adjudicator has taken or intends to take and the reasons for that decision.

A report need not identify the investigated pub-owning business, however, if the Adjudicator intends to identify the business, the Adjudicator must give the business a reasonable opportunity to comment on a draft of the report before publishing it.

Investigation costs

In some circumstances, a pub-owning business may be required to pay for some or all of the costs of an investigation if, at the end of the investigation, the Adjudicator finds that the business has failed to comply with the Code. 

The Adjudicator may require a person, other than a pub-owning business, to pay some or all of the cost of an investigation if: 
a) the investigation was initiated as a result of a complaint made by the person; and
b) the Adjudicator is satisfied that the complaint was vexatious or wholly without merit.

Liability to make payment of investigation costs arises when the Adjudicator gives a person a notice in writing that states:
a) that the Adjudicator is requiring the person to make a payment in respect of the costs of an investigation;
b) the reason the Adjudicator is doing so;
c) the amount of the required payment;
d) the period within which it must be paid; and
e) how it must be paid.

The maximum amount  of an investigation costs payment required must not exceed the Adjudicator’s costs in carrying out the investigation and taking enforcement action at the end of the investigation.

Arbitration

A dispute can be submitted to arbitration by either a tied-pub tenant or a pub-owning business. The Adjudicator must act as the arbitrator, or appoint another person to do so, if the dispute is:
a) between a tied-pub tenant and a pub-owning business;
b) about whether the business has complied with a term of the Code, other than an excluded term; and
c) submitted to the Adjudicator for arbitration either under section 15 or in accordance with an agreement between the parties to the dispute.

A dispute may be referred to arbitration only if the tenant has first notified the pub-owning business that they consider there has been a failure to comply with the Code. That notification must be given by the tenant to the pub-owning business within 6 months of the date upon which the alleged failure to comply with the Code occurred.  

This 6 month period can begin on: 
a) the day on which the alleged failure to comply with the code occurred; or 
b) where the alleged failure was a continuing one, the day on which the failure ceased; or
c) the day on which the tenant became, or could reasonably be expected to have become, aware of the alleged failure, if later than the day mentioned in (a) or (b). The dispute itself must then be  submitted to arbitration within a period of four months beginning with the day falling 21 days after the business was notified. 

The 21-day period is to allow the parties a reasonable time to try to resolve the dispute without the need for arbitration. 

The six-month and four-month limits are designed to ensure that any alleged failures to comply with the Code are addressed promptly. The four and six months periods are always measured in calendar months, so if either period begins on the 29th, 30th or 31st of a month, and there is no corresponding date four or six months later, then the period ends on the last day of that later month (e.g. a four month period would end on 28th February if the period began on 31st October).

Arbitration fees

When parties seek arbitration, there is a fee structure that aims to balance the interests of both parties and encourage fair dispute resolution.

A tied-pub tenant must pay a fee of £250 to the Adjudicator in respect of a dispute submitted to arbitration by the tied-pub tenant under Section 15 (submission of dispute to adjudicator) of the Act. The fee is payable at the time the dispute is submitted to cover associated costs with the arbitration process. (Section 17(1))

While tenants bear the arbitration fee, tenants and/or pub-owning businesses may also be liable to pay for the arbitrator’s reasonable fees and expenses in most situations. (Section 16) 

More information

To find out more about the Code, or to get advice, please visit www.gov.scot or contact the Adjudicator - pubscodeadjudicator@gov.scot