Last month the Department for Communities and Local Government published a consultation paper relating to the use of restrictive covenants in the pub industry and their impact on local communities.
Although the consultation exercise is very narrow
in its focus, the fact that the consultation has even been launched
raises a number of issues in relation to both the competition rules
and their impact on the real estate sector and also the
Government's proposals for the "Community Right to
Buy".
The primary purpose of the consultation paper is to gather evidence
as to the extent to which restrictive covenants are imposed on the
disposal of pubs which prevent future use as pubs and whether this
has a negative or harmful impact on local communities (for example
who might want to operate a local community owned pub from the
premises in the future).
The paper also sets out four different options which could be used
to deal with the issue (assuming there is an issue). These are self
regulation within the pub industry relating to the use of
covenants, a nationwide ban on the use of such restrictive
covenants in relation to pubs, a local ban against such covenants
imposed by a local authority or a ban on an individual pub by pub
basis (whereby local authorities are able to decide on a case by
case basis whether a pub is considered to be a community asset,
assess the impact on a particular community of any restrictive
covenants which affect the relevant pub and ban these covenants
where applicable). This last approach is clearly the
Government's preference and would involve using the List of
Community Assets.
Although narrow in its particular application, the fact that the
consultation paper has been launched raises a number of important
questions including:-
- Land agreements used to be excluded from the scope of the rules
on anti-competitive agreements under the Competition Act 1998.
However, that exclusion ceased to apply on 6 April 2011. Since the
competition regime now applies to land agreements, why is it not
sufficient to rely on the enforcement of the competition rules,
rather than creating an extra layer of regulation just for the pubs
sector?
- The pub sector is clearly the focus of this particular paper.
There are suggestions in the consultation paper that the approach
of using the Community Assets List is something which could be
looked at and applied to other community assets such as local shops
and community centres in the same way so there are wider
obligations for the industry if this approach is adopted in
relation to the pub sector. For example how is the asset to be
valued prior to community acquisition (with or without the
covenant?)
For those interested in the detail of the consultation itself and wishing to comment, the consultation period expires on 25 October 2011. For a copy of the consultation paper please see the following link.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 09/09/11.
