The new ‘Pubs Code’ due to be introduced this May will bring costs savings for tied pub tenants of large pub owning companies regarding their lease payments – but may pose challenges in the run-up to them coming into force.
The Pubs Code will allow tied tenants - at certain review points in the life of a lease - to opt for a ‘Market Rent Only’ (MRO) lease. This means that they can cut the tie and pay an open market rent for the pub instead, which will usually save them a lot of money.
While they will be paying a more realistic rent to the brewery, they will not be tied to buying their drinks from the brewery (usually at inflated prices) - and will have the freedom to pick and choose suppliers at competitive rates.
However, some landlords are trying to delay the impact of these changes by invoking the Landlord and Tenant Act 1954, which allows them to serve renewal notices up to 12 months before the end of any current lease or where the existing lease expired some time ago. Their aim is to delay the effect of the Pubs Code by forcing the tenant to wait until the next “trigger event.” This will usually be the next rent review, often three or five years later on.
As such, it is expected that the big pub companies will employ this tactic heavily in the next few months.
We advise those pub tenants whose leases are up for renewal over the next year not to be browbeaten into agreeing terms that will be disadvantageous. There are a number of ways to ensure that they reap the benefits of the new Pub Code and they are advised to take advice from solicitors who are experienced in commercial leases and tenancy agreements.
hlw Keeble Hawson’s Litigation and Dispute Resolution team has a wealth of expertise and an enviable track-record of providing creative, cost-effective outcomes for clients of all types and sizes and works with each to resolve their dispute in the manner that best suits their needs and budget.
If you would like to discuss the implications of the forthcoming Pub Code legislation (part of the Small Business Enterprise and Employment Act 2015), or any broader tenancy or lease renewal issues, please contact Thomas Freeman at firstname.lastname@example.org or on 0114 252 1472.