Small Business, Enterprise and Employment Bill

Lord Hodgson of Astley Abbotts Excerpts

Tuesday 17th March 2015 Lords Chamber

[Baroness Neville-Rolfe]

My Lords, I am grateful to the noble Lord, Lord Mendelsohn, for his very kind remarks and for giving me the opportunity to return briefly to the matter of pubs. As he said, I sent a letter to the noble Lord, Lord Stevenson, yesterday and I have, for the convenience of the House, placed a copy in the Library.

Noble Lords expressed concern on Report about protections that would be available to a tied tenant whose pub is sold. Let me clarify the position: when a tied pub, owned by a company covered by the statutory code, is sold to another code company, the rights of the tenant under the code will be unaltered and will continue seamlessly. A tenant in this situation will retain the right to exercise the market rent only option after sale if any of the MRO triggers are activated. Where a tied pub is sold by a code company to a company outside the scope of the statutory code—for example, to a family brewer—the tenant will retain all the protections of the code except for MRO until the end of the lease or until completion of the next rent review, whichever comes first. In this scenario, if the purchasing company offers the tenant an agreement on different terms from their existing agreement, the tenant will have the right to a rent review.

If the tenant considers that the rent review breaches the code then he or she will be able to refer the matter to the adjudicator for arbitration. The adjudicator will not have powers to investigate non-code companies because the investigation powers are designed to address suspected systemic abuses of the code across many tenants. It would not be right to include in scope companies which are covered by the code only by virtue of the historic ownership of some of their pubs and in respect only of those particular pubs.

I turn briefly to the matter of investment. I have been clear that the Government want to see investment in tied pubs. That is key to the success of the industry, both for pub companies and for tenants. Pubs are at the heart of our communities and our heritage. They are important to the old and the young. We want pubs to thrive. I therefore announced on Report that the Government would set out in secondary legislation how tenants and pub companies can agree a waiver of two MRO triggers in exchange for significant future investment in a pub. I would like to make it clear that the waiver will apply only to the renewal and scheduled rent review triggers for MRO. All other code protections will remain in place during the waiver period. This means that the two exceptional triggers for MRO will remain; namely, a significant price increase and an economic event which impacts on the tenant’s ability to trade. The Government will set out safeguards in the code to ensure the tenant is protected from attempts to abuse a waiver. Any attempt to avoid these safeguards could be referred to the adjudicator for arbitration and redress.

[Lord Hodgson of Astley Abbotts (Con)]

I am grateful to my noble friend. I hoped to get through this afternoon without having to discuss pubs yet again. When a pub is sold by one of the companies covered by the code to a company that is not covered by it—a family brewer was the example she used—who enforces the rights of the tenant against the pub company that is outside the code? At that point, as my noble friend said, it is not part of the code so how does the adjudicator make that work?