Pub companies, pub tenants & pub closures: introducing statutory regulation (2014-15)

Over the last twenty years the number of pubs across the country has fallen significantly, an issue that has aroused considerable popular interest as well as much activity within the House and its Committees. The trend has been associated with an overall decline in beer sales and the growth in the off-licence trade, particularly in the sales of alcohol by supermarkets. For many commentators the most striking aspect of the pubs sector has been the continued market strength of the pubcos – the small number of companies which lease out their pubs – despite consistent complaints that the system for regulating the legal relationship between the pubcos and their tenants is not fit for purpose.

In June 2014 the Coalition Government announced that it would legislate ‘at the earliest opportunity’ to establish a Statutory Code and Adjudicator. Under the Government’s proposals all tied tenants would be covered by a ‘Core Code’, “providing them with increased transparency, fair treatment, the right to request an open market rent review if they have not had one for five years, and the right to take disputes to an independent Adjudicator.” An ‘Enhanced Code’ would cover tenants who are tied to a pub owning company with 500 or more tied pubs; this would “require their pub owning company to provide them with a parallel free-of-tie rent assessment if rent negotiations for their pub fail.”

On 25 June the Government published the Small Business, Enterprise and Employment Bill (Bill 11 of 2014‑15); part 4 of the Bill would introduce a statutory Pubs Code for England & Wales, and an independent Pubs Code Adjudicator to enforce it. One controversial aspect of the Bill was that the Code would not include a ‘market rent only option’: provision to give all tenants the automatic right to choose a free-of-tie agreement. However at the Report stage of the Bill on 18 November 2014, the Commons agreed an amendment, tabled by Greg Mulholland, to make the ‘market rent only’ option a feature of the new regulatory regime.

Subsequently the Government announced that it accepted this change ‘in principle’, and introduced a series of amendments to the Bill in the Lords, at both the Committee stage and at Report, to this end. In addition the Minister, Baroness Neville-Rolfe, set out the Government’s position on some issues of concern that had been raised during these debates in an open letter. At Third Reading, speaking for the Opposition, Lord Mendelsohn said that, as a result of the Minister’s letter, and the amendments made to the Bill, “these measures have our strong support and we are grateful to the Minister and the Government for listening and their positive response and detailed scrutiny of our suggestions.” These amendments were agreed by the Commons on 24 March, and the Small Business, Enterprise and Employment Act 2015 received Royal Assent on 26 March 2015.

This note looks at the passage of this primary legislation to provide for the new Pubs Code. A second background note discusses the historical developments that led to this initiative (SN6740).