Pubs Code: what is extended protection?
“There was a certain amount of confusion amongst respondents as to the scope and implications of extended protection. This included whether MRO should be available under extended protection” – Government’s consultation response, April 2016.
A new statutory code of practice (known as ‘the Pubs Code’) was introduced on 21 July 2016 to regulate businesses which own public houses and let them on terms which oblige their tenant to purchase some or all of their drinks or other products from the landlord (known as ‘a tie’).
The articles and commentary about the Pubs Code have focussed on the right of tenants of large pub-owning businesses (ie with over 500 tied pubs – being at the time of print Ei, Punch, Star, Admiral, Greene King and Marston’s) to ask for a free of tie lease at certain points in their lease (known as ‘MRO’ or ‘Market Rent Only’).
This article is about an area that has not been the subject of much comment and about which some confusion may persist.
When a large pub-owning business sells their freehold or leasehold of a tied pub, what rights does the tied tenant continue to enjoy under the Pubs Code?
Those rights are called ‘extended protection’ by the Pubs Code.
This article is intended to be an introduction to the main points raised by extended protection and more information can be obtained if you contact us.
Extended protection, amongst other things:
- Does not give the tenant the right to ask for a free of tie lease
- Does not mean that other existing tenants of the new landlord get the same rights
- Does not mean that the new landlord can be the subject of investigations by the Pubs Code Adjudicator
- Does require the landlord to provide more information to incoming tenants on assignments
- Does require the first rent review after the transfer to be upward or downward and at either party’s instigation
- Does require the landlord to provide rent proposals in a particular format and with more information
- Does require schedules of dilapidation to be served 6 months before the end of the term
- Does require business development managers (BDMs) dealing with the particular pub to be trained in the Pubs Code
- Does require a compliance officer to be appointed
What this means for you?
The Pubs Code requirements are technical, and we would always advise a new landlord or a prospective new landlord to consult with specialist surveyors and solicitors familiar with the Pubs Code, to ensure compliance with the law.
Extended protection imposes an administrative and training burden on the new landlord, albeit one which is significantly less than those faced by landlords with more than 500 pubs.
In some cases the regulations reflect best practice and will largely be funded by the tenant paying a more substantial fee, for instance on assignment.
Need advice? Get in touch today
Rob Hastie is one of the UK's leading advisers to pub owners concerning the Pubs Code. Rob and his team have been involved with more than a third of the total number of cases referred to the Pubs Code Adjudicator. That specialist knowledge and experience is particularly important because the referral process is confidential, and the knowledge gained from the referrals will not be publicly available in a detailed form. As a result we believe that Rob and his team here at Gosschalks are better placed than any other law firm to advise pub owners on the Pubs Code.
Please call Rob Hastie on 01482 324252.
Or email Rob here.
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