My Lords, Amendment 33M makes provision that the Secretary of State may, through secondary legislation, create an opt-out for an MRO in return for a sum of investment. The amendment tries to outline important provisions and considerations and to ask the Government to be clear on what that means. It also asks that they implement safeguards to ensure that the MRO is not watered down. Our belief is that if the investment offer is fair, reasonable and attractive to a tenant, there will be little or no risk of the tenant taking up the MRO at that time. The MRO trigger would be there to ensure that pub companies made reasonable investment offers and were not just bullying or cajoling tenants into signing away rights cheaply.
My reasons for tabling the amendment are twofold. First, we do not fully accept the Government’s argument concerning Clauses 42 and 43 on the Pubs Code. We think that the legislation is insufficient and would be very interested to hear the Minister’s view on this. Secondly, this measure has the capacity to undermine the Commons amendment. We do not feel that it is appropriate to accept the measure without a detailed indication of what it entails and without some markers on the face of the Bill.
There are many horror stories in relation to this, as in relation to the operation of how pub companies deal with the provision of a sale. Indeed, I heard this morning from a tenant about how all their rights were bullied out of them and how they were moved dramatically from a position of reasonable success and security, with the pub company using the provision in a dispute over a sale. Many Members of this House will have heard stories from a variety of sources about issues concerning investment. We are concerned to make sure that these are dealt with adequately, and that the problems that led to this part of the Bill and to the issues that arose in the other place are dealt with properly.
We are also very keen to make sure that the industry, in and of itself, has the capacity to continue to develop and invest, finding a way to work with its tenants productively, sensibly and creatively so as to grow, commercialising the sector to full effect. Therefore, we are looking to the Government to provide a clear view on how they will deal with this. We accept that much of this will be dealt with in secondary legislation, as with other things, but because of the nature of some of these provisions, and the speed at which they have been made, we will be very keen to have some idea of what the Government see the regulations and guidance as including and how they will be framed.
We would be very grateful for some clarification on the following: the definition and amount of investment; what the Government consider to be the maximum deferral period of MRO in return for investment, and their view on whether it should be capped at five years; the stage at which the deferral for an MRO will begin— that is, will it be after the sums are agreed or when they are all fully expended?—the buyout of agreement provisions, whereby a tenant can opt for MRO; the tenant’s option to allow for alternative and blended
finance to maintain MRO and how this will operate with investment agreements; and the ability for an investment agreement to trigger the parallel rent assessment. We would also like to have a strong reassurance about how the investment agreement will be a trigger event for the MRO. We would like clarification that an agreement of investment will mean that there is no opt-out of the Landlord and Tenant Act 1954, and an assurance that the investment agreement will recognise the different nature and size of pubs and relevant investment requirements. There is a considerable difference between a large pub in, say, the centre of London and one in a remote village, and it needs to be recognised that a one-size-fits-all model does not work.
There are other considerations, such as who commissions the work, to what standard, who signs it off and is responsible for overruns, the examination of the current condition of properties and other matters. These are not the only relevant factors. We have also received correspondence on problems between pub companies and tenants, and on how these mechanisms have specifically been used. We believe that it is in everyone’s interests to have a working mechanism that allows for investment and makes that investment work. We feel that more clarity now will ensure that problems can be avoided in the future.
I hope that the noble Baroness the Minister will be happy to consider these matters in full. Given their sensitive nature, we will be happy to return to them at Third Reading following this debate on the substantive points. I beg to move.