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Pubs code & Tenanted code of Practice

What you need to know and where to find out more.

 

The Pubs Code came into force on the 21st July 2016, giving tenants more rights and greater protection when dealing with large pub companies that own tied pubs.

Large pub companies are defined as those with more than 500 pubs. Those under 500 pubs are not bound by the code, but many are signatories to the Tenanted Code of Practice. 

The Pubs Code Regulations and the Tenanted Code of Practice can be complex and confusing. There is also a lot of jargon and acronyms. At any point, you can access the glossary using the book icon on this page.

This page will will break down what it all means and point you to where you can find out more.

We also recommend speaking to our friends at the BII (British Institute of Innkeeping) who can put you in touch with specialists, particularly if you're considering an M.R.O. (Market Rent Only) application. You can also take a look at our links page.

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The Pubs Code (an origin story)

For many years breweries have tied tenants in their pubs to only buy their own products. Usually at a higher cost than they could get for the beer on the open market. In return, the tenant would expect a lower rent, and increased support from the brewery.
This same deal also works in a similar way for pub companies who don't make beer themselves.
This 'Beer-Tie' has always been contentious for some. Whilst supporters of the tie would say it allows a lower cost way for publicans to get their own pub, and with the cost not on rent, they are paying only as much as trade increases and beer sales rise.
Those against the tie however will say that it restricts the range of beer available regionally and by selling beer to publicans so much higher than market value, reduces their ability to made a good living from their hard work.

After some attempts at asking the industry to self-regulate, the decision was made that a form of statutory regulation was required, and in 2016 The Pubs Code was born.

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What does The Pubs Code do for publicans?

The Pubs code outlines the rights that tenants have and the responsibilities that the P.O.B (Pub Owning Business, in layman's terms, Pub Companies) have.
It can be broken down into 3 main parts:


Rights prior to a new agreement
Information that you must be provided with and the relevant timescales.

Rights within an agreement/renewals
A T.P.T.'s rights around an M.R.O. (Market Rent Only) option.

General rights/protections
Not necessarily relating to rent.

When does the Pubs Code NOT apply?
The Pubs Code does not apply in all situations.

Timeline

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March 2015

The Small Business, Enterprise and Employment Bill (including the Statutory Pubs Code and an MRO (Market Rent Only option clause) is passed by parliament

March 2016

Paul Newby is announced as the first Pubs Code Adjudicator (PCA)

21st July 2016

After a period of consultation and revision,
The Pubs Code became enforceable. 

Around 12,000 tenants of tied pubs belonging to the 'big 6' pub companies were given new legal rights and protections.
At this point the 'big 6' being Punch, Enterprise, Greene King, Admiral, Star and Marston's.

21st July 2016

At the same time, Codes of Practice come into place for tenants and lessees of the pub companies owning under 500 pubs.
Current signatories to the code of practice
Code of Practice for Tenants
Code of Practice for Lessees
Code of Practice for Scotland

October 2017

Fiona Dickie is appointed as Deputy PCA (Pubs Code Adjudicator)
Later to became PCA in February 2020

April 2019

First Pubs Code Review, a 12 week process examining if the code has been operating effectively since its launch in 2016

December 2019

The Tied Tenant Survey conducted by the PCA from a representative sample of tenants from the 'big 6', reveals that whilst 78% of them had seen, heard or read about The Pubs Code, only 33% claimed to be 'very aware' of the legislation

February 2020

Fiona Dickie is appointed as the new PCA

March 2020

In Scotland MSPs pass a bill to reform the tied pub relationships in Scotland (Tied Pubs (Scotland) bill. This paves the way for a similar statutory code and PCA role in Scotland as to the one already in place in England and Wales.

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Rights prior to a new agreement

 
 

The Pubs code makes it clear what information must be provided to prospective T.P.T.s (Tied Pub Tenants). This includes:

General Information

  • A range of information about the tenancy from the advice, support and assistance available to you, details of when the P.O.B. may amend their standard terms, and clarity on the events that would trigger an M.R.O. option. Also outlining procedure when you, or the P.O.B. breach terms of the agreement.

  • The P.O.B. must also provide information on matters such as, the license, the premises, repair obligations, the 'tie', insurance, arrangements for payments of rent/deposits, your TUPE responsibilities,  and whether or not the tenancy may be assigned or sold.

Rent and the Rent Proposal

  • The P.O.B. must provide you with a rent proposal before you consider the independent professional advice for the purposes of preparing your sustainable business plan.

  • The Government factsheet on new rent proposals is here.

Sustainable Business Plan

  • Prior to entering into an agreement with you, the P.O.B. must make sure you have prepared a sustainable business plan.

  • Before preparing this, they must advise you to consult  publicly available reports that analyse the trading and tenancy costs of tied pubs in the UK (such as statistics from the BBPA) and either provide you with copies of where to find this information.

  • Your business plan must contain financial forecasts including: • Estimates of income and expenditure • A sensitivity analysis • The impact of any indexation of rent or other costs in the new agreement • A forecast of reasonable and realistic income and net profit. (Roslyns Business Plans cover all of this information, and more.)

Condition of Premises

  • Before entering into the new agreement, the POB must advise you to conduct a thorough inspection of the pub premises, including any part of the premises which you intend to use as your home and obtain the advice of a qualified surveyor with professional experience relating to tied pubs.

  • The P.O.B. should specify in the tenancy the condition of the premises. This is known as the “Schedule of Condition”. This is then used, or is updated in various circumstances before and during the tenancy. Where a tenancy requires that you carry out repairs or maintenance of the tied pub, before entering into the new agreement the P.O.B. must take the Schedule of Condition into account when assessing any maintenance or repairs required at the premises, or before any obligations about the condition of the premises are agreed.

