Legalize / United Kingdom / Statutory-Instrument

The Pubs Code etc. Regulations 2016

Type Statutory-Instrument

Publication 2016-07-20

Last updated 2022-04-01

State In force

Department King's Printer of Acts of Parliament

Source legislation.gov.uk

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MRO procedure where a referral is made to the Adjudicator in connection with the independent assessor

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(1) This regulation applies where a matter is referred to the Adjudicator in connection with the independent assessor’s determination of the market rent.

(2) Where the Adjudicator (or a person appointed by the Adjudicator under regulation 58(2)(b) or 60(4)(b))—

(a) directs the independent assessor under regulation 59(3)(b)(ii) to make a second determination of the market rent; or

(b) appoints another independent assessor under regulation 59(3)(b)(iii) or (6)(c) to determine the market rent,

the independent assessor must communicate the determination of the market rent to the tied pub tenant and the pub-owning business within the period of 21 days beginning with the day on which the direction or the appointment, as the case may be, occurred.

(3) Paragraphs (4) and (5) apply where—

(a) the Adjudicator (or a person appointed by the Adjudicator under regulation 58(2)(b) or 60(4)(b)) makes a determination by virtue of regulation 59(3)(b)(ii) or (iii), (6)(b) or (c) or (7)(b); and

(b) the independent assessor determines the market rent in accordance with that determination.

(4) Where the pub-owning business or the tied pub tenant considers that—

(a) the rent determined is not the market rent; or

(b) the independent assessor has failed to comply with regulation 37(4),

either of them may refer the matter to the Adjudicator within the period of 14 days beginning with the day on which the determination was communicated to them.

(5) But if the tenant or the pub-owning business does not refer the matter under paragraph (4), the tied pub tenant must, by notice in writing to the pub-owning business, accept or reject the independent assessor’s determination and the associated tenancy or licence provided to the assessor under regulation 37(1) within the period of 21 days beginning with—

(a) the day on which the determination of the independent assessor is communicated to the tenant; or

(b) if later, the day on which any rent assessment, or assessment of money payable in lieu of rent, being carried out in respect of the tenancy or licence ends.

(6) If the tied pub tenant does not comply with paragraph (5), the tenant is treated as having rejected the determination and the associated tenancy or licence on the final day of the period mentioned in that paragraph.

PART 8 — End of the MRO procedure

End of the MRO procedure

39

(1) This regulation applies where a tied pub tenant has given an MRO notice.

(2) Where the tied pub tenant communicates to the pub-owning business, in writing, a decision to accept a tenancy or licence proposed by the pub-owning business (including where the tenant accepts a tenancy or licence under regulation 37(13), 38(5), 59(2), (5) or (9)), the tenant and the pub-owning business must, as soon as reasonably practicable, enter into the tenancy or licence.

(3) Where the tied pub tenant and the pub-owning business fail to enter into a tenancy or licence in compliance with paragraph (2), either of them may refer the matter to the Adjudicator.

(4) The MRO procedure ends on the earliest of the following days—

(a) where the tied pub tenant and the pub-owning business enter into a tenancy or licence, on the day on which the tenancy or licence is entered into;

(b) where the tenancy or licence under which the tied pub is occupied at the time the MRO notice is given ends, on the day on which the tenancy or licence ends;

(i) the referral period specified in regulation 35(5) ends;

(ii) the tied pub tenant does not, before or during that period, communicate to the pub-owning business, in writing, a decision to accept a tenancy or licence proposed by the pub-owning business;

(iii) the tenant does not make a reference under regulation 35 in relation to the proposed MRO rent; and

(iv) the time allowed under that regulation for making such a reference has expired,

on the day on which the referral period ends;

(d) where the tied pub tenant rejects a proposed tenancy or licence under regulation 37(13) or (14), 38(5) or (6), or 59(2), (5), (9) or (10), on the day on which the tenant rejects that proposal;

(e) where—

(i) a matter is referred to the Adjudicator under regulation 32(2); and

(ii) the Adjudicator (or a person appointed by the Adjudicator under regulation 58(2)(b) or 60(4)(b)) does not consider that the circumstances are such that the pub-owning business must offer the tenant a market rent only option,

on the day of the Adjudicator’s or appointed person’s ruling or, if later, the day after the day on which any further right of referral under regulation 32(2) ends;

(f) where—

(i) a matter is referred in connection with any other aspect of the MRO procedure; and

(ii) the Adjudicator rules that the MRO procedure ends on a specified day,

on the day so specified;

(g) where the pub-owning business conducts a rent assessment or an assessment of money payable in lieu of rent, on the day on which the tenant agrees, in writing, the new rent;

(h) where the pub-owning business sends a full response under regulation 29(4) and the tied pub tenant has not made a referral under regulation 32(2) in respect of it, the day after the day on which the period specified under regulation 32(5) ends.

Disputes about rent etc payable during MRO procedure

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Where the tied pub tenant and the pub-owning business disagree as to whether an amount has become recoverable by the pub-owning business at the end of the MRO procedure as a result of regulation 28(3), either of them may refer the matter to the Adjudicator.

PART 9 — Business development managers and compliance officers

Business development managers

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(1) The pub-owning business must ensure that each of its business development managers—

(a) receives a copy of these Regulations before the business development manager liaises with tied pub tenants over any matters relating to the Regulations;

(b) is provided with appropriate training in relation to the requirements of these Regulations at least once every 12 months; and

(c) deals with tied pub tenants in a manner that is consistent with the principle referred to in section 42(3)(a) of SBEEA 2015.

(2) A pub-owning business must provide to its tied pub tenants information about—

(a) the role of the business development manager; and

(b) the support and guidance which the business development manager will provide to the tenants.

(3) Where a business development manager is responsible for conducting rent assessments or assessments of money payable in lieu of rent, the pub-owning business must ensure that the business development manager receives appropriate training before conducting any such assessment.

(4) A pub-owning business must ensure that the business development manager—

(a) makes appropriate notes of any discussions with tied pub tenants in connection with—

(i) rent proposals;

(ii) rent assessments or assessments of money payable in lieu of rent;

(iii) repairs to the tied pub premises;

(iv) matters relating to the tied pub tenants’ current or future business plans;

(b) provides tied pub tenants with a record of any such discussions within the period of 14 days beginning with the day on which the discussion occurred; and

(c) requests that the tenant respond to the business development manager if the tenant does not agree with any aspect of the record within the period of 7 days beginning with the day on which the record was received.

(5) A pub-owning business must specify, in a document published by the pub-owning business—

(a) its commitment towards the continuous professional development and improvement of its business development managers; and

(b) how it proposes to fulfil such a commitment, referring where appropriate to relevant qualifications and training.

(6) A “business development manager” means—

(a) a person who is employed as such by a pub-owning business; or

(b) any other person who represents the pub-owning business in negotiations with tied pub tenants in connection with the matters listed in paragraph (4)(a).

Duty to appoint a compliance officer

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(1) A pub-owning business must appoint a suitably qualified employee to be the compliance officer, whose role is to verify the pub-owning business’s compliance with these Regulations.

