Pubcos accused of blocking MROs in new Pubs Code report

Claire Dodd

Claire Dodd

24 August 2017

Pub owning businesses (PBO) have been described as ‘intimidatory’, ‘bullying’ and ‘antagonistic’, by licensees seeking a market rent only option (MRO), in a new report that concludes many are still failing to act in the spirit of the pubs code.

The independent report, commissioned by the Pubs Code Adjudicator, found that PBOs have been effectively blocking tenants from accessing MROs, through 'actively "playing the system" by exploiting the loopholes in the Code'.

The report collected detailed evidence from tied pub tenants and their advisers about their experiences of pursuing the MRO option during the first year of the Code. It found that the biggest barrier to licensees seeking an MRO was the insistence by POBs that an MRO tenancy must be effected through a brand new tenancy agreement and not by way of a Deed of Variation (DoV) to the existing tied tenancy.

Tenants and tenant advisers stated that it was in the interests of POBs to be unhelpful throughout the MRO process as delays were to their financial advantage. Other reported barriers include attempts by POBs during the Independent Assessment stage to influence licensees to stay tied by questioning the outcome of the assessment and offering to re-open negotiations in return for a withdrawal of their MRO case, significant costs, and MRO offers that routinely include terms that have not been commonly found in either tied tenancies or in pre- and non-Code free-of-tie agreements.

However, the report also suggests an early lack of awareness about the code could have potentially suppressed demand for MROs.

Paul Newby, the Pubs Code Adjudicator, said: 'I commissioned the verification exercise because I have had concerns brought to me and I wanted the detailed evidence that I need to take action.

'The exercise has provided evidence on the impact of delays in the arbitration process on tenants’ costs. It has also demonstrated that the effect of pub-owning businesses requiring new agreements for MRO tenancies has created a series of hurdles that, taken together, tenants consider to be insurmountable.

'I am now asking the pub-owning businesses to provide me with further, detailed information about their particular processes and practices.'

He added: 'I am determined that this should be the year that the Code comes into its own and I am making it plain to the pub-owning businesses that I expect them to abide by the spirit as well as the letter of the law.'

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