Statutory code: Amendment seeks to exempt pubcos that invest from MRO

27-Jan-2015 - Last updated on 28-Jan-2015 at 08:56 GMT

The Bill is currently making its way through the House of Lords

Pub companies may be exempt from having to offer a market-rent-only option if they significantly invest in a tenant’s pub, following a proposed amendment to the Small Business Bill.

Conservative peer and former director of Marston’s, Lord Hodgson of Astley Abbots, tabled the amendment to the Bill ahead of the final committee stage in the House of Lords tomorrow.

The amendment states: “The Pubs Code shall offer an exemption from the Market Rent Only Option for a mutually agreed period in return for a significant investment by a large pub-owning business in that tenant’s pub”.

Labour peer Lord Stevenson of Balmacara also tabled an amendment which adds another trigger for MRO and seeks to prevent large pub companies from splitting into smaller subsidiaries in order to avoid being covered by the code.

It states: “The Secretary of State may by order infer the right of tied-pub tenants to trigger a Market Rent Only Option in the event of transfer of title or administration if in their view avoidance of being covered by the Pubs Code was a sole or significant reason for the sale or administration of that business.

“The Secretary of State may impose the provisions of the Pubs Code upon companies with fewer than 500 pubs if they are part of a group or have similar ownership to other companies which cumulatively own over 500 pubs.”

Lord Berkeley (Labour) also added a guest-beer option to the code in a new amendment, which would mean a tied pub tenants could buy one brand of cask-conditioned or bottle-conditioned beer “from any supplier at a freely negotiated price, and free from any penalty”.

The Government has added a new clause regarding disputes stating that the Secretary of State “may by regulations confer functions on the Adjudicator in connection with the resolution of disputes relating to the offer of a market rent only option”.

The Grand Committee stage is followed by the Report Stage in the Lords, before the Bill comes back to the Commons for the final chance for the Government to seek to reverse any changes the Lords have made.

Reaction

Brigid Simmonds, chief executive of the British Beer & Pub Association, said: “We support a number of amendments which will make the new market rent only option workable and remove some of the unintended consequences in the bill.

“We are particularly keen to see the option to opt out of the right to an MRO for a period of years, in return for capital investment from the pub company.

“We also support an exemption for genuine franchises where no rent is paid and the licensee’s share of the profit is unaffected by the price paid for tied products and for short term agreements to be excluded from the legislation.

“The guest beer option would be a death knell for many breweries and has already been considered and rejected by the Government in consultation. The choice of beers in tenanted and leased pubs is greater than in independent pubs and with over 1,400 breweries in the UK (more than Germany), there is no evidence to support the need for this change. Making a guest beer option just cask or bottle conditioned beer would be questionable under competition law.

“We will wait to hear what the Minister has to say on these issues, and consider our position again before Report Stage.”