Licensees could face struggle over code of practice rights

Campaigners have raised concern that both licensees and potential pub purchasers may be unaware of their rights and responsibilities under the Small Business, Enterprise and Employment Act.

The issue has become more prevalent as some of the larger pubcos look to divest some of their properties in the wake of the new legislation.  

Last month, head of licensed leisure at property agent at Savills Kevin Marsh​ warned that licensees would lose their market rent-only option (MRO) rights if their pub is sold.

Tied tenants, who find their pubs sold to other operators not covered by the code, retain their code of practice rights under “extended protection.” However, they have no right to request MRO. 

The code of practice rights are lost when a variety of situations are triggered such as the end of tenancy or licence, and the conclusion of the first rent assessment.

British Pub Confederation secretary Simon Clarke said there is a lack of knowledge among both licensees and purchasers on the impact of a sale.

“It appears that the news of the existence of the code and the legislation is fairly thin on the ground,” he said.

“Prospective purchasers of pubs from the big pubcos appear to be unaware that they have some liability under the legislation. Both tenants and new landlords don’t know anything about it.

“If the licensee has just had their rent review then they have five years of code protection with the exception of being able to choose to go MRO.”

He believes it may take a licensee willing to fight a case through the pubs code adjudicator to ensure that these rights are recognised.

The Pubs Advisory Service head Chris Wright said it would likely be something that could take some interpretation of the law: “There is protection for tenants that have had their pubs sold. But how that works in practice is yet to be seen.

“The Government needs to be doing more to communicate this.”

He said there were a lot of technical issues that needed to be finalised in practice.

“If the new owner changes the products available to the landlord, that could also trigger MRO,” he argued.