24/11/2015

New Pub Code Regulations to Reform Leases for Tied Tenants

Emma Hughes 1

On 29th October, the Department for Business, Innovation and Skills (BIS) published a first consultation on the draft Pubs Code Regulations 2016.  The Small Business, Enterprise and Employment Act 2015 requires the Secretary of State to create this statutory code of practice to govern the relationship between pub owning companies and their tied tenants, and also to provide for an independent adjudicator to monitor compliance with that code and settle disputes.  The principle behind the reforms is that a tied tenant should be no worse off than a non-tied tenant.

During the parliamentary process, the House of Commons amended the original Bill to include a new provision to require large pub owning companies (those that own 500 or more tied pubs) to offer its tenants a Market Rent Only (MRO) option.  The MRO option is without any obligation to buy some or all of the alcohol to be sold at the premises from the landlord, or from someone nominated by the landlord. Although removing the ‘beer tie’ was not the government’s original intention, it accepted these amendments.

The consultation document sets out the proposed Pubs Code Regulations on rent assessments and the option for tenants to request a MRO offer, setting out the circumstances that will trigger the MRO option, how it will work and how disputes with the procedure will be resolved.

Later this month, BIS are expected to issue a second consultation on the draft Pubs Code Regulations, covering repair and maintenance obligations and enforcement of the code.

Emma Hughes, Commercial Property expert at Thursfields comments “this is great news for pub tenants and will enable them to negotiate fairer terms on their lease.”

To discuss your lease with the Commercial Property team, please contact Emma on 01905 677056 or email ehughes@thursfields.co.uk.

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