It has been a month since the UK Government introduced the Pubs Code 2016, a new legislative measure aimed at increasing the protection and rights for tenants of larger pub companies. But what exactly does the new action entail and what benefit will it pose for those renting or leasing pubs?
On the 21 July 2016, the much anticipated Pubs Code regulation was introduced by the government as a means of providing transparency and fairness for tied pub tenants. The main aim of the code is to provide:
- Fair and lawful dealings by pub owning businesses in relation to their tenants
- Tied pub tenants the freedom to be no worse off than if they were not subject to any ties
Consequently, the Market Rent Option (MRO) will now be extended to tenants of pubs. The breaking of the tie means that the lessee will no longer have to comply with the 400 year old legislation, which says that tenants must buy supplies from their landlord. The MRO allows for tenants, upon request, to relieve themselves from their current contract, therefore severing ties with their landlord. This means that they now have the ability to remove their landlord in their purchasing, services and pub property decisions if necessary.
Ultimately the biggest advantage presented to tentants is the financial aspect. The MRO allows for tenants to ultimately save more money in the long run. However, the true benefits of the act will only be transparent in due time.
Is the MRO mandatory?
Only brewers or pub owners owning 500 plus pubs will have to comply with offering their tenants or leasees the MRO option. It is important to remember that the regulation does not work in retrospect. This means even if you have only recently renewed your contract with your landlord, you will not be able to invalidate it; only in special circumstances will this be reconsidered.
Association of Licensed Multiple Retailers (ALMR) chief executive Kate Nicholls stated: “It is important for the sector to push forward and ensure that work with the adjudicator runs as smoothly as possible and that the office of the adjudicator hits the ground running to ensure compliance.”
Inez Ward of Justice for Licensees said: “We are hopeful that, finally, we will see a much fairer and just balance in the relationships between pubco and tenant. The pubcos must learn that the bad practice that we have been unfortunate enough to witness will not be tolerated, this is a new dawn.”
Ultimately, it is important to weigh up the options available to you before you decide to make any sudden moves. Reviewing your current agreement with your landlord ahead of time is imperative. Although the MRO allows for greater freedoms, moving away from your current agreement may work out more expensive and could cause more difficulty. Ensure that you seek profession advice and carry out a range of financial scenarios before you decide to move forward.
If you would like to discuss the options for your pub in further detail, please contact Adam Moody at firstname.lastname@example.org.
To find out more information on the Pubs Code regulation or the Pubs Code Adjudicator, please go to https://www.gov.uk/government/organisations/pubs-code-adjudicator.