Tied pubs - pubs code consultation: workshops with tenants

Appendix B: Pre-workshop task

Background information

In April 2021, the Tied Pubs Bill was passed into law as the Tied Pubs (Scotland) Act. The Act requires the Scottish Government to create a Scottish Pubs Code that will regulate the relationship between tenants and their landlords. The Code will be enforced through a new, independent Scottish Pubs Code Adjudicator who will be appointed by Scottish Ministers. The Adjudicator will have the following key purposes:

a) Investigating compliance of pub-owning companies with the Code

b) Monitoring whether the pub-owning company is complying with a direction from the Adjudicator

c) Overseeing the offer of Market Rent Only leases to tenants

The Adjudicator will have various powers to enable it to carry out its functions and will have the power to impose fines.

The new Scottish Pubs Code will draw on aspects from the existing Scottish voluntary code of practice and the tied pubs code from England and Wales (which is set out in legislation). However, the Scottish Government is also very keen to hear the views of tied pub tenants on the proposed Code and what they think it should cover. That's why the Scottish Government has asked Progressive to conduct a workshop with tied pub tenants from around Scotland.

Proposals for the Scottish Pubs Code

What should the Scottish Pubs Code cover?

Before the workshop, please look at the existing voluntary code for Scotland and think about what the new Code should cover:

http://www.thepubgoverningbody.co.uk/wp-content/uploads/2016/07/Code-of-Practice-Scotland.pdf

Think about which elements of this code are most important and why, and should be included in the new Scottish Pubs Code. Also think about what else could be included that is not covered here. Below is a summary of some of the key things covered by the current voluntary Code in Scotland:

Letting of premises

Minimum requirements for company information e.g.

• Summary of general terms of agreement
• Treatment of cask conditioned beer
• Tenancy checklist
• Full description of premises including any restrictions on use

Business support and development

Business Development Manager:

• Appointment and role of Business Development Manager
• Requirements for Business Development Managers e.g. training and experience

Business support:

• Pub owning company to set out how relationship with tenant will work
• Pub owning company to provide information on range of support and advice available through them
• Pub owning company to set out policy on requests from tenant for help arising from circumstances outwith their control that have adversely affected business

Rent assessments, reviews and renewals

Rent assessments

• Obligations on tenants e.g. seeking advice from trade valuation advisor before accepting proposed rent
• Documenting alterations/changes carried out at tenant's own expense
• Rent Assessment Statements
• Making tenants aware of the basis of the rent assessment and how it's calculated
• Undertaking the rent assessment

Rent review and renewals

• Provision of relevant information and timetables by company
• Requesting a rent review

Complaints procedures

• Escalation of complaints within the company
• Company responsibilities around explaining procedures
• How the complaint should be made, dealt with and if necessary escalated
• Timeframes for addressing and resolving complaints

End of tenancy

• Obligations around purchase of fixtures and fittings at end of tenancy
• How companies will deal with requests for surrender outside agreed notice periods

Requirement to give information to tenants

The Code will require pub-owning companies to provide certain types of information to tenants. The Act gives as an example information on rent assessments. The Code will set out how information should be provided, its content and format.

Questions to consider:

• If the company that owns your pub was to carry out a rent assessment, what information would you want them to provide about the assessment?
• How should that information be presented?
• What other information do you think the Code should oblige the pub-owning company to provide you with? Having a look at the voluntary code may help you think about this.

Market Rent Only (MRO) leases

The Code will require the pub-owning company to offer the tenant a MRO lease if they request it, subject to certain exceptions. The MRO lease offer must comply with the following:

a) The tenant will only pay the market rent for the lease, to be determined jointly between the tenant and pub-owning company (if they cannot agree, the Adjudicator can appoint an Independent Rent Assessor to decide the rent)

b) There will be no product or service ties included in the lease other than insurance - so for example no requirement to sell specific beers or other alcoholic drinks

c) The legislation assumes the MRO offer should usually be made by varying the terms of the existing tenancy agreement rather than a completely new lease, and it should be varied only enough to make it an MRO lease. Your views are also welcome on this.

The Code may also specify a time limit on how long the negotiation of a MRO lease should take.

Questions to consider:

It may be that pub-owning companies are excepted from the requirement to offer a MRO lease if there has been recent substantial investment in the pub.

• What do you think about this in principle – does it seem fair to you or not?
• What would be the benefits and drawbacks of MRO leases?
• What kind of things do you think would be classed as 'substantial investment'?
• What information do you think you should be provided with as a tenant if you were thinking about applying for a MRO lease?
• How long following an investment do you think the tenant should be prevented from being granted an MRO lease?

Guest beer agreements

The Code will require pub-owning companies to allow tenants to enter into a guest beer agreement, whereby the tenant can sell at least one guest beer of their choice. The tenant will be able to change the chosen beer as often as they wish without incurring any penalties.

Questions to consider:

• What are your general views on this?
• How important is it to you that this provision is in the Code?
• What information about this provision do you think should be in the Code?
• Should guest beer be focused on beers from smaller or local breweries to improve consumer choice?