(2) The pub-owning business must ensure that the compliance officer—

(a) is provided with the resources necessary to carry out his or her role, including information relating to the pub-owning business’s obligations under these Regulations;

(b) is entitled to contact the business development managers to discuss matters relating to those obligations;

(c) makes himself or herself reasonably available to tied pub tenants and any other persons acting on their behalf who may have a query relating to these Regulations;

(d) is independent of, and is not managed by, the business development managers;

(e) is entitled to discuss with tied pub tenants the reasons for any decisions made by the pub-owning business under these Regulations;

(f) is entitled to discuss with the Adjudicator matters relating to the pub-owning business’s compliance with these Regulations;

(g) for the purposes of the annual compliance report, maintains records of the training received by the business development managers.

Annual compliance report

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(1) A pub-owning business must ensure that the compliance officer submits an annual compliance report to the Adjudicator relating to each financial year[^f00023].

(2) The annual compliance report must be submitted to the Adjudicator within the period of 4 months beginning with the day after the end of the financial year to which the report relates.

(3) Paragraph (4) applies in relation to a person who, immediately before these Regulations come into force, is the landlord of 500 or more tied pubs.

(4) The person must ensure that the first annual compliance report required under paragraph (1) relates to the period—

(a) beginning with the day on which these Regulations come into force; and

(b) ending on the last day of the first subsequent full financial year.

(5) Before the annual compliance report is submitted to the Adjudicator under paragraph (2), the report must be approved—

(a) by the Chair of the Audit Committee; or

(b) if the pub-owning business does not have an Audit Committee, by the non-executive director of the pub-owning business responsible for carrying out the functions normally associated with an Audit Committee, or, in the absence of any such non-executive director, by the pub-owning business’s Chief Executive Officer, Managing Director or equivalent.

(6) The annual compliance report must include a detailed and accurate account of —

(a) the pub-owning business’s compliance with these Regulations in the period to which the report relates;

(b) any instances where a breach or alleged breach of these Regulations has been identified by a tied pub tenant;

(d) any steps taken during the period to which the report relates to ensure compliance with these Regulations, including details of training and guidance offered to employees in connection with the Regulations.

(7) The pub-owning business must ensure—

(a) that the compliance officer provides such other reports as are necessary to ensure that the pub-owning business’s Audit Committee has an understanding of the pub-owning business’s compliance with these Regulations; or

(b) that, if the pub-owning business does not have an Audit Committee, the compliance officer reports directly to the non-executive director of the pub-owning business responsible for carrying out the functions normally associated with an Audit Committee, or, in the absence of any such non-executive director, to the pub-owning business’s Chief Executive Officer, Managing Director or equivalent.

(8) A summary of the annual compliance report must be included in the pub-owning business’s annual report.

(9) If the pub-owning business does not produce an annual report, the summary of the annual compliance report must be published clearly and prominently on the pub-owning business website (if any) within the period of 4 months beginning with the day after the end of the financial year to which the report relates.

Provisions of these Regulations which are not arbitrable

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For the purposes of section 48 of SBEEA 2015 (referral for arbitration by tied pub tenants) the following provisions are not arbitrable—

(a) regulation 41(1)(b), (3) and (5);

(b) regulation 42;

(d) regulation 45A.

PART 10 — Miscellaneous

Pub-owning business to notify Adjudicator and tied pub tenants of status under these Regulations

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(1) A person who, immediately before the commencement date, is the landlord of 500 or more tied pubs, must notify that fact to—

(a) the Adjudicator; and

(b) its tied pub tenants,

as soon as reasonably practicable after the commencement date.

(2) A person who, at any time on or after the commencement date, becomes the landlord of 500 or more tied pubs must, as soon as reasonably practicable after that date, notify the Adjudicator and its tied pub tenants, of that fact.

(3) A person who—

(a) gives notice under paragraph (1) or (2); and

(b) subsequently ceases to be the landlord of 500 or more tied pubs,

must, as soon as reasonably practicable, notify the Adjudicator and its tied pub tenants, of that fact.

Insurance

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(1) Paragraphs (2) to (4) apply where a pub-owning business intends to charge a tied pub tenant an amount (“the insurance charge”) in respect of premiums for insurance in respect of the premises to which the tenancy or licence relates.

(2) The pub-owning business must inform the tied pub tenant whether—

(a) the insurance charge exceeds the amount payable by the pub-owning business in respect of premiums for insurance in respect of the premises under the insurance policy and, if so, the amount of that excess; and

(b) the pub-owning business, or any group undertaking[^f00024] in relation to the pub-owning business, receives, or expects to receive, any commission or rebate in connection with that policy.

(3) Before the pub-owning business purchases, or renews, an insurance policy in respect of the premises, the pub-owning business must—

(a) provide to the tenant full details of that policy, including the cover which is provided, the charges payable and any contributions towards a claim which the tenant is required to make;

(b) provide to the tenant any additional information required to allow the tenant to compare the policy with other suitable, comparable policies which may be available; and

(c) where the tied pub tenant notifies the pub-owning business that it has identified a suitable and comparable alternative policy (the “tenant’s alternative policy”), consider that policy.

(4) Where the pub-owning business is required to provide information under paragraph (3), the pub-owning business must do so—

(a) at least 21 days before the day on which the policy has effect; or

(b) if earlier, at least 21 days before the day on which the pub-owning business enters into the insurance.

(5) Paragraph (6) applies where the insurance charge is higher than the amount which it would be if the pub-owning business entered into the tenant’s alternative policy (the “alternative insurance charge”).

(6) The pub-owning business must—

(a) purchase the tenant’s alternative policy; or

(b) agree, in writing, that any difference between the insurance charge and the alternative insurance charge is not payable by the tenant.

Gaming machines

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A pub-owning business—

(a) must not enter into a new tenancy or licence; and

(b) must not renew a tenancy or a licence,

which requires a tied pub tenant to purchase or rent gaming machines.

Blank template for profit and loss account

48

Where the tied pub tenant so requests, the pub-owning business must provide to the tenant a blank template for completing the tied pub’s profit and loss account.

Sale of freehold or long leasehold

49

(1) Where the pub-owning business is aware that the holder of the freehold, or the superior landlord, of the premises to which the tenancy or licence relates has—

(a) taken any steps to advertise the sale of the freehold or the leasehold;

(b) placed the freehold or the leasehold on the market;

(d) entered into an agreement to sell the freehold or the leasehold,

the pub-owning business must comply with paragraph (2) as soon as reasonably practicable.

(2) The pub-owning business must provide to the tied pub tenant—

(a) details of any arrangements which have been made of the kind mentioned in paragraph (1)(a) to (c); and

(b) where an agreement of the kind mentioned in paragraph (1)(d) has been entered into, the name and address of the buyers.

(3) The pub-owning business is not required to provide the information under paragraph (2)(a)—

(a) if the sale is part of a sale and leaseback transaction; or

(b) if a disclosure under that paragraph would breach any obligation under or by virtue of any Act.

Tied pub tenant not to suffer detriment

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A pub-owning business must not subject a tied pub tenant to any detriment on the ground that the tenant exercises, or attempts to exercise, any right under these Regulations.

