Specialising in advising pub tenants on Market Rent Only and Tied Lease options

Due to the complex nature of this type of business, we have created a unique team of industry specialists who have unrivaled experience in issues relating to tenancies, property, and the often complex landlord/tenant relationship.

This experience allows us to not only understand and foresee issues but to explain them to you in clear, jargon-free language and to ensure that you are able to take decisive, positive action. We understand the challenges which are involved in running a successful pub, and we want to work with you to help you to achieve your goals.

Our lawyers and surveyors are here to give pub tenants the support they need to develop a thriving pub business, to give specific and practical answers to your questions, and to help you get things done.

We want to work together with you over the long-term, and we will make ourselves available to you so that you always have somewhere to come with all your questions, not matter how insignificant they might seem. Our philosophy is that, with something as complicated as running a successful pub, it is better to get every-day advice which will avoid a crisis, rather than waiting until crisis point before getting advice.

If you would like to talk to a highly experienced expert who can give you come clear guidance on the best way to help your business succeed, get in touch.

Is a Market Rent Only (“MRO”) lease right for you?

Pub owning businesses (“POBs”) are experts in using the complex rules relating to MROs to put pressure on their tenants, and they are not afraid to use these rules tactically in MRO negotiations. It is therefore vital that you have your own expert support if you are involved in these discussions, because time frames are tight and, very often, missing a deadline means you can no longer seek MRO. We are highly experienced at dealing with these kinds of contentious situations and are ready to go into battle to help protect your rights, but we will only do so if the circumstances require it. Legal confrontations are usually caused by the pressure of tight and strict deadlines, so, due to this, you should always contact us as soon as possible so we can give you immediate assistance.

Some examples of the tight time frames involved in MRO negotiations are:

  • After one of the four trigger events occurs (see our FAQ: “What is a trigger event?”), a Tied Pub Tenant (“TPT”) has only 21 days to serve a trigger notice on the POB. You need to understand what constitutes a trigger event and then ensure that the proper paperwork is completed to serve your MRO notice within the 21-day limit.
  • Once an MRO offer is received by a TPT, you have only 14 days to object to any of the proposed terms. The terms of the new lease contained in the MRO will almost always be worse than your current agreement, but you will need to act fast to understand the new terms and the impact they might have on your business.
  • You have only 56 days to negotiate an MRO from the date of receipt, although it is possible for you to refer the case to an Independent Assessor if there has been no agreement reached on rent after 28 days.

We have a huge amount of experience working with these complicated rules and stringent deadlines, so you can rely on us to move quickly to ensure you are properly advised on the best approach to take through the complex legislation. Decisive action is required in most cases, and our experience and expertise will help you to take it.

It is our job to put you in the position to make the best decision, and we recognise that, in some circumstances, that may be to not seek an MRO. Our approach is based on providing the clearest, waffle and jargon free advice, and we will be very clear on the potential advantages and disadvantages of all your available options.

*See the glossary below for a definition of various terms used here.

The MRO process explained

1. The Pubs Code etc. Regulations 2016 (“the Pubs Code”)

The Pubs Code regulates the relationship between TPTs and their landlords (providing the POB owns 500 or more tied pubs in England and Wales), and tries to grant and protect the rights of TPTs in these necessarily unbalanced relationships.

The key principles of the Pubs Code are:

  • POBs should treat their TPTs in a fair and lawful way; and
  • TPTs should not be worse off than they would be if there was no tie.

The Pubs Code tries to ensure that TPTs understand what taking on a pub means; that they get all the information they need to make an informed decision about running a pub, including the terms and conditions of the lease; and that they receive a rent assessment at least every 5 years. In addition to this, the Pubs Code also requires that a TPT can request an MRO in certain circumstances (see our FAQ: “What is a trigger event?”), which removes the existing tie.

