A Pint Of Lager - and some pork scratchings please
Which of us has not uttered those lines in the local boozer over the years? But this has not been enough to keep many pubs profitable in the face of high rents charged by pub companies to the tenants of tied pubs. In an increasing number of circumstances, licensees have had no option but to close down.
Enter the Small Business, Enterprise and Employment Act 2015 (SBEEA), passed at the end of March. The SBEEA puts in place a statutory framework for the introduction of regulations to control some of the actions of pub companies owning and leasing ‘tied’ public houses, with the intention of mitigating some of the harsher effects evident in the current market. A ‘tied’ public house is one which requires the tenant to purchase some or all of the alcohol sold in the pub from the Landlord/a Group Company of the Landlord, or any other third party at their direction.
The SBEEA requires that the Secretary of State introduce regulations (the “Pubs Code”) governing the practices and behaviour of pub-owning companies when dealing with their tied tenants. The Pubs Code is yet to be drafted and introduced, but is intended to govern various areas of the relationship between the pub company and their tenants:
- A ‘Pubs Code Adjudicator’ will be appointed and any disputes between the pub company and the tenant must be referred to them for adjudication;
- Tenants will be able to request a rent review and the legislation indicates that they will have the option to pay a market rent. This is in contrast to many existing arrangements in leases for tied pubs, in which the tenant is required to purchase a minimum volume of alcohol at the appointed price from the pub company under the tie. This arrangement can prove very costly to tenants and often goes on for many years.
- It is also envisaged that the Pubs Code will address other restrictive terms in pub leases including protocols for dealing with the following situations:
- terms of the lease are inconsistent with the Pubs Code;
- terms of the lease seek to avoid the application of the Pubs Code;
- a rent review clause is upwards only or can only be triggered by the pub owning company
Posted on 05/06/2015 by Ortolan
