Since 21 July 2016 the Pubs Code has provided statutory regulation of the relationship between tied tenants and large pub-owning businesses which rent pubs and sell tied products and a new Pubs Code adjudicator is tasked to enforce the Code. The code applies to landlords owning 500+ tied pubs in England and Wales and currently captures Green King, Marston’s, Star Pubs and Bars, Admiral Taverns, Punch Taverns and, Enterprise Inns.
The Code aims to ensure that tied tenants receive information needed to take key decisions on terms offered, have their rent assessed at least every 5 years and most controversially have the right to free themselves of the tie and ask for a market rent from the landlord.
So now almost a year on this article reflects on what the Code has achieved so far. Has the legislation freed many tenants of their ties, or as was widely predicted (including in an article by Joanne Spittles of Paris Smith) has it instead given pub owning companies a route to frustrate and delay the requests of their tenants? Are the giants of the pub world playing fair in these David v Goliath battles?
The Pubs Code process specifies trigger events entitling a tenant to request an MRO tenancy. The legislation is exacting in its deadlines, giving fixed periods for notifications and responses. For example, a tenant can only request an MRO tenancy within 21 days of the MRO event, and the pub owning company then has 28 days in which to either reply in full, or disagree that the MRO event has arisen, whereupon the tenant must refer the case to the Pubs Code Adjudicator if they disagree. If the Adjudicator rules that the pub owner has not given a full response where they should have done, the pub company has a further 21 days to provide that full response. A tenant could therefore be waiting for 49 days plus the time it takes the Adjudicator to respond before they even have a full response to their initial MRO notice. A long cycle of negotiation, Adjudicator referrals, Rent Assessor referrals, and further referrals back to the Adjudicator could easily mean over 6 months of delay, without even account of the unspecified response time from the Adjudicator before a tenant is even offered an appropriate MRO tenancy to consider.
A typical scenario would be, a tenant serves a notice following an MRO trigger event, the landlord can then deny that the notice has been validly served. This is their full response. The tenant must then serve an adjudication notice as they disagree with the landlord’s position. The Adjudicator reviews the papers and holds that the notice is valid as served by the tenant. This triggers the requirement for a more detailed response from the landlord. The landlord serves his detailed response, the tenant doesn’t like it and we go back to the Adjudicator, who (let’s remember) hasn’t made a decision since July 2016 yet. So how long do we have to wait? The question is rhetorical; no-one really knows.
So far, in the period of operation of the Code, data from the Adjudicator shows that up to the 21st January, 121 referrals for adjudication were received, and yet, at the time of writing, no Adjudicator cases have been completed. According to the statistics 91% of enquiries to the Adjudicator were from tied tenants. It seems therefore that if a pub owning company does not wish to release a tenant from their tie, they can string out the response periods and force referrals to the Adjudicator to frustrate the process for an as yet indeterminate time. As cases are decided, common issues will hopefully become clearer and the process more streamlined, but at the present time, a tenant must ensure that they are fully compliant with the complex terms of the legislation to ensure that their request for an MRO tenancy is resolved as quickly as possible.
Landlords can also block a tenant from enjoying a tie free renewal lease by objecting to its renewal on the basis that the pub-owning business elects to operate the pub under its own management.
We have already issued MRO notices on behalf of tenants, and encountered the problems as set out above, however we can ensure that the process runs in accordance with the criteria (we’d like to say “as smoothly as possible” but until we know what a decision looks like that’s hard to say). If you need any further information about how we can help you negotiate the MRO process, please do not hesitate to contact David Eminton or Cliff Morris.