Flow monitoring devices

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(1) A pub-owning business must not subject a tied pub tenant to any detriment, or impose any liabilities on the tenant, as a result of any reading taken from a flow monitoring device, without additional evidence in connection with the purchase and stock of alcohol at the tied pub.

(2) A “flow monitoring device” means a device which is at the tied pub at the direction of the pub-owning business—

(a) to measure the amount of alcohol[^f00025] being sold by the tied pub tenant; and

(b) for the purposes of verifying that the tenant does not sell alcohol at the tied pub in contravention of the terms of the tenancy or licence.

PART 11 — Extended protection under these Regulations

Extended protection to last until the end of a tenancy

52

Where a protected 1954 Act tenancy is renewed, the tenancy ends, for the purposes of section 69(5)(a) of SBEEA 2015—

(a) on the date on which the tenancy is renewed; or

(b) if earlier, on the date on which the tenancy was due to expire before it was renewed.

Extended protection to last until a rent assessment is concluded

53

For the purposes of section 69(5)(b) of SBEEA 2015, a rent assessment or assessment of money payable in lieu of rent is concluded when the tenant and the landlord who is no longer a pub-owning business by virtue of section 69(1) of the SBEEA 2015 agree the new rent in writing under regulation 22(2).

PART 12 — Exemptions from these Regulations

Short agreements

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Where a pub-owning business and a tied pub tenant—

(a) enter into a short agreement (whether before, on or after the commencement date); and

(b) that agreement, together with all other short agreements (if any) previously entered into between the pub-owning business and the tied pub tenant entitle the tenant to occupy the tied pub for a total period of less than 12 months,

regulations 9 to 13 and Parts 3 to 10 of these Regulations do not apply to the dealings of the pub-owning business and the tenant in connection with that agreement.

Pub franchise agreements

55

(1) The following provisions of these Regulations do not apply to the dealings of a pub-owning business with a tied pub tenant under a pub franchise agreement—

(a) Parts 3 and 4 to 8;

(b) regulation 47; and

(2) A “pub franchise agreement” means an agreement between a pub-owning business and a tied pub tenant for the tenant to occupy the tied pub which—

(a) grants the tied pub tenant a fixed share of turnover or a relevant share of turnover;

(b) requires the pub-owning business to offer marketing, training and other business support to the tied pub tenant;

(c) grants the tied pub tenant a right to use the relevant business model and may require the tenant to pay a fee in respect of the use of that model;

(d) does not require the tied pub tenant to pay to the pub-owning business any other amount in respect of the tenant’s occupation of the tied pub;

(e) does not require the tied pub tenant to make any other payments to the pub-owning business in connection with the supply of products to the tied pub tenant or the services offered to the tenant unless the circumstances in paragraph (3) arise after the parties have entered into the pub franchise agreement; and

(f) grants the tied pub tenant a right to sell the business to a third party at market value.

(3) The circumstances mentioned in paragraph (2)(e) are that—

(a) the tied pub tenant accepts the pub-owning business’s offer to supply, at cost price, a tied product or service which the business has not already agreed to supply under the pub franchise agreement; and

(b) the pub franchise agreement does not require the tenant to accept such an offer.

(4) A “fixed share of turnover” means a percentage of the tied pub’s turnover, being a percentage which is fixed for the duration of the franchise agreement.

(5) A “relevant share of turnover” means a percentage of the tied pub’s turnover which —

(a) is a percentage (“the original percentage”) specified in the agreement; or

(b) is, where the tied pub’s turnover increases beyond one or more thresholds specified in the agreement, the original percentage increased by an amount or amounts specified in the agreement.

(6) “Relevant business model” means a model for doing business at a pub which—

(a) the pub-owning business has used at two or more pubs for a period of 12 months or more;

(b) the pub-owning business can demonstrate has the potential to succeed when applied to the tied pub; and

(c) includes details of intellectual property rights held by the pub-owning business and methods, procedures and other technical and industrial know-how required for its use.

(7) For the purposes of paragraph (6)(b), a relevant business model has the potential to succeed if it has the potential to generate, from the tied pub, a reasonable profit for the tied pub tenant and the pub-owning business.

The investment exception

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(1) The investment exception applies where—

(a) a pub-owning business has made a qualifying investment;

(b) the pub-owning business and the tied pub tenant have entered into an investment agreement in relation to the qualifying investment; and

(2) A “qualifying investment” is an investment in the premises of a tied pub—

(a) which is made in connection with a project which, when the investment agreement is signed, would be reasonably expected to—

(i) change the trading environment, the nature or the capacity of the premises; and

(ii) increase the trade and profit of the tied pub;

(b) which is not made in pursuance of any duty under the terms of the tenancy or licence under which the tied pub is occupied; and

(i) where the tenant was in occupation of the tied pub throughout the last complete financial year preceding the date on which the investment agreement was signed, twice the rent, or the money payable in lieu of rent, payable under the tenancy or licence in respect of that period;

(ii) where paragraph (i) does not apply but the tenant was in occupation of the tied pub throughout the period of 12 months preceding the date on which the investment agreement was signed, twice the rent, or the money payable in lieu of rent, payable under the tenancy or licence in respect of that period;

(iii) otherwise, twice the rent, or the money payable in lieu of rent, payable under the tenancy or licence in respect of the period of 12 months beginning with the date on which the tenancy or licence first confers on the tied pub tenant the right to occupy the tied pub.

(3) An “investment agreement” is a written agreement between the tied pub tenant and the pub-owning business which includes—

(a) a description of the proposed investment which demonstrates that it is a qualifying investment;

(b) a term specifying any proposed change to the terms of the tenancy or licence;

(i) the dates on which those works are to be completed;

(ii) the estimated costs of the works; and

(iii) confirmation that the tied pub tenant has had an opportunity to obtain alternative estimates for the works;

(d) a term specifying the dates on which the investment period is to begin and end;

(e) a term specifying—

(i) that at least one rent review will be conducted during the investment period; and

(ii) the date of that review; and

(f) confirmation that the tied pub tenant has obtained independent professional advice in relation to the agreement.

(4) Before the investment agreement is signed by the pub-owning business and the tied pub tenant, the pub-owning business must provide to the tenant information which, in the pub-owning business’s opinion, is necessary to demonstrate to the tenant how the investment would be reasonably expected to achieve the outcomes described in paragraph (2)(a)(i) and (ii), such as a reasonable forecast profit and loss statement for the tied pub for a period of 2 years.

(5) For the purposes of paragraph (1) the investment agreement—

(a) is of no effect unless the pub-owning business complies with paragraph (4); and

(b) ceases to have effect if the works mentioned in paragraph (3)(c) are not completed—

(i) within the period of 12 months beginning with the day on which the investment agreement is signed by the pub-owning business and the tied pub tenant; or

(ii) if later, by the date agreed by the parties in the investment agreement.

