Small Business, Enterprise and Employment Act 2015
On the 18th November 2014 MP’s voted to include a ‘Market Rent Only’ option for tied and leased Public Houses. This decision effectively heralded the end of the beer tie as we know it. The Act received Royal Assent on 26th March 2015. Pub companies with an estate of 500 or more premises will have to offer a ‘free of tie’ option to their tenants from summer 2016.
Here is a link to the government website which details the Market Rent Only Option:
Government Information Document
Market Rent Only Key Details
The market rent only option is now law in England and Wales and government has announced that the New Code of Practice for tied tenants. In a briefing note sent to members of the ALMR (association of licensed multiple retailers) Kate Nicholls said “The new Code will be introduced on 26 May 2016 and will be effective immediately – any rent review which takes place from 27 May 2016 will be governed by the new provisions and will give tenants the right to have detailed tied rent assessments, request a Market Rent Only (MRO) alternative and take a case to the Adjudicator for any behaviour or rent event after that date. The government has also confirmed that all the code provisions, aside from MRO will carry over should a tied pub be sold to a landlord not covered by the statutory code until the lease ends of the first rent review, whichever is sooner.
Tied tenants will have a right to request an alternative MRO free-of-tie rent assessment at rent review, renewal (contracted in agreements only) or if there is a significant increase in price or substantial change in circumstances. The original proposal that an MRO option would only be available at rent review where the rent increases has been abandoned, tenants will have a right to request an MRO assessment irrespective of whether the rent increases, decreases or stays the same. An MRO request can be triggered outside the rent review process where there is a significant increase in price. This is assessed by reference to the relevant ONS Price Index and for beer, it must be more than 3% above the index, for other alcoholic drinks it is 6% above (both are inclusive of duty) and for other tied products and services, a price increase of more than 20% above the relevant ONS Price Index. The price comparison period is over 12 months on a like-for-like cost basis and referring to prices actually paid by the tenant. MRO can also be triggered if there is an event which has a significant impact on trade. The requirement for this to be an event which only affects that particular pub has been removed, but the change has to be one of long term change to local economic, environmental or employment factors or as a direct consequence of changes in the tie imposed by a pub owning business (such as) removal or a particular tied product. The tenant will have to provide a written analysis of the forecast impact on trade for the next 12 months.”
The new code was introduced by the Minister for small business Anna Soubry who said “I have had to take some tough decisions, and I am certain that parties on different sides of the debate will find they disagree with some of the conclusions. However, it is my job to strike a balance which ensures that tied tenants of the largest pub-owning businesses are no worse off than free-of-tie tenants, that there is fair and lawful dealing between pub-owning businesses and their tied tenants and that all this takes place without placing undue burdens on businesses.”
Pubs Code Adjudicator (PCA)
The Pubs Code Adjudicator is responsible for promoting and enforcing the Pubs Code. The Pubs Code Adjudicator Line is open Monday to Thursday, 9:30am to 5pm and Friday, 9:30am to 4pm on 0800 528 8080. Fact sheets explaining the Pubs Code are available on the PCA website
Don’t Give Up On Market Rent Only
Two years into the Pubs Code and unfortunately very few Pubs have managed to take the Market Rent Only option. There have been various reports within the media which site the POB’s (Pub Owning Businesses) of using underhand tactics to stop market rent only breaks. Indeed the Royal Borough of Windsor and Maidenhead recently branded the Pubs Code as ‘not fit for purpose’. This has resulted in intense pressure on POB’s and the PCA. The Government is now finally listening to tenants and pressure groups about this problem.
Latest News Following BEIS Enquiry
After submitting evidence to the BEIS Enquiry on 26th June 2018. Pub Owning Businesses (POB’s) have now written to Richard Harrington MP pledging to waive their right to confidentiality in decisions made by the PCA. This is a good start as it will highlight to prospective MRO candidates processes which successful MRO tenants have used to force the POB’s to allow an MRO option to go ahead. If you are considering MRO and looking to use the Pubs Code to your advantage, please get in touch to discuss your options for brewing. You can watch DigiBrew in action here: DigiBrew Brews Beer
Pubs Code Needs Urgent Action-Says BEIS Chair
Rachel Reeves has written to Richard Harrington MP the Parliamentary Under Secretary of State to inform him of the failings within the Pubs Code legislation, in particular the lack of MRO’s being granted. You can view her letter here: Rachel Reeves Letter 3/07/18. The letter is quite damming particularly of Greene King and Ei Group and states that these companies are ‘gaming’ the legislation. Rachel Reeves suggests an urgent review of the Pubs Code before 2019.
A New Profit Centre With Market Rent Only
There has never been a better time to craft real ale on-premise. According to the Campaign for Real Ale (CAMRA) 70% of Public Houses are now selling Cask Ale. Consumer tastes have shifted towards English Ale styles (less than 30% of Public Houses were serving Cask Ale in 1975).
The Market Rent Only option enables tied Public Houses to offer their customers a wealth of choice including their own-brewed craft ale. Craftmaster® Digibrew® is the tool for the 21st century Public House. Progressive Beer Duty (50% less than big brewers) and now the Market Rent Only option, means that those pubs which start brewing first will reap the maximum benefit of these government assisted benefits.
Contact us today and we can guide you through the process of setting up your own in-house microbrewery. Come and visit one of our successful clients and talk to them directly about the transformations they have witnessed in their businesses.
It’s amazing what you can do when you Digibrew®!