'£60,000 profit boost' for pub following MRO appeal

By Michelle Perrett

- Last updated on GMT

'£60,000 profit boost' for pub following MRO appeal

Related tags: Lease, Contract, Paul newby

A pubs code consultant has exclaimed “Bravo Mr Newby” after pubs code adjudicator Paul Newby ruled in favour of the tenant in a market-rent-only (MRO) appeal.

The MRO decision, made by an independent arbitrator, was appealed by pub operating company (POB) Ei and sent to the PCA Paul Newby for a final decision.

Michael Erridge, founder of MDE Pub Consultants, told The Morning Advertiser​ that the ruling in favour of his client, the tenant, would improve the pub’s profitability by around £60,000 a year.

The details of the pub have not been disclosed for confidentiality reasons. 

Frustratingly long process

Erridge said: “We have been very frustrated by how long this process has taken, but the actual award Newby made was detailed and 18-pages long. It gave due consideration to the points that Ei made.

“The reason I said bravo Mr Newby was that the MRO rent was upheld.”

Overall Erridge said he has dealt with around 70 cases on behalf of tenants, with 30 of these having been referred to an independent rent assessor.

He admits that some cases have reached agreement, some have completed and some have reached a compromise.

Often this can mean that tenants remain on a part-tied deal with some sort of rent reduction. POBs can offer a “sweetner” such as an investment or extending the lease term, he said.

“When you conclude an independently assessed MRO it is going to lose the pubco quite a lot in revenue. It is at that point they will jump in with an equivalent deal on a tied basis in terms of savings,” he said.

Large variation between pub company offers

Another area that is an issue, he argues, is that there is also a large “variation” between the MRO leases offered by the six pub-owning companies.

A number of his cases with the PCA also concern “uncommon terms” written into these MRO leases.

“If any terms in the proposed MRO agreement are uncommon in normal free-of-tie agreements you can reject them,” he said. “If you look at Ei leases they ask a publican that wants to go MRO to agree to things such as pay-as-you-go electric meters, a repair and maintenance fund and other things that we consider uncommon.”

'Damned if he does and damned if he doesn’t'

Erridge, who is an ex-Greene King tenant and business development manager, admits that Newby has a tough job but said there was “frustration” with the length of time the process is taking.

“The problem is that he is damned if he does and damned if he doesn’t. I don’t think he is in a position single-handedly to move through them any quicker because each case does require a degree of attention,” he said.

“At the end of the day he has upheld the rent correctly in my opinion and has justified his reasoning very well.”

The Morning Advertiser​ approached Ei for a response to this ruling but the company declined to comment.

The PCA’s office provided this statement: “I can confirm that the PCA respects the confidentiality of arbitration cases and their outcomes. Even if one of the parties has put some information into the public domain we don’t comment on leaks or breaches.”

Related topics: Legislation

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