(6) But paragraph (5)(b) does not apply where, after the investment agreement has been signed by both parties—

(a) an event occurs which is beyond the reasonable control of the pub-owning business;

(b) the event is likely to delay the date on which the works are completed;

(c) the pub-owning business notifies the tenant, in writing, within the period of 14 days beginning with the day on which the event occurs, of a new date by which the works are to be completed; and

(d) that new date is reasonable, given the nature of the event.

(7) In that case, the investment agreement ceases to have effect if the works mentioned in paragraph (3)(c) are not completed by the new date mentioned in paragraph (6)(c).

(8) For the purposes of paragraphs (5)(b) and (6), the works are completed when the pub-owning business provides the tenant with a practical completion notice.

(9) Where a tied pub tenant considers that the investment agreement is of no effect for the purposes of paragraph (1) because the pub-owning business has not complied with paragraph (4), the tenant may refer the matter to the Adjudicator.

(10) Where a tied pub tenant considers that the investment agreement has ceased to have effect for the purposes of paragraph (1)—

(a) because the works specified in that agreement are not completed within the period, or on the date, specified in paragraph (5)(b) or (6)(c); or

(b) because the new date mentioned in that paragraph is not reasonable,

the tenant may refer the matter to the Adjudicator.

(11) Where a tied pub tenant and a pub-owning business have entered into an agreement but disagree as to whether it is an investment agreement, either of them may refer the matter to the Adjudicator.

(12) The “investment period” is the period which—

(a) begins with the day on which the investment agreement is signed by the pub-owning business and the tied pub tenant; and

(b) ends with a date agreed between the tenant and the pub-owning business, being a date—

(i) which is reasonable in the light of the value of the qualifying investment;

(ii) which is no later than 7 years from the day on which the investment agreement is signed.

(13) For the purposes of paragraph (4) a “reasonable forecast” is a forecast which is based on an assessment of the level of trading at the tied pub after the investment if it were operated by a reasonably efficient tenant.

PART 13 — Void or unenforceable terms

Void or unenforceable terms of a tenancy or licence

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(1) A term of a tenancy or other agreement between a tied pub tenant and a pub-owning business (whether entered into before or after the commencement date) is void if it purports to—

(a) penalise the tenant for requiring the pub-owning business to act, or not act, in accordance with Parts 2 to 10 of these Regulations; or

(b) provide that a rent review or a review of money payable by the tenant in lieu of rent in relation to the tied pub—

(i) may be initiated only by the pub-owning business; or

(ii) may only determine that the rent or money payable in lieu of rent is to be increased.

(2) A dispute in relation to a term which is unenforceable, in that it purports to exclude, limit or otherwise modify the processes or the obligations of pub-owning businesses required under Parts 2 to 10 of these Regulations, may be arbitrated in accordance with an arbitration agreement[^f00026].

PART 14 — Disputes

Referrals to the Adjudicator in connection with the MRO procedure

58

(1) Paragraph (2) applies where a matter has been referred to the Adjudicator under—

(a) regulation 32(2) (disputes in connection with the full response);

(b) regulation 32C(1) (disputes in connection with MRO non-compliance, etc.);

(ba) regulation 33A(3) (disputes in connection with revised response);

(d) regulation 39(3) (disputes in connection with a tenancy or licence after proposal agreed);

(e) regulation 40 (disputes in connection with recovery of rent etc after MRO procedure);

(f) regulation 56(9), (10) or (11) (disputes in connection with the investment agreement).

(2) The Adjudicator must either—

(a) arbitrate the dispute; or

(b) appoint another person to arbitrate the dispute.

(3) Except where this Part makes different provision, the arbitration must be conducted in accordance with —

(a) the rules regarding arbitrations issued from time to time by the Chartered Institute of Arbitrators; or

(b) the rules of another dispute resolution body nominated by the arbitrator.

Referrals to the Adjudicator in connection with the independent assessor

59

(1) Where—

(a) a matter is referred to the Adjudicator under regulation 37(10); and

(b) the Adjudicator (or a person appointed by the Adjudicator under regulation 58(2)(b) or 60(4)(b)) rules that the alleged failure has not occurred,

paragraph (2) applies.

(2) The tied pub tenant must, by notice in writing to the pub-owning business, accept or reject the determination provided under regulation 37(9) and the associated tenancy or licence provided under regulation 37(1) within the period of 21 days beginning with—

(a) the day on which the determination is communicated to the tenant; or

(b) if later, the day on which any rent assessment or assessment of money payable in lieu of rent being carried out in respect of the tenancy or licence ends.

(3) Where a matter is referred to the Adjudicator under regulation 37(10), and the Adjudicator (or a person appointed by the Adjudicator under regulation 58(2)(b) or 60(4)(b)) rules that the alleged failure has occurred, the Adjudicator (or a person appointed under regulation 58(2)(b) or 60(4)(b)) must—

(a) give an explanation, in writing, as to why the failure has occurred; and

(b) having regard to the nature of the failure—

(i) substitute a figure for the market rent himself or herself and provide an explanation for that substitution;

(ii) direct the independent assessor to make a second determination of the market rent in the light of that explanation within 21 days beginning with the day on which thedirection is made; or

(iii) make such other determination as the Adjudicator (or a person appointed by the Adjudicator under regulation 58(2)(b) or 60(4)(b)) considers appropriate.

(4) When making a determination under paragraph (3)(b)(iii), the Adjudicator (or a person appointed by the Adjudicator under regulation 58(2)(b) or 60(4)(b)) may, in exceptional circumstances, appoint another independent assessor to conduct an assessment of the market rent; and where such an appointment is made, the appointee must determine the market rent within the period of 21 days following the appointment.

(5) A substitution of the market rent made by the Adjudicator (or a person appointed by the Adjudicator under regulation 58(2)(b) or 60(4)(b)) under paragraph (3)(b)(i) is final and, once it has been communicated to the tied pub tenant, the tenant must, by notice in writing to the pub-owning business, accept or reject the substitution and the associated tenancy or licence provided under regulation 37(1), within the period of 21 days beginning with—

(a) the day on which the substitution made by the Adjudicator (or a person appointed by the Adjudicator under regulation 58(2)(b) or 60(4)(b)) is communicated to the tenant; or

(b) if later, the day on which any rent assessment or assessment of money payable in lieu of rent being carried out in respect of the tenancy or licence ends.

(6) Where a matter is referred to the Adjudicator under regulation 37(11), the Adjudicator (or a person appointed by the Adjudicator under regulation 58(2)(b) or 60(4)(b)) must—

(a) determine that the independent assessor requires additional information to complete the determination of the market rent;

(b) direct the independent assessor to make the determination within a period of time specified by the Adjudicator (or a person appointed by the Adjudicator under regulation 58(2)(b) or 60(4)(b)); or

(c) appoint another independent assessor within the period of 14 days beginning with the day of the referral to make the determination.

(7) Where the Adjudicator (or a person appointed by the Adjudicator under regulation 58(2)(b) or 60(4)(b)) makes a determination under paragraph (6)(a), the Adjudicator must—

(a) require the tied pub tenant or the pub-owning business to provide any additional information to the independent assessor; and

(b) direct the independent assessor to complete the determination within a period of time specified by the Adjudicator (or a person appointed by the Adjudicator under regulation 58(2)(b) or 60(4)(b)).

