Pubs Code and Adjudicator

The Small Business, Enterprise and Employment Act 2015 introduces:

Contents

1. About the code
2. About the adjudicator
3. Consultations

• a statutory Pubs Code to regulate the relationship between tied pub tenants and the large pub-owning businesses which rent the pubs to them and sell them tied products
• a new independent Pubs Code adjudicator to enforce the code

About the code

The code came into force on 21 July 2016 and applies to all businesses owning 500 or more tied pubs in England and Wales. It governs their relationships with tied pubs but not with their managed houses or free-of-tie pub tenants. The 2 principles of the code are:

• fair and lawful dealing by pub-owning businesses in relation to their tied tenants
• tied pub tenants should be no worse off than if they were not subject to any tie

The code makes sure that tied pub tenants:

• receive the information they need to make informed decisions about taking on a pub or new terms and conditions
• have their rent reassessed if they haven’t had a review for 5 years
• can request a market rent only option to go free of tie and pay only a market rent in specific circumstances, including at a rent review or renewal of tenancy

The Department issued a note of clarification on 3 March 2017, in light of questions raised by stakeholders as to the legality of a provision of the Code and the terms of the Small Business, Enterprise and Employment Act 2015. This note sets out the Department’s clear view that a market rent only compliant tenancy can include a stocking requirement.

About the adjudicator

The Secretary of State for Business has appointed Paul Newby as the adjudicator.

Paul Newby is no longer the PCA.

The adjudicator will be funded through a levy on the pub-owning businesses covered by the code.

The adjudicator has powers to:

• resolve individual disputes
• award redress to a tied tenant if a breach of the code is found
• investigate widespread abuses of the code

The forms of enforcement available to the adjudicator after an investigation are to:

• make recommendations
• require information to be published
• impose a financial penalty

The adjudicator is able to:

• give advice on any matter relating to the Pubs Code to tenants, pub-owning businesses and interested parties
• arbitrate disputes referred to him by tenants for alleged breaches of the Pubs Code
• arbitrate disputes relating to the market rent only process referred to him under the code by either tenants or pub-owning businesses

The adjudicator will have to publish guidance on investigations by 2 November 2016 by the latest and will then have the power to start investigations into breaches of the code.

Before the guidance is published the adjudicator has to consult on the:

• criteria for deciding whether to carry out investigations
• practices and procedures he intends to adopt for investigations
• criteria for choosing to use the various enforcement powers and for deciding the amount of any financial penalty

The adjudicator may also consult on and publish other guidance on any other matter relating to the application of the code or compliance with it.

Under the Enterprise Act 2016 the adjudicator will be required to report to the Secretary of State on any unfair practices by pub-owning businesses aimed at avoiding the pubs provisions of the SBEE Act or the Pubs Code.

Consultations

We consulted on the contents of the code and other regulations. This consultation has 2 parts:

• Pubs Code and adjudicator: market rent only option and rent assessments
• Pubs Code and adjudicator: fees, enforcement and other parts of the code

We received 80 responses to the consultation. These mainly came from:

• pub companies and breweries with 500 or more pubs
• interest groups, trade bodies and other organisations
• tied tenants

The government response to this consultation was published on 14 April 2016.

When we previously consulted on this issue, in 2013, we received more than:

• 1,100 responses from all parts of the industry
• 7,000 responses to an online survey run in parallel

The government response to this consultation was published in 2014, ahead of the introduction of the act to Parliament.

The government has also introduced measures to help protect pubs of community value and taken a number of tax reduction and other measures to support the pubs industry.