The Government has suggested setting the maximum penalty for a breach of the pubs code at 1% of the total UK turnover of the pubco.
In its second consultation on the pubs code, released this morning the Department for Business, Innovation & Skills set out its views on how legislation of the tied pub sector would work in practice.
The consultation says that in cases where a tied tenant is ordered by the adjudicator to pay a pubco’s arbitration costs, the cap would be £2,000. This cap could be waived if the referral for arbitration was deemed to be vexatious.
It defended its decision to exclude parallel rent assessments from the code, saying its version of the Market Rent Only option would carry out all the functions intended by PRA.
The Government said: “The MRO procedure permits the tied tenant to use the MRO offer to make an informed choice between two options – a tied rent figure and a free-of-tie figure – that are both subject to independent third party scrutiny.These are available to the tenant ‘in parallel’ at the triggers points at which rent assessments and the MRO option are available.”
The second part of the consultation also tackles controversy sparked by the proposal in the first version that a tenant would only have access to MRO if the proposal made to it at rent review was for an increase on the rent they were currently paying.
The issue was debated at the report stage of the Enterprise Bill this week where an amendment was made to enshrine the principal of MRO in a second piece of legislation
The consultation said: “While the legal effect of the current drafting is uncertain we understand that the intended effect of the amendment is to disallow the Government’s proposal in part one of the Pubs Code consultation to permit tied pub tenants to request an MRO option at a rent assessment only where the rent is increased.”
It is therefore asking for comments on the potential removal from the draft code of this condition.
Other areas tackled by the second half of the consultation include definition of genuine franchises. The Government has set out five key characteristics which a pub franchise must adhere to in order to be exempt from certain aspects of the code.
To see the full consultation click here