(8) Where a matter is referred to the Adjudicator under regulation 38(4) the Adjudicator (or a person appointed by the Adjudicator under regulation 58(2)(b) or 60(4)(b)) may, within the period of 21 days beginning with the day on which the referral is made, make a further determination of the market rent which is final.

(9) Where the Adjudicator (or a person appointed by the Adjudicator under regulation 58(2)(b) or 60(4)(b)) makes a final determination of the market rent, the tied pub tenant must, by notice in writing to the pub-owning business, accept or reject the final determination and the associated tenancy or licence provided under regulation 37(1) within the period of 21 days beginning with—

(a) the day on which the determination is communicated to the tenant; or

(b) if later, the day on which any rent assessment or assessment of money payable in lieu of rent being carried out in respect of the tenancy or licence ends.

(10) If the tied pub tenant does not comply with paragraph (2), (5) or (9), the tenant is treated as having rejected the determination and the associated tenancy or licence on the final day of the period mentioned in that paragraph.

Arbitration commenced by pub-owning business

60

(1) This regulation applies where—

(a) there is an arbitration agreement between a tied pub tenant and a pub-owning business;

(b) the pub-owning business commences arbitral proceedings about a matter which is, or which includes, an MRO dispute between the pub-owning business and the tied pub tenant; and

(c) the tied pub tenant would have been able to refer the MRO dispute to the Adjudicator (were it not for the commencement of arbitral proceedings by the pub-owning business) under —

(i) regulation 32(2) (disputes in connection with the full response);

(ii) regulation 32C(1) (disputes in connection with MRO non-compliance, etc.);

(iia) regulation 33A(3) (disputes in connection with revised response);

(iii) regulation 37(10) or (11) or 38(4) (disputes in connection with the independent assessor);

(iv) regulation 39(3) (disputes in connection with a tenancy or licence after proposal agreed);

(v) regulation 40 (disputes in connection with recovery of rent etc after MRO procedure);

(vi) regulation 56(9), (10) or (11) (disputes in connection with the investment agreement).

(2) The tied pub tenant may, by giving notice in writing to the pub-owning business and the Adjudicator, appoint the Adjudicator to arbitrate the MRO dispute.

(3) A notice under paragraph (2) must be given—

(a) where the arbitration agreement provides for the arbitrator to be appointed by a person other than the pub-owning business or the tied pub tenant, within the period of 21 days beginning with the day on which that person notifies the tied pub tenant of the person proposed to be appointed as arbitrator;

(b) otherwise, within the period of 21 days beginning with the day on which arbitral proceedings commenced.

(4) Where the Adjudicator is appointed to arbitrate the MRO dispute (whether under paragraph (2) or otherwise) the Adjudicator must—

(a) arbitrate the MRO dispute; or

(b) appoint another person to arbitrate that dispute.

(5) Section 14 of the Arbitration Act 1996[^f00027] makes provision about the commencement of arbitral proceedings.

(6) An “MRO dispute” is a dispute relating to the offer of a market rent only option.

Information required by the Adjudicator

61

(1) If the Adjudicator appoints another person as arbitrator under regulation 58(2)(b) or 60(4)(b), the Adjudicator may require the arbitrator, or the pub-owning business and the tied pub tenant concerned, to provide information to assist the Adjudicator in carrying out functions under this Part.

(2) The Adjudicator may enforce any requirement to provide information under this Part by bringing civil proceedings to obtain an injunction.

PART 15 — Group undertakings

Adjudicator’s determination during referral of a dispute

62

(1) This regulation applies where—

(a) a tied pub tenant has referred a dispute between the tenant and a pub-owning business (“P”) to the Adjudicator under section 48 of SBEEA 2015; and

(b) there is evidence before the Adjudicator which suggests that a group undertaking (“U”) in relation to the pub-owning business—

(i) discharges, has discharged, exercises or has exercised, influence over any of P’s obligations under the tenancy or licence to which the dispute relates; or

(ii) is responsible for, or exercises influence over, the terms of that tenancy or licence, the financial arrangements, the charging policies or any other administrative, managerial or executive decisions of P, which affect the tied pub tenant,

in a way which is relevant to the dispute.

(2) Where this regulation applies, the Adjudicator may determine that U is to be treated as a pub-owning business, as well as or instead of P, for the purposes of the arbitration.

(3) Before the Adjudicator makes a determination under paragraph (2), the Adjudicator must consider representations from U.

(4) The Adjudicator may disregard a request from a tied pub tenant for U to be treated as a pub-owning business, where—

(a) U is not identified by the tenant in such a way that the Adjudicator is able to establish U’s name, business address and its relationship with P;

(b) the tied pub tenant has not notified U in writing of the dispute; or

Investigations by the Adjudicator

63

(1) This regulation applies where—

(a) the Adjudicator is conducting an investigation of a pub-owning business (“P”) under section 53 of SBEEA 2015; and

(b) in the course of that investigation, evidence becomes available to the Adjudicator which suggests that a group undertaking in relation to P—

(i) discharges, has discharged, exercises, or has exercised, influence over any of P’s obligations under the tenancy or licence to which the investigation relates; or

(ii) is responsible for, or exercises influence over, that tenancy or licence, the financial arrangements, the charging policies or any other administrative, managerial or executive decisions of P, which affect the tied pub tenant,

in a way which is relevant to the investigation.

(2) Where this regulation applies, the Adjudicator may determine that the group undertaking is to be treated as a pub-owning business, as well as, or instead of P, for the purposes of an investigation under sections 53 to 61 of SBEEA 2015.

Adjudicator’s determination in relation to UK businesses only

64

The Adjudicator may not determine that a person who is a group undertaking in relation to a pub-owning business is to be treated as a pub-owning business unless the person—

(a) carries on a trade or business in the United Kingdom; or

(b) is a UK-registered company within the meaning of section 1158 of the Companies Act 2006[^f00028].

PART 16 — Transitional provisions

Rent proposals

65

(1) A pub-owning business is not required to provide a rent proposal under regulation 15(1) by virtue of the application of regulation 15(2), unless the event mentioned in regulation 15(2)(a) occurs on or after the commencement date.

(2) A pub-owning business is not required to provide a rent proposal under regulation 15(1) by virtue of the application of regulation 15(3), unless the event mentioned in regulation 15(3)(a) occurs on or after the commencement date.

(3) A pub-owning business is not required to provide a rent proposal under regulation 15(1) by virtue of the application of regulation 15(4), unless the event mentioned in regulation 15(4)(a) occurs on or after the commencement date.

(4) A pub-owning business is not required to provide a rent proposal under regulation 15(1) by virtue of the application of regulation 15(5), unless the event mentioned in regulation 15(5)(a) occurs on or after the commencement date.

(5) A pub-owning business is not required to provide a rent proposal under regulation 15(1) by virtue of the application of regulation 15(6), unless the event mentioned in regulation 15(6)(a) occurs on or after the commencement date.

