The Licensed Trade ‘Market Rent Only’ (MRO) option
On 21st July 2016 the long awaited Pubs Code came into effect. If you are not a tenant or lessee of a public house this will probably mean nothing to you. It is best for it to stay that way too as it is fiendishly complicated to understand. If you are a tenant or lessee of a public house however it may seem like the opportunity to reach the promised land.
For those readers blissfully unaware or the Pub Code and the rest who have been forced to open this Pandora’s Box here is a very brief explanation of what it is all about.
For about 200 years, give or take too long a period to be worried about, the owners of public houses have been able to tie in the tenants (from now on in this blog tenants and lessees will be interchangable) of their property to buy beer and other products from them. This dates back from the times when the brewers of beer owned the public houses and wanted the tenants to sell only their beer. This resulted in these tenants claiming that they suffered a restriction in trade and could manage only modest profits from their business compared to ‘free of tie’operators. In 1989 the ‘Beer Orders’ were put in place to try and solve this, limiting the number of pubs a brewer could own. As with many pieces of legislation this brought about the unexpected consequence of allowing pub companies or Pub Co’s who were not brewers to build up bigger estates than even the brewers enjoyed whilst retaining the tie.
Tenants continued to worry that they were disadvantaged by the tie arrangement and following years of submissions to sub-committees it was agreed by those who make the rules (this not being the tenants) that a code should be put in place that does not allow a tied tenant to be disadvantaged from a free of tie tenant. This therefore provides the opportunity for everyone to agree that a tied tenant should not be disadvantaged but it also retains the ability to confirm that a tied tenant is not disadvantaged. In short therefore, the Pubs Code should allow for everything.
Until a number of conversions from tied tenancy to market rent only option and free of tie tenancy have been completed the lasting effect of the Pub Code will not be known. It is not the solution to many issues that have dogged the licensed trade for many years but it may help some publicans make a break-even business into a profitable business. The process to achieve a market rent only option tenancy is strictly laid out in the Pubs Code and it must be adhered to precisely if a tenant is to complete their application.
Information about the Pubs Code can be found at https://www.gov.uk/government/publications/pubs-code-market-rent-only or by contacting one of the following trade bodies below:
The market rent option may not be for everyone and each public house tenancy should be looked at on an individual basis. If you need more information please contact me on firstname.lastname@example.org