Tied pubs - Scottish Pubs Code - part 2: 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 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."

3. The Scottish Pubs Code will be made through secondary legislation and will need to be approved by the Scottish Parliament. The Adjudicator will oversee and enforce the code and can arbitrate in disputes between pub-owning businesses and tenants about whether a pub-owning business has complied with the code.

4. A Pubs Code 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 what else the Scottish Pubs Code should contain beyond Market Rent Only leases and guest beer agreements (which were subject to a separate Scottish Pubs Code Consultation – Part 1 earlier this year). This consultation includes proposals for information to be provided to new tenants and at lease renewals, proposals on rent reviews and rent assessments, dilapidations and repairs.

6. The consultation covers proposals for determining the maximum financial penalty which the Adjudicator can apply when a pub-owning business has failed to comply with the code. The consultation also seeks your views on when tied pub tenants should pay arbitration fees and expenses (the Act already deals with the responsibility of pub-owning businesses for arbitration fees and expenses).

7. After all the responses to this consultation have been considered, Ministers will make a final decision on the proposed content of the Scottish Pubs Code. Regulations setting out the whole Scottish Pubs Code will be submitted to the Scottish Parliament for approval. We are aiming for the code to be in place by the end of November 2022.

What to expect in the consultation document

8. Chapters 2 and 3 set out the Government's proposals on the rest of the Scottish Pubs Code and proposals on financial penalties and fees and expenses for arbitration.

9. Annex A contains draft regulations on the rest of the Scottish Pubs Code.

10. In terms of policy aims, the Scottish Government is intervening here to re-balance the relationship between landlords and tenants. The code should be fair for both parties and it should be straight-forward, unambiguous and easy to use/follow, without unnecessary process.