I am getting a lot of questions at the
moment regarding the new pub code legislation and MRO,
So here are a few of the most common.
If you have any questions not covered please drop me a line.
The Pubs Code is a piece of government legislation that was passed into law in July 2016. The legislation governs the relationship between a Tied Pub Tenant (‘TPT’) and the Pub Owning Business (‘POB’) – assuming the POB currently owns more than 500 tied pubs.
Currently there are 6 POB’s with more than 500 tied pub sites covered by the legislation, namely: Ei Group (formerly Enterprise Inns), Punch Taverns, Greene King, Star Pubs & Bars (Heineken), Marston’s and Admiral Taverns.
At present the Pubs Code only covers England & Wales.
A MRO offer is a new right afforded to Tied Pub Tenants (‘TPT’) of one of the 6 major Pub Owning Businesses (‘POB’), that forms a part of the Pubs Code legislation. It allows the TPT to request and consider a Free of Tie offer from the POB at certain points in time – as explained within our ‘Trigger Events’ section.
In order to request a MRO offer a trigger event must occur. Owing to the short-term non-substantive nature of a TAW agreement it’s unlikely you would be eligible.
Assuming your lease is protected by the Landlord & Tenant Act – the receipt of a Section 25 notice will serve as a trigger opportunity to request a MRO offer. Assuming the POB doesn’t object to renewing your lease – then this is a straightforward trigger opportunity. Regrettably, as the possibility of going free of tie can impact on the POB’s profit, the likelihood does increase that the POB will choose to object to a renewal to incorporate the site into their managed division. If you’ve been served such a notice we advise you seek professional advice right away to consider your options – especially if you disagree with any of the grounds for objecting to a renewal.
This depends on a number of factors, such as the MRO rental, your current deposit balance, legal completion costs, professional fees, etc. For an accurate assessment we advise you get in touch – as depending on the nature of agreement, costs can be considerable.
Currently the 3 POB’s that also brew their own products propose a stocking requirement as part of their standard MRO response. This may be rejected on the basis that such a requirement is “uncommon” in a normal free of tie agreement, and this can be determined on a case-by-case basis by the Pubs Code Adjudication (‘PCA’).
This will depend on a number of factors, such as whether the proposed MRO lease terms are agreeable, and whether the MRO rental requires an independent assessor which tends to be the case. The MRO rental may further be subject to an appeal which can also delay completion. Typically at the moment we would advise that the process usually takes 6 – 12 months to complete.
The MRO process is specifically designed to allow a “parallel rental assessment”. This effectively means that until agreement is reached both the tied and MRO offer can be discussed and progressed alongside one another. So in short – yes.
This will depend on the nature of your existing agreement terms, and the nature of your business. Generally the more tied beer you sale as a percentage of turnover, the greater the potential gain. However, it will also depend on your current rental. So whilst generally a wet-led site will be better off, there are no guarantees.
Once free of tie, you would become a commercial tenant. Therefore the ‘support’ offered by the POB would cease, and the RM/BDM relationship would no longer be necessary.
As per the Pubs Code, a MRO agreement must be offered for at least the equivalent length of term as your existing agreement. With some tenancies of a short-term nature this can render a MRO agreement somewhat irrelevant, so it does require careful consideration.
The POB cannot prevent you from exercising your legislative right to a MRO agreement if you have a trade debt – although you will need to settle the balance in full prior to the granting of a new agreement.
Yes – agreeing a tied deal doesn’t alter your future legislative rights, but you would obviously need to wait until the next trigger event’s occurrence, such as at the point of your next rent review.
In line with the Pubs Code legislation, you cannot be subject to any terms which are “uncommon” in usual free of tie agreements – and you are entitled to reject any such onerous provisions. However as your existing agreement is tied, there may be some provisions that are common place in the free of tie marketplace that you aren’t currently subject to – and some of these may be less favourable – such as quarterly rental payments for example. Therefore it is possible that some terms will differ, and it’s important to consider the bigger picture in relation to whether a MRO agreement is right for you.
We agree that there are significant improvements that need to happen in order that the MRO process functions as intended. However we also believe that it’s a massive step in the right direction, as the vast majority of our clients have improved their position. Therefore we would urge every single Tied Pub Tenant to request a MRO offer when entitled to do so, and seek professional advice to negotiate the best possible outcome for your business.