(6) A pub-owning business is not required to provide a rent proposal under regulation 15(1) by virtue of the application of regulation 15(7), unless the notification mentioned in regulation 15(7) occurs on or after the commencement date.

Rent assessments

66

(1) The reference in regulation 19(1)(a) to a rent review which is required under the terms of a tenancy or licence does not include—

(a) a rent review where the rent review date falls before the commencement date; or

(b) a rent review which is concluded before the commencement date.

(2) A tied pub tenant may request, on or before the 5-year anniversary date, a rent assessment or an assessment of money payable in lieu of rent under regulation 19(2)(a) if, and only if—

(a) no rent assessment or assessment of money payable in lieu of rent has been concluded before the date of the request; and

(b) no rent review has been concluded within the period of 5 years ending with the date of the request.

(3) A tied pub tenant may not request a rent assessment or an assessment of money payable in lieu of rent under regulation 19(2)(b) unless the tenant first receives notification of the significant increase on or after the commencement date.

(4) A tied pub tenant may not request a rent assessment or an assessment of money payable in lieu of rent under regulation 19(2)(c) unless the tenant sends the written analysis mentioned in that paragraph on or after the commencement date.

(5) Paragraphs (6) and (7) apply where—

(a) a pub-owning business is required to conduct a rent assessment or an assessment of money payable in lieu of rent under regulation 19(1)(a); and

(b) the rent review date falls before the end of the period of 6 months beginning with the commencement date.

(6) Regulation 20(2)(a) does not apply; instead, the pub-owning business must provide the rent assessment proposal to the tied pub tenant before the end of the relevant period.

(7) In paragraph (6) “the relevant period” means—

(a) where the rent review date falls before the end of the period of 3 months beginning with the commencement date, the period of 6 weeks beginning with the commencement date;

(b) otherwise, the period of 12 weeks beginning with the commencement date.

(8) For the purposes of this regulation—

(a) a rent review is concluded when the rent, or money payable in lieu of rent, is agreed in writing between the pub-owning business and the tied pub tenant;

(b) a rent assessment is concluded when it ends (see regulation 22).

(9) In this regulation, the “5-year anniversary date” means the date which is 5 years after the commencement date.

Market rent only option: the MRO notice

67

(1) References in regulation 23(1) to an event occurring do not include an event which occurred before the commencement date.

(2) The reference in regulation 25(1) to a relevant analysis which demonstrates that a trigger event has occurred does not include a relevant analysis which demonstrates that a trigger event has occurred before the commencement date.

PART 17 — Review

Review of Parts 11 to 16

68

(1) The Secretary of State must, for each review period, carry out a review of Parts 11 to 16[^f00029] (and of Part 1 so far as it applies for the purposes of those Parts).

(2) As soon as practicable after a review period, the Secretary of State must publish a report of the findings of the review for that period.

(3) The first review period is the period beginning on the commencement date and ending 2 years after the following 31 March.

(4) Subsequent review periods are each successive period of 3 years after the first review period.

SCHEDULE 1 — Information specified for the purposes of a new agreement etc.

Regulations and code of practice

1

The Pubs Code etc. Regulations 2016.

2

Where the pub-owning business has a code of practice which is relevant to its dealings with the tied pub, a copy of that code.

The type of tenancy or licence

3

An overview of the different tenancies or licences offered to tied pub tenants by the pub-owning business.

4

Whether the tenancy offered by the pub-owning business is a protected 1954 Act tenancy and the process for the renewal of such a tenancy, or any other tenancy, including when notification to renew, or otherwise, must be given.

5

Whether there is a superior landlord and, if so, the name and address of the superior landlord.

6

The length of the tenancy, licence or relevant tie agreement offered to the tied pub tenant by the pub-owning business, including the date on which the tenancy, licence or relevant tie agreement is to begin and the date on which it is to end (“the end-date”).

7

Whether the tied pub tenant or the pub-owning business may terminate the tenancy, licence or relevant tie agreement before the end-date.

8

Details of the pub-owning business’s procedures for responding to any request by the tied pub tenant to terminate the tenancy, licence or relevant tie agreement before the end-date.

9

In paragraphs 6 to 8 a “relevant tie agreement” is an agreement of the kind described in section 43(8)(b) of SBEEA 2015 where the terms of that agreement are not included in the tenancy or licence offered to the tenant.

The premises

10

A full and clear description of the premises to which the tenancy or licence relates, including—

(a) details of the premises licence, within the meaning of section 11 of the Licensing Act 2003[^f00030] and any licence conditions;

(b) details of any enforcement action taken by any public authority in connection with the tied pub during the previous 2 years, where known;

(c) details of any foreseeable material changes to the commercial conditions in the tied pub’s local area and how these might influence the costs and trading environment of the tied pub tenant;

(d) details of any restrictions on the use of the premises, such as planning constraints, restrictions on types of trading, restrictions on access to the premises (including details of any shared access) and hours of trading;

(e) a Schedule of Condition;

(f) details of any specific problems in the premises.

11

Whether the fixtures and fittings in the tied pub are required to be purchased by the tied pub tenant under the tenancy or licence and, if so, the arrangements for the payment for such fixtures and fittings.

Maintenance and repair

12

The respective obligations of the pub-owning business and the tied pub tenant under the tenancy or licence or pursuant to any other document, such as a code of practice, in relation to repairing and maintaining the premises to which the tenancy or licence relates.

13

The pub-owning business’s procedures for discharging its obligations to repair and maintain the premises under the tenancy or licence, including the procedure by which a tied pub tenant can raise concerns about the discharge of those obligations.

14

Where the tenancy or licence requires the tied pub tenant to repair or maintain the premises to which the tenancy or licence relates, confirmation that, unless otherwise specified in the tenancy or licence, the requirement is to keep or maintain the premises in the condition set out in the Schedule of Condition.

15

The procedures to be followed in connection with the respective obligations of the pub-owning business and the tied pub tenant under the tenancy or licence in relation to assessing andmaking good dilapidations, including—

(a) the time when the Schedule of Condition may be reviewed;

(b) if applicable, the process for agreeing the works which must be carried out in the light of a review of the Schedule of Condition;

(c) where the tenant is responsible for remedying, or paying for, any dilapidations, the period before the end of the tenancy when a survey will be carried out to determine the extent of dilapidations;

(d) the process for resolving a dispute in connection with any obligation under the tenancy or licence to maintain, repair and make good.

16

Where, before entering into a new agreement, a short agreement, or an agreement to renew a tenancy which not a protected 1954 Act tenancy, the pub-owning business is aware of any maintenance, repair or improvement works (“initial works”) which must be carried out to the premises to which the tenancy or licence relates—

(a) a Schedule of Condition prepared before the initial works are carried out;

(b) a list of the initial works which must be carried out;

(c) the respective obligations of the tied pub tenant and the pub-owning business in relation to those works under the tenancy or licence;

(d) details of any initial works which are required to be completed before the agreement or the renewal is in force including whether the pub-owning business or the tenant will be responsible for carrying them out;

(e) where any of the initial works—

(i) are to be carried out to improve the premises significantly; or

(ii) require a significant investment of capital,

a sketch or an artist’s plan (if any) of those works; and

(f) where any of the initial works are to be carried out after the agreement has been entered into or after the renewal has been agreed —

(i) whether the pub-owning business or the tenant will be responsible for carrying out the works;

(ii) the date on which the works must be completed; and

(iii) any penalty in respect of a failure to complete the works, or to complete them by a certain date.

