The Small Business, Enterprise and Employment Act 2015 (SBEEA 2015) requires the Secretary of State to introduce a statutory Pubs Code (Code), governing the relationship between large pub-owning businesses (those that own 500 or more tied pubs) and their tied tenants. The SBEEA 2015 also provides for a new independent adjudicator to enforce the Code.

The two driving principles of the Code are:

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

The Code will make 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 (MRO) option to go free of tie and pay only a market rent in specific circumstances, including at a rent review or renewal of tenancy

On 29 October 2015, BIS published the first of two consultations on the proposed Pubs Code Regulations 2016 that comprise the Code. In the first consultation, the Department for Business Innovation and Skills (BIS) sought views on delivering one of the two principles of the reforms: that a tied tenant should be no worse off than a free-of-tie tenant (see Legal update, BIS consultation on draft Pubs Code Regulations 2016).

The Department for Business Innovation and Skills (BIS) has now published part two of its consultation on the draft Pubs Code Regulations 2016 and Pubs Code Adjudicator.

The closing date for the consultation is 18 January 2016.

Tenants with tied pubs will be interested in the proposals in Part Two of the consultation relating to:

• Repair and maintenance obligations.
• The exemption of tenancies at will and temporary agreements from the ambit of the Code:

During the passage of the SBEEA 2015, the government committed to exempt from the scope of the Code tenancies at will and temporary agreements that were genuinely short-term, in that they did not extend beyond a certain limited period. The government has concluded that 12 months seems a reasonable length for the limited exemption period, and is seeking views that this is suitable.

• The sort of information a new tenant should receive from the pub-owning business when entering into a tenancy at will or short-term agreement.

BIS is also consulting on a number of other issues in this consultation which include:

• Whether the government's approach to the MRO option, along with the requirements to provide information in relation to a tied rent offer, fulfil the objectives of a parallel free-of-tie rent assessment.
• The effect of removing from the Code the condition that there must be a proposal for an increase in the rent at the rent assessment before a tenant may exercise the MRO option.
• Whether there are any provisions that should be specified as non-arbitrable.
• Contractual inconsistencies with the Code.
• Enforcement of the Code (including the maximum financial penalty that the adjudicator may impose).

For further advice contact a member of our Commercial Property team.

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