Agreement over Lords debate outcome

In a rare moment of agreement, both sides of the controversial pubs code debate said they were pleased with the Government’s announcement that exemptions to the market-rent only option will be consulted on separately to the Bill and introduced as secondary legislation.

Business Minister Baroness Neville-Rolfe said during the House of Lords report stage yesterday the Government will use secondary legislation to allow tenants and pubcos to agree a waiver for MRO in cases where pubcos are willing to make “significant investments”.

She also said she would use existing powers within the pubs code to exempt “genuine franchise agreements” from the MRO clause.

Amendments calling for similar measures to be enshrined within the pubs code were withdrawn after Baroness Neville-Rolfe’s announcement.

'Government deserves praise'​

Greg Mulholland, co-ordinator of the Fair Deal for Your Local campaign group, who tabled the original MRO clause, thanked Business, Innovation & Skills Ministers in both houses and civil servants “for the way they engaged and consulted” over the past few weeks.

“​The Government deserve praise for honouring their promise to respect the will of the House of Commons and we now have a genuine, clear, deliverable and legal market rent only option that tied pubco tenants can pursue at specified trigger points, which is what we had campaigned for,” he said. 

"It is also sensible that certain complicated issues are subject to the consultation over the detail of the statutory code, including genuine franchised pubs. I look forward to engaging in this with all sustainable companies and associations to help get this right.” 

Well done to the House of Lords for improving the Small Business Bill and bringing a #fairdealforyourlocal a step nearer! #pubsmatter RT

— FairDealforYourLocal (@FairDeal4Locals) March 9, 2015

Brigid Simmonds, chief executive of the British Beer & Pub Association, also welcomed the announcement and said she was pleased the Government recognised the need to ensure the legislation does not deter capital investment in pubs and does not cover franchise agreements.

“​Whilst those who opt for a MRO option have the absolute right to source finance from anywhere, those who wish to remain tied should equally have the right to choose a partnership with their pub company and defer MRO in return for substantial capital investment.  We look forward to the consultation in due course.

“There is no point in offering MRO to a franchise where no rent is paid, so we are pleased that the Government has now recognised this and seeks to exempt these types of agreement from MRO in secondary legislation,” she said.

Yesterday, the Government also successfully introduced an amendment that extends the protections of the code – apart from the MRO option – to tenants whose pub is sold by a “code company” to one outside the code.

Simmonds said while this will involve greater cost, it is “considerably better” than the proposal that such licensees would retain the right to MRO, which she claims would have led to “no pubs changing hands”. 

Parallel-rent assessments​

However, she said she is concerned about the re-introduction of parallel rent assessments (PRAs) for existing licensees “who of course now have the option of MRO”. 

“Comparing the profitability of a tied pub with a free-of-tie pub is not easy as has already been highlighted by RICS.  It is essential that there is a link between a PRA and an MRO calculation which is both simple and easy to understand for both the pub company and licensee,” she said.

Kate Nicholls, chief executive at the Association of Licensed Multiple Retailers, said: “Government Ministers and officials are to be applauded for the intensive and exhaustive consultation they have engaged in over the past three months. This has been inclusive, detailed and probing and has ensured that we now have a workable and practical solution which will help to underpin investment in the sector as well as long-term sustainable growth.

"Much of the detail of how the proposed new powers will work and their implementation on the ground has yet to be determined and we look forward to continuing the productive dialogue with all stakeholders to ensure that this careful balance is maintained going forward.”

The Bill will complete its Third Reading in the House of Lords next week before returning to the Commons.