Simmonds said: “The public consultation closed on the 18th January and with six weeks to go before implementation on 26th May, we are now told that there will be no transition and that tenants who have a rent review due between 26th May and 25th November will have to be offered a Market Rent Only agreement.
"This is despite the fact that the existing Industry Framework Code requires lease rent reviews to commence at least six months before they are due. Some 40% of the 800 plus reviews due over the next six months have already been completed.
“Disruption”
“When the Groceries Code was introduced there was a six month’s transition between adoption and the need to act on it, and the same should apply to the pubs legislation.
“Quite apart from the disruption to agreements already concluded, with no final details available, there is no time for staff training of those who will have to ensure compliance with the new legislation. Some 1,000 colleagues in the industry need to understand the details of the Code and this will take time.
“This point also applies to tenants, as they will need to be briefed, trained and advised on the new legislation. The adjudicator will also need to produce guidance, advising publicans of their rights under the new code. None of these important actions can reasonably be expected to take place smoothly, without a sensible transition period.
“Unworkable”
“BBPA also has some real concerns about other details of the secondary legislation, but the proposal that the waiver for investment can only be entered into where the investment is at least 200% of dry rent (e.g. £50k rent and £100k investment) and for a maximum of seven years is unworkable. This puts at huge risk much of the £200 million capital invested each year by pub companies in their tied pubs and will ultimately lead to further closures.
“In one company, 80% of their pub investments last year were under 200% of dry rent and, for example, a recent £400,000 investment in an ailing community pub in Newcastle will never happen again as it would not pay back within seven years.
“Finally, for very small entrepreneurs wanting to own their first pub, it is very disappointing that the Government is looking to impose the statutory code elements of the legislation, such as the extensive compliance and information requirements, on them if they buy a pub from one of the large companies. The cost of compliance will be considerable.”
“Upset the pubcos”
Speaking at a House of Commons debate yesterday, BIS minister Anna Soubry said she knew she had ‘upset the pubcos’.
“I have not agreed to the pub companies’ request for a six-month transition. The pub companies saw our draft regulations late last year. The requirement to provide a rent assessment is not new for them. We have staggered the points at which they have to provide MRO, to allow at least two months’ preparation. I know that they are, to put it mildly, less than pleased at that decision, but I take the firm view that they are able to implement the pubs code. They have had long notice of the code coming in, and frankly I just want to get on with it and get the code up and running, so that we can do the right thing by tenants.”