Introduced in 2016, the Pubs Code was intended to redress the balance between large brewing companies and their pub tenants, but what does it cover, when does it apply and what’s changed since it was brought into force?
So, what is the Pubs Code?
The Pubs Code applies to tied pubs (i.e., where the tenant of the pub is under a legal obligation to buy at least some of their beer from their brewing company landlord) owned by any company which operates more than 500 tied pubs in England and Wales. Currently, this covers six companies: Admiral, Greene King, Marston’s, Punch Pub, Star Pubs & Bars and Stonegate (the trading name of Ei Group), known in the legislation as “pub owning businesses” or POBs for short.
The tenants and licensees of a pub which is covered by the Pubs Code will benefit from a series of rights and protections which are all based around the two core Code principles -
- Dealings between pub companies and their tied tenants should always be fair and lawful, and
- A tied tenant should be no worse off than if they were free of tie (i.e., if they were free to source their beer from where they like).
What does the Pubs Code cover?
The Pubs Code introduced a whole host of new requirements on the POBs aimed at informing, protecting and supporting tenants, as well as creating the role of the Pubs Code Adjudicator to arbitrate any disputes.
Some of the key provisions include:
- A requirement for a POB to provide a pack of information about the pub to a prospective tenant or licensee before they enter into their agreement
- A requirement for prospective tenants and licensees to prepare a sustainable business plan for their proposed use of the pub after taking professional advice
- The right for a tenant or licensee to request a “market rent only” or “MRO” tenancy to free themselves from their tie on renewal of their lease and at other trigger points
- A requirement for a POB to provide an information pack on a rent review (including a forecast profit and loss statement for the next year) to assist rent negotiations, and
- The right for either party to refer a dispute to the Pubs Code Adjudicator for arbitration.
The Pubs Code also introduced requirements for POBs to create a Code Compliance Officer role who is responsible for compliance with the Pubs Code, and to formalise Business Development Manager (“BDM”) relationships. BDMs are expected to offer support and manage the day to day relationship between tied tenants and pub companies.
For those on short term agreements and pub franchises, there are reduced Pubs Code rights.
Since coming into force, various changes have been made to the Pubs Code, including the introduction of a requirement on the Pubs Code Adjudicator to report any unfair business practices to the Secretary of State. The latest raft of changes (from April this year) changed arbitration and MRO deadlines and introduced a formal negotiation period for renewing tenancies under the Code.
The Code is under regular review, including a formal statutory review every 3 years by the Secretary of State. The latest statutory review is currently underway so watch this space for more changes in the not-so-distant future.
More information can be found on the PCA website here. However, rights and responsibilities under the Pubs Code are a specialist area and we recommend you seek legal advice if you have any questions or concerns about the Code or how it applies to your pub. Our licensed premises specialist Scott Smith will be more than happy to help if you need any assistance, or you can call us on 01223 791000 to speak to another member of the commercial property team.
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