2.  MRO trigger events

An MRO event is a trigger which enables a TPT to serve an MRO notice on the POB (see our FAQ: “What is a trigger event?”). A key question in these circumstances is whether the MRO should be arranged as a variation on the existing lease or as a brand-new tenancy agreement. The imposition of a new tenancy agreement can often be highly unfavourable to the TPT, as they may become liable for a range of different costs (such as legal fees and deposits) and, potentially, dilapidation claims.

The Pubs Code sets out a clear procedure for agreeing an MRO lease once a trigger event has occurred, including a strict timetable.

3.  Lease renewals

The provisions of the Pubs Code have also had an impact on the process of renewing a pub lease under the Landlord and Tenant Act 1954. A TPT must now state on the claim form whether it has served an MRO notice and, if such a notice has been served, the court must consider whether to stay proceedings until the outcome of the MRO process is finalised. Guidance is also provided on the different process required if the claim is opposed or unopposed, and in relation to claims for interim rent from Pubs Code tenants.

4.  The Pubs Code Adjudicator

Sometimes, the process of agreeing an MRO lease following a trigger event does not run smoothly. Partly because of this, the Pubs Code created the position of Pubs Code Adjudicator, an independent position with powers to make recommendations, require the publication of information and to impose financial penalties on parties which breach the Pubs Code. In particular, the Pubs Code Adjudicator gets involved to:

  • Resolve disputes between POBs and TPTs.
  • Adjudicate on breaches of the Pubs Code, and to award redress to TPTs if appropriate.
  • Investigate suspected abuses of the Pubs Code

5.  Referrals to the Adjudicator

Under the provisions of the Pubs Code, a TPT can make a referral to the Adjudicator if it believes that there has been a breach of the regulations. An example of such a breach could be if a POB’s response to an MRO notice is considered defective in some way. The Adjudicator can also be asked to rule on the terms of a free of tie tenancy if agreement cannot be reached between the parties. In these circumstances, the rent payable would be determined by an independent assessor.

It is hoped that decisions by the Adjudicator will start to create precedents which can be used to better understand how the Pubs Code should be applied to particular cases (for example, whether a deed of variation or a new tenancy should be used when an MRO lease is agreed). As yet, the specific nature of the individual cases which have been referred to the Adjudicator means that no general precedents have emerged from the rulings, but this system should develop as more adjudications are made.

Our fees

We are proud of our Yorkshire values of straight forwardness, getting things done and, importantly, offering value for money. We offer a free, no obligation initial consultation, which enables us to understand your goals. Following this meeting, we will be able to provide you with a detailed assessment of your prospects and a bespoke fee proposal. We are often able to offer fixed fee arrangements for certain matters, as appropriate.

We are confident that we will find a pricing option which suits you and your circumstances. We can do everything bigger, national firms can do, but our flexibility and personal approach, plus our commitment to avoiding waffle and legal jargon, means that we can offer a better, more cost effective, service.

Get in touch today for your free, no obligation, initial consultation.

 

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Glossary

MRO and Tied Lease Agreements

A tied lease agreement means that the tenant is only able to sell beer they have purchased from their landlord.

An MRO lease is free of such a tie.

We can help advise you on the best type of lease for your situation.

The Pubs Code

The Small Business, Enterprise and Employment Act 2015 introduced The Pubs Code etc. Regulations 2016 (the “Pubs Code”). The Pubs Code attempts to regulate the relationship between TPTs and POBs and to grant, and protect, TPT rights.

The Pubs Code seeks to increase transparency in the relationship between TPTs and POBs, so that both parties fully understand the terms of the relationship between them, and to specify strict timeframes and processes which must be followed at key moments in the relationship (such as the decision whether to enter into a lease, assignments of leases, rent reviews and schedules of dilapidations). One of the main consequences of the Pubs Code is that, throughout the term of the lease, but especially at these key moments, landlords are required to provide information to tenants to enable them to make more informed decisions. The Pubs Code also requires that tenants have the right to a rent assessment at least every five years.

