Schedule 1: the Scottish Pubs Code
Requirement to provide information
61.Paragraph 1(1) provides that the code may require pub-owning companies to give information to their tenants (including prospective tenants) and to the adjudicator. Sub-paragraph (2) sets out one example of such a requirement: that the code may require pub-owning businesses to give tenants an assessment of what the rent of the premises will be.
62.Under sub-paragraph (3) the code can require pub-owning companies to follow a certain methodology when producing such information and present it in a certain way. Under sub-paragraph (4) the code may contain references to other documents in relation to any requirements concerned with the provision of information, which could include referencing documents that will be published in future. This allows the adjudicator to prepare (and later revise) documents referred to in the code after the code itself has been made, without this undermining the enforceability of the requirement on pub-owning companies under sub-paragraph (3).
Requirement to comply with adjudicator’s directions following an investigation
63.Paragraph 2 states that the code must require pub-owning businesses to comply with any directions given to them by the adjudicator following an investigation (see discussion of section 9).
64.As a result, a failure to comply with such a direction would be a failure to comply with the code and would therefore be subject to investigation and potentially sanction by the adjudicator (see discussion of sections 8 and 9).
Restriction on enforcing certain terms of agreement
65.Paragraph 3 requires the code to include a prohibition on the enforcement of certain contract terms (set out in sub-paragraph (2)) and allows the code to identify other terms which pub-owning businesses will be prohibited from enforcing. This relates to section 7 of the Act which states that any contract terms between pub-owning businesses and their tied tenants are not enforceable if they are prohibited in the code.
Requirement to offer a guest beer agreement
66.Paragraph 4 states that the Scottish Pubs Code must require pub-owning businesses to offer their tenants the opportunity to sell at least one guest beer of the tenant’s choosing. A tenant can change the guest beer as often as they choose. If a tenant accepted this offer, they would be able to source, stock and sell a guest beer, i.e. a beer other than those they are contractually obliged to buy from their pub-owning business. If accepted, the guest beer arrangement would therefore form part of the contractual arrangement between the tenant and the pub-owning business. Further details about the guest beer right are to be set out in the code.
67.The guest beer arrangement is unrelated to the market rent only provisions in the Act (see below) and any tied tenants that take up the guest beer arrangement opportunity will remain tied premises as per their contract with their pub-owning business.
Requirement to offer market rent only lease
68.A market rent only (MRO) tenancy is one in which the tenant pays the market rent for the lease of the premises only (either as agreed between the parties, or, where there is no agreement, as determined by an independent rent assessor) and is freed from all product or service ties (i.e. the requirement to purchase products, such as alcohol, and/or services, other than insurance, from the pub-owning business). An MRO tenancy would therefore end the tied arrangement and MRO tenants would no longer be tied tenants. An MRO tenant would no longer be covered by the code or have recourse to the adjudicator (but see the commentary below on section 21).
69.Paragraph 5(1)(a) states that the Scottish Pubs Code must require pub-owning businesses to offer their tied tenants an MRO lease if requested to do so by the tenant. However, sub-paragraph (3)(b) allows the code to set out circumstances in which a pub-owning business need not offer to enter into an MRO lease with a tenant (and provides an example circumstance of where an agreement to invest in a tied pub has been entered into). Sub-paragraph(1)(b) provides that an MRO offer must be made by varying the terms of the existing tenancy agreement, rather than via a new lease, and should vary the terms only to the extent required to make the lease a MRO lease. However, sub-paragraph (3)(c) allows the code to set out circumstances in which pub-owning businesses could make an MRO offer by instead offering a new lease or by offering to modify the terms of an existing agreement in ways other than only those that are strictly required to make it a MRO lease.
70.Under sub-paragraph (1)(c) the code must require pub-owning businesses to make every effort to enter into an MRO agreement as soon as possible following a request from a tenant. As a result, the adjudicator will be able to investigate allegations that a pub-owning business has not been making a genuine attempt to conclude an MRO agreement and could impose a financial penalty if a pub-owning business was found not to have been complying with this requirement of the code.
71.Sub-paragraphs (2) to (4) define an MRO lease.
72.It should be noted that the scope of the availability and delivery of the MRO is one of the fundamental differences between the Act and the equivalent legislation in England and Wales under the 2015 Act. In England and Wales, the MRO is available to tenants only in certain specified circumstances and in line with various trigger points and is not required to be delivered by varying an existing lease.
Market rent only lease: further provision
73.Paragraph 6 provides some examples of what the MRO process set out in the code may include. Sub-paragraph (a) provides that the code can specify a period for an MRO negotiation. This is in addition to the requirement on pub-owning businesses to use best endeavours to deliver an MRO as soon as is possible when requested to do so (see paragraph 21).
74.Sub-paragraphs (b) to (e) mention that the code may include provision about the appointment of a rent assessor, whose role is to determine what the market rent should be.
Generality of enabling power unaffected
75.Paragraph 7 confirms, for the avoidance of doubt, that the Scottish Pubs Code may impose restrictions and obligations on pub-owning business other than those listed in the schedule.
