Pubs Code and the Adjudicator

Neil Carmichael Excerpts

Thursday 14th April 2016 Westminster Hall

[Greg Mulholland]

The hon. Gentleman is correct. That is why we are doing this. The British Pub Confederation and other organisations have clearly written about these two glaring loopholes. In the wording of the pubs code, BIS must ensure that any waiver is limited, reasonable and entered into willingly by both parties. The code must also restrict waiver-free investment to a tenant who has been in a substantive agreement, not a tenancy at will, for two years, and must clearly forbid any waivers for investment for new tenants.

I have brought the attention of the Minister and her Department to pubco gaming and some of the behaviour at the moment, and have not really had any response. Paragraph 127 of the impact assessment says:

“Some specific risks include…That pub owning companies find a loop hole in the statutory code that allows them to continue acting as they do currently. To mitigate this risk the rules will be written in terms that are difficult to game. The code, which is likely to be set out in secondary legislation, will be amendable in certain circumstances which will allow it to reflect new developments in the industry and close any loop holes that are found.”

We have already identified these two loopholes, which must now be closed if people are going to have confidence in the code, and if it is going to work in the intended way.

[Neil Carmichael (Stroud) (Con)]

I am certainly a supporter of this code, but I note that codes like this can have unintended consequences. One unintended consequence might be that pub owners would be put off from investing if they were discouraged by the changes that the hon. Gentleman recommends. Would it not be wiser to allow the code to bed in and then review it? The risk is that gaming and unintended consequences could occur, which we would need to monitor anyway.

[Greg Mulholland]

I thank the hon. Gentleman for his intervention, though I do not agree with him. With respect, I feel he has always been slightly confused on this issue. These are clear loopholes that could have very damaging consequences. I can tell the hon. Gentleman, the Minister and the House that pub companies are currently doing all they can to avoid the legislation and the code before 26 May. They are applying pressure on lessees to take up a rent review before 26 May, in advance of scheduled reviews, in order directly to circumvent the code and the market rent-only option specifically.

Some tenants are being coerced to relinquish long leases and take up five-year contracts that are not renewable, so that they are not subject to a market rent-only option. Some pubcos—I have seen one such case myself—are cynically issuing section 25 notices, ending existing tenancies or leases by 31 March to escape the impact of the market rent-only option. The Government must make it clear that the pubs code and the market rent-only option apply to all agreements that have renewal dates or rent reviews from 1 June 2016, because there is some confusion. I hope we will hear that from the Minister today.

Some tenants are also being bribed to sign an agreement without a market rent-only option. One tenant contacted the Save the Pub group to say that she had been offered a 20% drop in her dry rent if she signed a new five-year non-renewable tenancy, which therefore will not have the market rent-only option. It is funny, however, that the pub company did not mention that last bit. It simply presented the agreement to her and said, “Would you like to sign this very attractive new lease with lower rent?”

Is BIS aware of what is going on? It has not said so or responded. If it is aware, is it dealing with the problem, and how? We need a clear announcement that any agreements made from the date on which the pubs code comes in will be subject to the market rent-only option, and that the sort of behaviour that is going on is unacceptable. That is what we want to hear from the Minister today.

Before I move on to the Pubs Code Adjudicator, I will simply say that if the Minister and her Department make the two changes that have been requested, I will announce that we are happy and will praise the Minister, her team, the Department and the Government for getting it right and for listening. All we ask is for those two loopholes to be closed and for her to criticise the way in which pub companies are cynically trying to avoid the code before it even comes in.