Victory for pub tenants as beer ties cut

The long-awaited Pub Code that will cut obligations for tied pub tenants in the UK to buy beer from their landlords, often at inflated prices, has finally come into force.

The Pub Code came into effect on 21 July

The Pubs Code came into effect on 21 July with the aim of giving tenants more rights and greater protection when dealing with large pub companies that own tied pubs.

Tied tenants of pubs had been obliged to buy beer and other drinks from their landlords, often at a large mark-up, in exchange for reduced rent payments.

Under the new rules, all business owning 500 or more tied pubs in England and Wales will have to adhere to the new code, which will give around 12,000 tenants new rights such as increased transparency about the tied deals available, a fair rent assessment and the right to move to a free-of-tie tenancy in certain circumstances.

Tenants will also be able to request a rent assessment every five years, or whenever there is a significant change in the price they are charged for drinks, or in their trading conditions. At this time, they will have to opportunity to renegotiate their rent or switch to a “market rent only” arrangement where they are able to buy beer from any supplier.

“The Pubs Code will improve relationships across the industry and help tied tenants get a fairer deal”, said business minister Margot James. “I want to take this opportunity to urge all tenants and pub companies to work with the Pubs Code Adjudicator, as well as one another, to do what’s best for Britain’s pubs.”

As part of the code’s introduction, the UK’s first ever Pubs Code Adjudicator has been appointed to oversee its enforcement.

Paul Newby will oversee the operation of the code, arbitrate disputes and investigate breaches of the code.

“I completely understand and appreciate that there are tied tenants out there struggling to make a living as a result of bad deals with their landlords”, said Newby.

“This goes right to the heart of why the code really matters – it is about giving more rights to tenants who need to provide for their families and keeping thriving pubs open for local communities to enjoy.”

Pub companies such as Punch Taverns and Enterprise Inns will be most affected by the changes due to their large number of tenanted pubs. In preparation for the code’s introduction, both have reformed their business models.

As reported by the Financial Times, Enterprise said earlier this year that it would have to sell 1,000 pubs as a result of the new law, and increase the number of pubs under its own management from just 16 to between 750 and 850.

Punch Taverns meanwhile has already earmarked 400 pubs for sale, and will convert 100 pubs a year to a new “franchise” format.

Franchise contracts and allow the pub company to retain 100%  of sales, the cost of sales, and pub costs, while the franchisee runs the front of house and receives a percentage of total turnover.

Punch has said this model, which it says allows pub managers to run operations within the need to manage its financial operation and stock, is proving to be more profitable than the existing tenanted model, with volumes reportedly up by 25% in franchised versus tenanted pubs.

Tenants can visit the website of the Pubs Code Adjudicator for more information and advice.