Pubs Entry Training

  • Before you enter into the new agreement, the P.O.B. must advise you to complete pubs entry training.

  • The P.O.B. does not need to advise you to complete pubs entry training if any of the following apply: • You operate at least one other tied pub • You can show you have at least three years' relevant business management experience • The POB has previously granted you a tied tenancy.

 

Full details of the information that should be provided are known as 

Schedule 1 and can be found here.


 

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Rights within an agreement/renewals

The Pubs code also is clear on when a T.P.T. has the right to request an M.R.O. (Market Rent Only) option.

An M.R.O. is essentially an agreement to end the previous 'tie' and instead, go forward with the P.O.B. on a free of tie basis with a market rent instead.

We will look in greater detail at M.R.O. in our FAQs but this is basically the process:

M.R.O. Triggers

  • A T.P.T. cannot request an M.R.O. at any time, there are certain circumstances when this option can, and cannot, be used. The 5 triggers are:

  1. At your next rent review (providing it was due after 21st July 2016 and the review process is not already complete)

  2. On renewal of your agreement (providing your agreement is contracted into the Landlord and Tenant Act (essentially giving you a right to renew, not all contracts fall within this act) and the renewal date is after 21st July and you have not already completed the process.

  3. If there has been a significant increase in price (essentially this is defined by an increase above the C.P.I. rate (Consumer Prices index) by a certain percentage. more detail on these percentages and what constitutes an official 'significant price increase is available here.)

  4. If there has been a substantial change in circumstances. (this must be an event that will see 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 for example the removal or a particular tied product. You will have to provide written evidence and forecast the impact it will make on trade for the next 12 months to justify the request. It should be noted that as COVID restrictions affected all pubs, this is not considered to be a trigger event under this clause.)

  5. If you have not had a rent review in the last 5 years. (There are specific timings around this)

It should be remembered that a T.P.T. can submit an M.R.O. request at the same time as negotiating a new rent proposal with the tie remaining in place. This is known as a Parallel Rent Assessment.

 

There is a set timetable relating to how M.R.O. requests are to be handled once

the request has been received. Information on this is found here.
 

 
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General rights and protections

Machines

  • A P.O.B. cannot enter into a new tenancy or renew a tenancy that requires a T.P.T. to purchase or rent gaming machines.

  • If gaming machines are offered to the tied pub under the tenancy or licence, the terms on which they are supplied must be provided, including details of the arrangements for the distribution of income from the machines and an outline of the trading, payment and credit terms in relation to them.

Effectively what this means is that if you are entering into a new agreement or renewing one, the P.O.B. must tell you the full details about the terms of the machines, and cannot compel you to accept gaming machines if you do not want them.

Flow Monitoring Equipment

  • Many pubs have their draught beer lines fitted with equipment that monitors the flow of beer through the line. This information can be used in many ways, from detecting if a T.P.T. is buying out of their agreement, but also to inform all parties of the timing of peak sales for example.

  • All information from flow monitoring equipment must be shared with the T.P.T.

  • The P.O.B. is responsible for the cost of the equipment, installation and maintenance. The T.P.T. is responsible for covering the small amount of running cost for electricity.

  • If it is believed that the equipment has highlighted a breach of the tie, then the P.O.B. B.D.M. or their agent, should visit the premises to test and calibrate the equipment.

  • If it is proven to be working, before taking any action against the T.P.T. the P.O.B. must supply one other piece of corroborating evidence.

Role of Pub Company B.D.M.s (Business Development Managers)

  • As the pub company's B.D.M.s are often the main point of contact for a tied pub tenant, the Pubs Code covers how they are expected to act, the procedure for complaints and the training they should receive relating to the pubs code.

  • In matters relating to the pubs code, the role of the B.D.M. should not be as an advisor, but to point a tenant to the source of independent advice.

  • A pub-owning business must provide to its tied pub tenants information about

(a)the role of the B.D.M. (Business Development Manager); and

(b)the support and guidance which the B.D.M. will provide to the tenants.

  • Communication between a pub company B.D.M. and the T.P.T. are also covered. Records of any discussion must be kept and the T.P.T. must be provided with these notes within 14 days (or sooner) of the meeting. The T.P.T. has 7 days in which to object to this record of the discussion.

Role of Code Compliance Officers

  • A C.C.O. (Code Compliance Officer) are employees of the P.O.B.s who are responsible for ensuring adherence to the Pubs Code. they are independent of the operations team at that company.

  • The contact details for the C.C.O.s of the big 6 pub companies can be found here.

More information on B.D.M.s and C.C.O.s

can be found here.

 
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Exceptions

The Pubs code does not apply in all cases:

Agreement is not with a 'Big 6' Pub Company

Only a P.O.B. with over 500 pubs falls under the rules of The Pubs Code, under 500, and most are still covered under The code of Practice:

Agreement is not a tied tenancy

​Only tied tenancies are covered by The Pubs Code.

Other agreements are not such as: Franchises or Operator Manager/Retail Agreements

These are agreements whereby an operatorprovides staff for a pub and in exchange earns a percentage of turnover, and sometimes additional bonuses. They do not buy any stock or pay rent.

The agreement is for less than 12 months

These agreements cannot be reviewed or extended and are not covered by The Pubs Code.

There is investment being made in the pub by the P.O.B.

Known as The Investment Exception, this means that your right to request the MRO option can be restricted where you agree to the P.O.B. making a significant investment in your tied pub premises.

More information on the Investment exception can be found here.

This page contains a lot of content and may be better viewed on tablet, laptop or PC.

You can also go directly to FAQ, GLOSSARY, or the LINKS page via these buttons

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