The Government has unveiled its consultation into the use of restrictive covenants by pub operators, which force change of use when pubs are sold.
The 12-week consultation seeks to establish an “evidence base” about the use of the measure and its impact on local communities, to assess whether further action needs to be taken.
According to the Department for Communities and Local Government, which released the consultation, between 2004 and 2009 some 572 pubs are said to have been permanently lost following a sale with a restrictive covenant.
The measure has proved controversial in industry, with the Campaign for Real Ale describing their use as a “cynical” move by pub companies to restrict competition for their other local pubs to the detriment of communities. However, its supporters say the measure can be vital to ensure the survival of other venues.
Last year the Morning Advertiser, sister title to M&C Report, revealed that 11 tenanted pub operators refused to rule out applying restrictive covenants in their updated codes of practice. These were mostly prominent regional brewers but it including one national firm, Scottish & Newcastle Pub Company.
Announcing the consultation at yesterday’s Great British Beer Festival, community pubs minister Bob Neill said: “Very often restrictive covenants have been a problem. We are concerned that the use of restrictive covenants in particular can mean a pub is lost to the community for ever.”
The consultation, which runs until 25 October, asks whether covenants can have a “negative or harmful impact” on communities and whether the Government should act to restrict their use.
It offers four options for change:
1) Using a list of community assets. A local authority could annul a covenant if the pub that came up for sale was included on the list of community assets, giving communities a window of opportunity to buy the site, under the current Localism Bill.
2) Encouraging more self regulation. The Government would simply encourage the trade to voluntary cease the use of covenants, following moves by major companies such as Punch and Enterprise. However, the Government said this appears “difficult to achieve” because some firms are “actively interested” in retaining covenants.
3) Nationwide ban. Enacted via primary legislation. It would be a “last resort”, as such a “blanket ban” may be considered “centralist” and “heavy handed”.
4) Local ban. Councils would get powers to ban the use of covenants on pubs that fall under the scope of “local services” in the Sustainable Communities Act. The idea was suggested by Darlington and Newcastle City Councils in their petition to the Government.
The Government also wants to know whether covenants are a barrier to local people taking on pubs under the upcoming Community Right to Buy powers.
The consultation lists the number of pubs sold using a restrictive covenant by major pub operators between 2004 and 2009.
Enterprise used the measure in 374 of its 2,002 disposals in that period, while Punch used it for 150 of its c.3,000 sales. Greene King sold 11 pubs with a restrictive covenants in that period, out of 221, and Marston’s sold one with the clause out of 426. However, all four companies ruled out using restrictive covenants in the future in their new codes of practices.
Mike Benner, CAMRA chief executive, said: “CAMRA wholeheartedly welcomes this announcement of a Government consultation on the use of restrictive covenants - it’s a great success for localism, and shows that Government recognises that pubs are vital community assets that need to be protected.
“For the new community right to buy scheme being introduced as part of the Localism Bill to work, pubs need to be available for communities to keep open.”
JW Lees boss William Lees-Jones, a staunch supporter of restrictive covenants, defended his company’s use of the measure in an interview with the Morning Advertiser in January.
“Assuming that people believe in the free market rather than Stalinism, the free market should dictate [if a business changes use],” he said. “You have to adopt a use-it-or-lose-it mentality.”