17

Any requirements under the tenancy or licence in relation to the condition in which the premises to which the tenancy or licence relates are to be returned to the pub-owning business at the end of the tenancy or licence.

18

(1) The pub-owning business’s policy for investing in the premises to which the tenancy or licence relates by way of improvements and refurbishments to those premises, including any policy on joint investment with its tied pub tenants.

(2) Where, at the time the information under this Schedule is sent to the tenant, the pub-owning business is considering investing in the premises, the information required under sub-paragraph (1) includes details of the potential impact of any such investment on the rent, money payable in lieu of rent or other payments which the tied pub tenant must pay under the tenancy or licence.

19

The respective obligations of the pub-owning business and the tied pub tenant under any enactments in relation to—

(a) utilities at the tied pub, such as electrics, gas, water or sewerage; and

(b) environmental impact, health and safety.

Obligations in relation to the purchase of tied products and services

20

Details of any obligations to purchase products or services subject to a product or service tie including—

(a) the current price list for those products or services and notification of any imminent changes to that list;

(b) any discounts which may be available to the tied pub tenant in connection with the purchase of those products or services;

(c) whether the tenancy or licence authorises the tenant to purchase any food, drink or services which are not subject to a tie and, if so, the details of that authorisation;

(d) if gaming machines are offered to the tied pub under the tenancy or licence, the terms on which they are supplied, including details of the arrangements for the distribution of income from the machines and an outline of the trading, payment and credit terms in relation to them.

Assignment

21

In the case of a tenancy—

(a) whether the tenancy may be assigned or sold and, if so, the procedures which the tied pub tenant must follow to assign or sell the tenancy; and

(b) the procedures which the pub-owning business must follow where the tied pub tenant makes a request to assign or sell the tenancy.

Advice and support

22

(1) The advice and support available to the tied pub tenant during the tenancy or licence, including advice and support in respect of—

(a) the capabilities and training needs of the tied pub tenant and the tenant’s employees;

(b) licences and any relevant training requirements in relation to those licences;

(d) provision and maintenance of dispensing equipment;

(e) pub promotion and marketing;

(f) other aspects of business management which are significant, in the pub-owning business’s opinion;

(g) the benefits which the tied pub tenant may expect to enjoy as a consequence of the pub-owning business’s ability to procure and supply products, services and expertise to the tied pub tenant;

(h) business rates; and

(i) the exterior decoration of the premises, the signs, repairs to the building, car parks and gardens (where relevant).

(2) The information required under sub-paragraph (1) is not required to be provided to a tied pub tenant who is already subject to a tenancy or licence granted by the pub-owning business in relation to a tied pub unless that information has changed since the tied pub tenant received it in connection with that tenancy or licence.

23

The pub-owning business’s policy (if any) for dealing with requests for assistance from the tied pub tenant in cases of difficulties in respect of the tenancy or licence which are beyond the tenant’s control.

24

The circumstances (if any) in which the pub-owning business may be willing to consider amendments to its standard terms.

25

The events, the occurrence of which, entitle the tied pub tenant, under regulation 23, to give an MRO notice.

Insurance

26

Whether, under the tenancy or licence—

(a) the pub-owning business is responsible for insuring the premises and, if so, whether the pub-owning business requires an insurance charge; or

(b) the tenant is responsible for insuring the premises.

27

Where the tied pub tenant is responsible for insuring the premises, any minimum requirements for insurance under the tenancy or licence.

Payment of rent and deposits

28

(1) The arrangements for the payment of deposits, including—

(a) the amount of any deposit (“the deposit”) payable by the tied pub tenant to the pub-owning business for the purposes of securing the tenancy or licence;

(b) the period for which the deposit is likely to be retained by the pub-owning business;

(d) the circumstances in which the deposit may be required to be increased under the tenancy or licence;

(e) when and how the deposit will be repaid to the tied pub tenant;

(f) how the deposit is to be treated if the pub-owning business becomes insolvent.

(2) The information required under sub-paragraph (1) is not required to be provided to a tied pub tenant in connection with the renewal of a protected 1954 Act tenancy unless the pub-owning business proposes to change the arrangements for the payment of rent, money payable in lieu of rent and other deposits on the renewal.

29

Where the tenancy or licence provides that the rent or money payable in lieu of rent is to be varied by reference to an index—

(a) the index used;

(b) when the indexation rate will be assessed and applied; and

(c) an illustration of the impact which the indexation rate will have on the rent, or money payable in lieu of rent, during the tenancy or licence, using, by way of example, the indexation rate at the time the information under this Schedule is sent to the tenant.

30

In cases where damage to the premises to which the tenancy or licence relates impacts on the tied pub’s potential for trading, the pub-owning business’s policy in respect of the temporary suspension of—

(a) rent or money payable in lieu of rent; and

(b) minimum purchasing requirements under the tie.

31

Information in respect of other support available in cases where damage to the property impacts on the tied pub’s potential for trading.

32

Details of any other fees, charges, including service charges, or financial penalties which the tied pub tenant may be required to pay during the tenancy or licence.

Additional information where new agreement is a pub franchise agreement

33

(1) Where the new agreement being entered into is a pub franchise agreement—

(a) information about any initial and ongoing fees payable by the tenant to the pub-owning business under the agreement;

(b) details of the fixed share of turnover or the relevant share of turnover granted to the tied pub tenant;

(d) a forecast of a profit and loss statement for the tied pub for the period of 12 months beginning with the day on which the franchise agreement is proposed to be entered into (“the franchise forecast period”).

(2) The statement required under sub-paragraph (1)(d) must include the figures and other information specified in paragraph 5(a) to (i) of Schedule 2 to these Regulations.

(3) For the purposes of the duty under sub-paragraph (1)(d), references in paragraph 5 of Schedule 2 to the “forecast period” must be read as references to “the franchise forecast period”.

Other obligations

34

Information in respect of any obligation which the tied pub tenant may have in connection with the Transfer of Undertakings (Protection of Employment) Regulations 2006[^f00031].

Breaches

35

The pub-owning business’s procedures for establishing whether the tied pub tenant has breached the tenancy or licence.

36

Where a tied pub tenant is in breach of the tenancy or licence, the pub-owning business’s procedures for informing the tied pub tenant that the tenant is in breach and whether the tenant will have opportunities to remedy the breach before any enforcement action is taken.

37

Information about the procedures which may be followed by the tied pub tenant in cases where the tenant considers that the pub-owning business has failed to comply with the provisions of these Regulations.

SCHEDULE 2 — Information specified for the purposes of a rent proposal or a rent assessment proposal

1

A summary of the methods which must be used under the tenancy or licence to calculate the initial or revised rent or the new rent including—

(a) the information which will be used to support those calculations;

(b) the justification for the use of such information.

