Pubs Code: Industry reacts to draft which 'undermines' MRO

In section 8.12 the draft states​ a tenant will gain the right to request an MRO offer following the receipt of a rent review proposal – so long as the rent proposed by the pubco is higher than the existing rent that the tenant is paying.

The Pubs Advisory Service (PAS) has been ‘inundated’ with calls from worried licensees who were ‘shocked’ by an unexpected condition in the Code.

Co-founder Chris Wright said: “If things stay as they are the whole Pubs Code can be simply neutered by a landlord who has only to offer the tenant nothing come rent review.”

Government’s Business Innovation and Skills department (BIS) said in response that it believes the draft takes a "proportionate approach".

A spokesman said: "We are keen to hear the views of interested parties on this and any other aspect of the regulations.”

'Waste of time'

Simon Clarke, licensee and Fair Pint campaigner, said the clause makes the Code an “utter waste of time”.

“It’s going to cause mayhem. Nobody will be able to take the MRO option; pubcos can just keep rents the same and rising with inflation. It doesn’t matter if a tenant isn’t happy with their current rent. It massively undermines the Code.”

Parallel Rent Assessment

The draft has also removed the right to a Parallel Rent Assessment (PRA) – which aimed ensure tenants on tied rent are no worse off than if they were free of tie.

It was removed as due to claims MRO can achieve the aim alone, and due to its ‘cost, complexity and proportionality’ – a decision which has drawn mixed reactions.

Clarke said it will force operators down a tied route.

 “PRA is supposed to work hand in hand with MRO,” he said.

“You’ll never know if you’re worse off tied without PRA. The code is supposed to help with transparency, and an informed decision. If you’re tied and not happy with rent, you now need to take MRO.”

But the British Beer and Pub Association welcomed the move.

Chief executive Brigid Simmonds said: “I do welcome that the Government appears not to be proceeding with parallel rent assessments, which we always argued strongly would be too costly and complex to operate.

“We also welcome proposals to allow for an MRO waiver in return for a significant capital investment. Over £200 million is invested by BBPA members in their leased and tenanted pub estates, each year. It is essential that this investment continues.”

Free market

Trade union for tied pub tenants GMB said it hoped the code will encourage a free market for wholesale drinks.

Lead officer Steve Kemp said: "It is nearly a year since Parliament voted for legislation to give tied pub tenants a market only rent option with freedom to buy drinks wholesale on the open market. GMB hope that the intention of the consultation is to implement that principle and not to water it down.”

The Association of Licensed Multiple Retailers championed a moderate approach in the ‘polarising’ debate, and has been working with the BIS.

Chief executive Kate Nicholls said: “We aim to ensure a workable solution for businesses and to secure investment across the sector, from both landlords and other sources, to secure funding for lessee investment.”

And the Campaign for Real Ale​ "concerned" about wording in "several areas" on the draft.

Head of public affairs Jonathan Mail said: "We look forward to working with the Government in coming months to ensure that the final version of the Pubs Code is workable and succeeds in supporting the ongoing effort to keep pubs open and at the heart of community life."

Chair of the parliamentary Save the Pub group​, Greg Mulholland MP, said: “This is an attempt to make the concept of market rent only something which it is not and which is not what the House of Commons voted for. The draft code will need to be substantially changed so the proper definition of MRO is understood and the right to trigger it is based on the trigger points set out in the Small Business Act.

"There is clearly still a lot of work before we get a code that hardworking publicans will welcome.”