My noble friend is right: a new agreement would appear to attract costs for tenants, which would include legal costs and stamp duty.
As I was saying, we recognise that there will be occasions where a larger investment requires a longer return-on-investment period. After careful consideration and discussion with stakeholders, the Government have decided to address this issue, but to do so via secondary legislation, using the powers in Clause 42. I can reassure the noble Lord and my noble friend that the Government are committed to using these powers to set out in the code different rent assessment periods for different amounts of substantial capital investment offered. We will consult on what constitutes substantial capital investment and what the waiver period should be for different amounts. But we are clear that this could extend the rent assessment interval beyond the usual five years where it is appropriate to do so. This would mean that MRO cannot be exercised during the waiver period unless one of the triggers of a change of circumstances beyond the tenant’s control, or a significant price increase, is met.
In our discussions with stakeholders, we have heard varying calls for the length of waiver period that would be required to enable a pub company to see a return on its investment. These calls have varied between the five years suggested by the amendment moved by the noble Lord, Lord Mendelsohn, and 10 years. Clearly, individual circumstances will differ and we need to understand the details through consultation before we set this out in secondary legislation. The code will set out the safeguards that must be met to ensure that the tenant is protected from attempts to abuse a waiver. Again, it is vital that we consult on these to get them right.
I was glad that the noble Lord, Lord Mendelsohn, welcomed the idea of providing for investment. He set out a number of understandable concerns and potential safeguards where I think there is a lot of agreement but where we will need to work out the detail; for example, ensuring that the investment is substantial, that the tenant must take independent advice before agreeing to the deal, and that it is a genuine investment and not running repairs. He also mentioned that the pub company should not be able to require that a waiver agreement involves opting out of the Landlord and Tenant Act. I can reassure him that, using existing powers, we could restrict a pub company from requiring an opt-out of the Landlord and Tenant Act protections as a condition of investment.
My noble friend Lord Hodgson set out two areas of protection in his amendment: “significant investment” and “specified period”. Again, I think we all agree that these are important, and the secondary legislation I am proposing will set them out in detail. To meet the
concerns of my noble friend Lord Younger, it will indeed be by affirmative resolution, which will enable us to have a debate.
There are other potential safeguards which will really benefit from consultation. The noble Lord, Lord Mendelsohn, asked whether the tenant can buy out of their agreement at a later date or source the finance from elsewhere. We will want to consider safeguards around ensuring that a pub company delivers the investment it promises, including when the deferral period should start. The adjudicator will have the power to intervene and arbitrate disputes where the landlord has breached the relevant provisions of the code. Remedies under the Arbitration Act are wide-ranging and the adjudicator can order redress which includes the payment of money in appropriate circumstances. I agree with the noble Lord, Lord Mendelsohn, that we need to take account of the fact that different sums of investment are significant for different types of pub—I think that he talked about urban and rural pubs, but it is probably even more complex than that. This is again a matter for secondary legislation and consultation.
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The noble Lord suggests in his amendment that the investment agreement should be a trigger event for MRO and PRA. The Government are not convinced that this is the right approach. Tenants will have the right to choose the investment offer or to remain with their current agreement. They will have the opportunity to take advice on whether to take the investment deal. To require MRO every time an investment offer is made would be likely to discourage pub companies from making or agreeing to such offers and so undermine the very investment that we are all trying to encourage.
This is an area where considered consultation is required. I have listened to the many points made in the House by all noble Lords. We will take account of them during the consultation process. I thank the noble Lord, Lord Snape, and the noble Viscount, Lord Younger. I encourage noble Lords to feed in their thinking to the consultation.
The Government are committed to acting to enable investment in tied pubs, with proper safeguards for tenants, through the powers already available in the Bill. I hope this provides the reassurance that the noble Lord and my noble friend seek, albeit from a slightly different perspective. I hope they will be content to withdraw their amendment.