The Department for Business, Innovation & Skills said while there is no expectation that the assessment would produce rents of zero, there is “a theoretical possibility” that a rent of zero could be suggested in order to meet the code’s principle that a tied tenant is no worse off than a free-of-tie tenant.
A spokesperson told the Publican’s Morning Advertiser: “We would expect this to be rare and only in cases when there is extreme differential between the tied and free of tie price in the calculations.
“The aim of our legislation is to improve the ability of all tied tenants to secure a fair deal through negotiation and if pub companies treat tenants fairly then they will not need to request a parallel rent assessment.”
Code proposals
The Government’s code proposals outline that pub companies with 500 or more tied pubs would be required to offer parallel tied and free-of-tie rent assessments to potential or existing tenants if they request them when they are considering taking on a pub tenancy or at the time of their regular tied rent review.
It said: “A tenant would have the right to request this parallel free-of-tie rent assessment once the parties had been unable to reach agreement on a tied rent offer following a period of negotiation. [...] The new adjudicator will give tenants confidence that if the parallel rent assessment provision is not properly implemented, then they can seek redress from a truly independent third party.”
Last month, British Beer & Pub Association policy director Andy Tighe said that parallel rent assessments could be unlawful if it means an adjudicator could use them as a basis to determine rent.
The Royal Institute of Chartered Surveyors also raised concerns in its written submission to the Small Business, Enterprise & Employment Bill Committee, claiming that the Government’s current explanation would produce an assessment that is not backed up by any market evidence.