Another key provision in the Pubs Code is the option for tenants to request an MRO lease in certain circumstances, called trigger events (see our FAQ: “What is a trigger event?”).

Pubs Code Adjudication

The Pubs Code Adjudicator is responsible for enforcing the Pubs Code.

Pubs Code Arbitration

Disputes between a TPT and POB during the MRO process can be referred by the TPT to the Pubs Code Adjudicator to resolve through arbitration. The TPT makes a formal referral to the adjudicator (for a fee of £200), and the adjudicator sets out the required steps which must be taken by each party. Each party prepares their case, and the adjudicator makes a formal determination and issues an award. The award is final and binding on the parties and, unless both parties agree, remains confidential. Normally, the costs of the process are covered by the POB.

Most cases are dealt with entirely on paper, without any hearing, and, depending on the complexity of the case, Pubs Code arbitrations are usually completed in a matter of months.

Commercial market agreements

A commercial market agreement refers to the best possible commercial use of a property, which may not be as a pub. If this is the case, the rent under such a lease may be higher than a specific public house lease. We can advise if you are subject to a commercial market agreement.

Lease agreements

Most POBs will have their own standard agreements which they offer to tenants. It is important to be fully aware of what you are committing to when you sign such an agreement, and we are able to provide legal advice on the terms of the lease, as well as practical tips on how your lease compares to market standards.

Lease renewals

The law protects the rights of tenants at the end of a lease. We can help tenants to understand what those rights are and what action is most appropriate for them and their business.

Rent Reviews

Most agreements contain a rent review provision which sets out how the current rent will be reviewed over the course of the agreement. We can advise on the process, rent expectations, and what your lease specifies about how a rent review should be undertaken by the landlord.

Rent Assessment Proposal

Rent reviews are usually made on a market rent upward only basis, which means that the rent will either remain the same, or increase, depending on the local rental market. A POB must send a Rent Assessment Proposal at least six months before a rent review date, which is a trigger event for an MRO process, meaning the TPT can request an MRO from the POB.

It is also possible for a TPT to request a rent assessment if there has been no rent assessment in the last 5 years, the price of tied products or services has significantly increased or a trigger event has occurred which will have a significant impact on trade.

The Rent Assessment Proposal must include the proposed new rent, as well as detailed financial information and forecasts relating to the tied pub. At this point, the TPT should seek independent financial advice on the proposed rent.

The TPT can make a referral to the Pubs Code Adjudicator if they feel that the POB has failed to comply with the requirements of the Pubs Code in relation to the Rent Assessment Proposal, and the POB has failed to provide a satisfactory response within 21 days.

Dilapidations

Dilapidations refers to the requirement that a tenant repairs, replaces or renews parts of the property at the end of a lease. There is a specified procedure governing this process, and we can help you if you have any concerns about how it should work.

Lease Assignments

A lease may be assigned to another party during the term of the lease. If you are looking to take over the management of a pub, this might be a good option for you, depending on your circumstances. Talk to us for expert advice on the possible benefits of taking on the assignment of a lease.

Business Rates

All business owners or occupiers must pay business rates, unless their property is of a low enough value that they qualify for small business relief. If you think you might be paying too much for your business rates, contact us for expert advice.

Estate Management

If your business manages more than one pub, it can be extremely complicated to coordinate different lease terms, rent reviews and other management issues which are made more complex across multiple properties. We have a huge amount of experience helping people to manage estates of different sizes, so the process is less stressful for you, and less likely to result in issues such as missed deadlines.

Employment Issues

Running a pub will almost certainly involve you employing staff, and making sure you are up to date with all the requirements of employment law is a difficult challenge. We are here to assist you stay on top of your responsibilities as an employer.

Incorporation advice

Pub tenants come in all shapes and sizes, and there are many options in terms of how you choose to operate your business. We can provide advice on the best way for you to incorporate your operation, whether you are a sole trader thinking about becoming a limited company or a community group wanting to become a community benefit society.