2

An outline of the procedure to be followed during negotiations of the initial or revised rent or the new rent between the pub-owning business and the tied pub tenant.

3

A list of the matters which will be considered to be relevant and irrelevant in such negotiations.

4

Information in respect of the cost of service charges relating to the tied pub during the last 3 years.

5

A forecast profit and loss statement for the tied pub for the period of 12 months beginning with the day on which the initial or revised rent or the new rent is payable (“the forecast period”) and the figures and other information which have been relied on to formulate that statement, including—

(a) the volume of alcohol, including the number of barrels of alcohol, purchased during the last 3 years from the pub-owning business or its agents;

(b) the percentage of the tied pub’s turnover during the last 3 years which the sale of this volume of alcohol represents;

(c) if different from the figure in (a), the volume of alcohol in respect of which duty was paid during the last 3 years;

(d) a figure for the total estimated sales and gross profit margins of the tied pub for the forecast period, with a breakdown showing separate figures for the estimated sales, gross profit margins, for—

(i) draught ales;

(ii) draught lagers;

(iii) packaged beers;

(iv) draught ciders;

(v) packaged ciders;

(vi) wines;

(vii) spirits;

(viii) flavoured alcoholic beverages; and

(ix) soft drinks;

(e) the percentage of the pub’s turnover for the forecast period which each drink in sub-paragraph (d)(i) to (ix) represents;

(f) an estimate figure for the volume of draught beer and cider which will not be sold during the forecast period (including draught beer and cider wasted, unfit for sale or dispensed in promotions) where that figure has not been accounted for in the gross profit margin;

(g) the estimated operating costs likely to affect the tied pub tenant’s profit during the forecast period including, where relevant, the estimated cost of a manager during that year, where the tied pub tenant is not the manager of the tied pub;

(h) an explanation of how estimated income during the forecast period from any gaming machine, in the tied pub has been accounted for in the statement;

(i) a breakdown of any costs during the forecast period which have not been accounted for separately but have been included in the estimated figures for other costs (for example, the cost of cellar gas).

6

The figures which are provided under paragraph 5 must be provided net of value added tax or machine games duty (within the meaning of Schedule 24 to the Finance Act 2012[^f00032]).

7

The profit and loss statement provided under paragraph 5 must refer to relevant and current data available publicly in connection with the typical costs of operating a tied pub in the United Kingdom and explain any variance between the costs referred to and the pub-owning business’s costs estimate.

8

The statement, figures and other information which the pub-owning business provides to the tied pub tenant under paragraphs 5 to 7 must —

(a) be sufficiently clear and detailed; and

(b) include justification or supporting evidence for any assumptions,

to allow the tenant to understand the basis on which the estimated figures in the statement have been calculated.

9

Any information which the pub-owing business provides under paragraph 5, must be—

(a) accurate, wherever it refers to historical data; and

(b) reasonable, wherever it refers to projected data.

10

In paragraph 5(c) “duty” means any duty of excise charged on beer by section 36(1) or section 37(1) of the Alcoholic Liquor Duties Act 1979[^f00033].

11

Any information in Schedule 1 which—

(a) the tied pub tenant has not already received; or

(b) has changed materially since it was provided to the tenant.

12

A timetable specifying the dates on which any other information will be made available to the tied pub tenant before negotiations begin.

SCHEDULE 3 — Documents to which the independent assessor must have regard

1

Documents held by the tied pub tenant or the pub-owning business which provide evidence of the tied pub’s level of trading in the last 3 years.

2

Documents held by the tied pub tenant or the pub-owning business which present a reasonable forecast of the tied pub’s level of trading for the next 3 years.

3

For the purposes of paragraph 2, a “reasonable forecast” is a forecast which—

(a) is based on an assessment of the level of trading at the tied pub if it were operated by a reasonably efficient tenant; and

(b) may be based on an assessment of the pub’s level of trading if it were not subject to a product or service tie.

4

Documents held by the tied pub tenant or the pub-owning business which describe any special commercial or financial advantages provided to the tied pub tenant under the terms of the tenancy or licence.

Signed

Margot James — Parliamentary Under Secretary of State — Department for Business, Energy and Industrial Strategy — 20th July 2016

Explanatory note

(This note is not part of the Regulations)

EXPLANATORY NOTE

These Regulations are the first to be made under sections 42 to 45, 48, 69 and 71 of the Small Business, Enterprise and Employment Act 2015 (“SBEEA 2015”).

Section 42 of SBEEA 2015 requires the Secretary of State to make regulations about practices and procedures to be followed by pub-owning businesses in their dealings with their tied pub tenants. A “pub-owning business” is a landlord of 500 or more tied pubs. Parts 2 to 4 of these Regulations make provision in connection with such dealings.

Part 2 requires pub-owning businesses, before they enter into new agreements with their tied pub tenants, to advise tenants to complete appropriate training, to ensure that tenants have a sustainable business plan and to provide certain information to the tenants. This Part also places obligations on pub-owning businesses in relation to the maintenance of tied pub premises and in connection with a tenant’s proposal to assign a tenancy.

Parts 3 and 4 require pub-owning businesses to provide rent proposals and rent assessments, respectively, to their tied pub tenants in certain specified circumstances and include provision about the contents and timing of such proposals and assessments.

Section 43 of SBEEA 2015 provides that regulations must be made requiring pub-owning businesses to offer certain tied pub tenants a market rent only option (an “MRO option”) in circumstances specified in that section. An MRO option is an option for the tenant to occupy the tied pub under a tenancy or licence which is MRO-compliant and to pay, in respect of that occupation, a rent agreed between the parties or, failing such agreement, the market rent.

Part 5 describes the four circumstances in which a tenant may request an MRO option. Part 6 requires the pub-owning business to provide a full response to the tenant’s request. It also describes the nature of an MRO-compliant tenancy or licence and the negotiation period which follows that response. Part 7 describes the involvement of the independent assessor where, during the negotiation period, the parties fail to agree the rent to be payable under the MRO-compliant tenancy or licence. Part 8 describes the point at which this MRO procedure ends.

Part 9 describes the obligations of pub-owning businesses in respect of their business development managers and requires pub-owning businesses to appoint a compliance officer who is to submit an annual compliance report to the Pubs Code Adjudicator (“the Adjudicator”).

Part 10 places further obligations on pub-owning businesses in respect of matters such as insurance, gaming machines and flow monitoring devices.

A reference in SBEEA 2015 to “the Pubs Code” is a reference to Parts 2 to 10 of these Regulations.

Where a landlord ceases to be a pub-owning business, SBEEA 2015 provides that its tenants continue to have extended protection until the earlier of the end of the tenancy or licence concerned or until a rent assessment occurs. Part 11 of these Regulations describes, for these purposes, when a tenancy or licence ends and when a rent assessment occurs.

Part 12 exempts short agreements and pub franchise agreements from certain provisions of these Regulations. It also provides that the tenant may not request an MRO option in all four circumstances described in Part 5, where an investment agreement has been entered into between a pub-owning business and a tied pub tenant.

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