Tied pubs - Scottish Pubs Code - part 1: consultation

Chapter 1: Introduction

Background

1. The Tied Pubs (Scotland) Bill was passed unanimously by the Scottish Parliament on 23 March 2021. It became an Act on 5 May 2021. The Act provides for a Scottish Pubs Code to govern the relationship between pub companies and tied pub tenants and establishes a Scottish Pubs Code Adjudicator to oversee and enforce the code. The aim of the legislation is to ensure that there is a balanced relationship between the position of the business which owns the pub and the tenant. The Act promotes fairness and equitable treatment within commercial agreements.

2. The Tied Pubs (Scotland) Act^[1] commits the Scottish Government to lay a Scottish Pubs Code before Parliament by 5 May 2023. The Scottish Government is seeking to deliver a code that is consistent with the regulatory principles set out in the Act:

"(a) the principle of fair and lawful dealing by pub-owning businesses in relation to their tied-pub tenants,

(b) the principle that tied-pub tenants should not be worse off than they would be if they were subject to neither a product tie nor a service tie,

(c) the principle that any agreement between a pub-owning business and a tied-pub tenant should fairly share the risks and rewards amongst the parties."^[2]

3. The Scottish Pubs Code will be made through secondary legislation and will need to be approved by the Scottish Parliament.

4. A Pubs Code^[3] for tied pubs has existed in England and Wales since 2016. This only applies to pub-owning businesses owning 500 tied pubs or more.

Purpose of this paper

5. This consultation paper seeks your views on Market Rent Only lease and guest beer agreement provisions in the Scottish Pubs Code.

6. After all the responses to this consultation have been considered, Ministers will make a final decision on the proposals for Market Rent Only leases and guest beer agreements. We will be consulting separately on wider aspects of the code. Regulations setting out the whole Scottish Pubs Code will be submitted to the Scottish Parliament for approval.

What this consultation does not cover

7. The consultation is not about revisiting any aspect of the Tied Pubs (Scotland) Act 2021 and whether a code should be introduced or not. This consultation is rather about what the Scottish Pubs Code should contain.

8. This consultation only covers what the code could include on Market Rent Only leases and guest beer agreements. It does not cover other topics which could be included in the code such as rent assessments (outside of Market Rent Only leases) and information to prospective tenants. It also does not include information on compliance with directions from the Scottish Pubs Code Adjudicator (who will oversee and enforce the code), penalties for non-compliance, fees and expenses for arbitration and terms excluded from arbitration. It is intended these topics will be subject to a consultation in spring 2022.

What to expect in the consultation document

9. Chapters 2 and 3 set out the Government's proposals on Market Rent Only leases and guest beer agreements. Chapter 4 addresses impacts of the proposals in terms of businesses, equalities and other impacts. Annex A contains draft regulations on Market Rent Only leases and guest beer agreements and Annex B contains a partial (i.e. a draft) Business and Regulatory Impact Assessment.