Assets of community value

Many communities are now choosing to take over the running of their local pub. More than 2000 pubs are now registered as Assets of Community Value, and the model is still growing in popularity. We have a great deal of experience helping groups to save their local pub using this process. If you feel that your local is at risk of closing, and you think you might be able to help, contact us today.

Landlord and tenant disputes

Disputes between landlords and tenants are common, but they are usually resolved relatively easily once the lease agreement is properly understood. We can provide expert advice on the provisions of your agreement and on the correct procedure to follow if your disagreement becomes more complicated.

Licensing

A valid licence is a requirement for all pubs. We are specialists in licencing and how licensing authorities operate. This can be a complex area of law and it is important that you get it right. Please speak to us in relation to your licence arrangements to ensure that you are fully compliant with the rules.

Frequently Asked Questions

How much does it cost to get expert advice about running a pub?

We offer a free, no obligation initial consultation, which enables us to understand your goals. Following this meeting, we will be able to provide you with a detailed assessment of your prospects and a bespoke fee proposal. We are often able to offer fixed fee arrangements for certain matters, as appropriate.

Get in touch today for your free, no obligation, initial consultation.

Which pubs are covered by the Pubs Code?

The Pubs Code regulates the relationship between TPTs and POBs, providing the POB owns 500 or more tied pubs in England and Wales.

The POBs currently covered by the Pubs Code are:

  • Greene King
  • Marston’s
  • Star Pubs and Bars
  • Punch Taverns
  • Ei Group
  • Admiral

Is there a way to avoid a large dilapidations bill?

The most obvious way to avoid having significant repair costs at the end of your lease is to maintain the property in good condition throughout the term of your lease. We can advise you about organising an annual property inspection with an expert surveyor who can identify areas which require, or may soon require, attention. It is almost always better, and cheaper, to deal with repairs on an ongoing basis.

We are happy to arrange a surveyor inspection which could help you to control your dilapidations liability.

What are dilapidations, and how might they affect me?

Dilapidations refer to things that you need to repair, replace or renew in the property under the terms of your lease. This is most likely to affect you at the end of your lease when your landlord is entitled to serve you with a schedule of dilapidations which sets out precisely the things which you are responsible for.

If you have any concerns about what your landlord is asking you to do under the terms of the dilapidations provisions under your lease, contact us, as you may be able to contest this schedule.

What does MRO mean?

An MRO lease means Market Rent Only and is free of tie. If you are currently running a pub under a tied lease, there are certain trigger points which mean that you can request an MRO lease from your landlord (see our FAQ: “What is a trigger event?”).

What is the difference between a fully tied lease and a free of tie lease?

Fully tied refers to a situation where the tenant is required to buy all their beer (and often other products) from a particular Pub Owning Business (POB) or brewery. Often the terms of leases like this set the price of these products higher than market value, making it hard for pubs to make a profit.

Conversely, a free of tie lease means that the tenant is free to make their own decisions about the products they sell and can communicate directly with suppliers to negotiate prices.

There is also a middle ground called a partial tie, which means that the POB stipulates some of what the tenant must sell.

What is the difference between freehold and leasehold when considering running a pub?

Buying a freehold means you own the pub outright, and you can make all the decisions about how you run the pub and what you sell. This is likely to involve a large initial cost to purchase the freehold.

On the other hand, if you buy a leasehold, you will not own the property, but you will be granted a lease for a fixed number of years. Under the terms of the Landlord and Tenant Act 1954, you will have the right to renew the lease when it ends. You will most likely have to take responsibility for maintaining and insuring the property during the term of the lease, and you will probably be required to make good any damage to the property when the lease ends (called dilapidations -see Glossary). Most leases with POBs will also tie you in to purchasing products from a particular brewery – this is known as a tied-lease agreement.

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