A letter seen by The Morning Advertiser (MA) from Ei Group to one of its tenants states: “On 7 June 2019, the PCA published guidance entitled ‘Taking the MRO option – tied rent considerations’.
“The advice note is not formally binding but represents the PCA’s summary of their understanding of the relevant provisions.
“One of the conclusions of that advice is that if the MRO procedure ends with the tenant entering into an MRO tenancy then the pub-owning business is not permitted to recover any additional amount of rent (ie, a rent increase), which may have become payable under the tied agreement after the MRO notice was served.
“Ei does not necessarily agree that advice is correct summary of the position but have elected, at this stage, not to raise a formal challenge. They reserve the right to do so in future.
“Ei are prepared to refund, to tenants, any increases in rent that they have paid following the service of the MRO notice, without prejudice to their right to seek payment of those amounts in future.”
According to the office’s figures, the PCA has accepted 160 MRO cases involving Ei Group tenancies.
Stonegate Pub Company recently agreed to buy Ei Group for £1.27bn – a move that will see the former’s pub estate grow by approximately 4,000 sites.
Erroneous advice
As previously reported by MA, chair of the British Pub Confederation and former MP Greg Mulholland sent a letter to Secretary of State Greg Clarke MP on 10 June – three days after the advice note’s withdrawal – explaining the PCA’s retraction of its advice on rent dispute clauses and Calderbank letters (offers of settlement) made Paul Newby’s position as pubs code adjudicator “untenable”.
Mulholland argued that the withdrawn advice – initially published in July 2017 and backing pubcos to lawfully impose additional arbitration upon tenants seeking MRO – has affected thousands of tenants and denied them legal rights after being issued erroneously.
The withdrawal followed north London licensee Gary Murphy launching a crowdfunding campaign to mount a High Court challenge to pubcos and the PCA over the beer tie.
As reported by MA, Murphy launched a campaign to raise legal fees after he believed the PCA misinterpreted the pubs code in issuing his arbitration award.
According to Murphy, the process means pubcos benefit from elongating the process as long as they can because cheaper MRO rents are only introduced from the date an agreement is signed.
He argued that a correct interpretation of Regulation 28 on rent recovery would leave rent backdating open to negotiation.
Refund decision
Discussing the decision to refund tenants, an Ei Group spokesperson said: “Following the recent publication of a revised interpretation, by the office of the pubs code adjudicator, of the conduct of tied rent reviews during an MRO process, we have decided to promptly refund agreed increases in tied rents to a very small number of tenants where the MRO process extended beyond the contractual rent review date.
“We reserve our position pending further clarification of the matter.”
