Tied pubs - Scottish Pubs Code - part 1: consultation

Chapter 3: Proposals: Guest beer agreements

29. Under the Act, the Scottish Pubs Code must require pub-owning businesses to offer to enter into a guest beer agreement with tenants in certain circumstances. A guest beer agreement allows a tenant to sell to their customers at least one beer that the tenant has chosen, at a price of the tenant's choice. The beer can be changed as often as the tenant wishes. The code can set out other criteria that a guest beer agreement must meet. The code can also describe the circumstances where a guest beer agreement must be offered.

30. The Scottish Government's policy objectives on guest beer agreements are as follows:

• To give the tenant a further opportunity to improve their business and rebalance the relationship between tenant and landlord
• To uphold the second regulatory principle in the Act – that tied pubs are not worse off than they would be if they were not subject to any tie
• To support small brewers
• To improve consumer choice.

31. Draft code provisions on guest beer agreements are in Annex A.

Guest beer agreements

Question 19: To what extent do you agree with the policy aims on guest beer agreements?

Strongly agree

Agree

Neither agree or disagree

Disagree

Strongly disagree

Please explain your reasons for agreeing or disagreeing with the proposals.

Characteristics of a guest beer agreement

32. The Scottish Government propose that guest beer agreements should be for beers with small production capacity which will support small brewers and improve consumer choice. It is proposed that guest beer agreements should be for beers whose annual production level does not exceed, or is not estimated to exceed, 60,000 hectolitres.

33. It is difficult to establish exactly what is a small production level. The UK Government's Small Brewers' Relief (a tax relief) is currently available to any brewer that produces less than 60,000 hectolitres of beer a year^[8]. Whilst this is not an exact comparison, it can give an indication of what might be a small production value. We would welcome views on the proposed threshold of guest beer agreements being focused on beers whose annual production level does not exceed 60,000 hectolitres.

Question 20: Do you agree or disagree that a guest beer agreement should cover brands of beer with small production levels?

Agree

Disagree

Don't know

Please explain your reasons for agreeing or disagreeing.

Question 21: Is 60,000 hectolitres the appropriate production level to capture small production beer brands?

Yes – please go to question 23

No

Don't know

Question 22: If you have an alternative suggestion for a different production level, please state it here.

34. The intention is that the code will clarify that the tenant can buy a guest beer from whomever they like, in whichever format they like (e.g. casks or kegs), provided the beer in question does not exceed the given production level. The proposal is that the code will also allow for a guest beer agreement to include a reasonable service equipment charge if the pub-owning business is content to service this under a principal brewer arrangement, for example.

Question 23: Do you have any other comments on the characteristics of a guest beer agreement?

Requirement to offer a guest beer agreement

35. The Scottish Government wishes to find a balance between tenants being able to exercise their guest beer rights against the administrative time and costs for pub-owning businesses involved in offering such agreements. It is proposed that guest beer agreements need not be offered in certain circumstances.

Question 24: Do you agree or disagree that a guest beer agreement need not be offered in the following circumstances?

The remaining term of the lease is less than 6 months

• Agree
• Disagree
• Don't know

There is already a guest beer agreement in place which matches the definition set out in paragraph 4(3) of Schedule 1 to the Act.

• Agree
• Disagree
• Don't know

The tenant has been offered a guest beer agreement within the last 2 years. (This does not apply to agreements offered prior to the code being created.)

• Agree
• Disagree
• Don't know

The tenant is currently involved in MRO negotiations.

• Agree
• Disagree
• Don't know

Please explain your reasons for agreeing or disagreeing with the proposals.

Question 25. If you have any comments or suggestions on the circumstances in which guest beer agreements need be offered, please provide these here.

Process for offering a guest beer agreement

36. The Scottish Government proposes that a tenant must request a guest beer agreement in writing and that the pub-owning business should send an offer as soon as possible and no later than 4 weeks after the request is made.

37. The guest beer agreement offer must offer to vary the existing lease in a minimal way to include only the guest beer agreement. The pub-owning business and tenant are to meet their own legal costs and they should minimise the costs and administrative burden of entering into any guest beer agreement.

Question 26: If you have any comments on the process for offering guest beer agreements, please provide these here.