The market-rent-only (MRO) option is defined as “the right to have an independent assessment of the market rent of the pub, on a free-of-tie basis, and then have the option to pay that rent only to the pub-owning company without other changes to the lease and without the pubco being able to thwart access to it”.
After being introduced to parliament while Mulholland was Liberal Democrat MP for Leeds North West, the MRO option’s implementation was supported by a majority of MPs and inserted into the Small Business, Enterprise and Employment Bill.
However, the British Pub Confederation has since written to the Secretary for State for Business, Energy and Industrial Strategy Greg Clark MP explaining that a “genuine MRO” option has not been implemented and that the pubs code must be amended to ensure tenants have access to rights they were promised.
As reported by The Morning Advertiser, the Government launched its first statutory review of the pubs code on 30 April to evaluate the effectiveness of the code between its introduction in 2016 and 31 March 2019.
Discussing the launch of the review, small business minister Kelly Tolhurst said: “We created the pubs code adjudicator [role] in 2016 to ensure a fair environment for pub tenants and operators.
“This review will look closely at how the pubs code regulations and the role of the adjudicator have worked since introduction and we encourage stakeholders to share with us their views on what is working well, as well as what changes might make it even more effective.”
List of demands
Speaking exclusively to The Morning Advertiser in February, Tolhurst highlighted that despite complaints about the MRO option, its introduction and implementation had yielded improved deals for many publicans.
“Clearly, there are concerns being raised by tenants and their representatives around the application of the pubs code, such as the length and complexity of the market-rent-only (MRO) option process and the relatively low number of MRO agreements that have been concluded so far,” she explained.
“There are also reports of tenants being in a stronger negotiating position securing better deals as a result, or following PCA decisions.”
However, in a letter to Clark, the British Pub Confederation and Fair Deal for Your Local campaign group have outlined three amendments to the pubs code that would ensure tenants are offered a “genuine” MRO option.
Firstly, they state that the MRO option must be formally defined as “the tenant taking up their legal right to pay an independently assessed market rent and be free of all product and supply ties and with all other terms of a lease (including the length of the lease) remaining unchanged” – with pubcos afforded no right to impose any changes in terms.
Secondly, they demand: “The free-of-tie offer made by the pubco must not be called a ‘market rent only’ offer as this is not correct and is not based on an independently assessed market rent.”
Finally, from the point of triggering the MRO option, a tenant must have the right to pay the independently assessed market rent 120 days later and reject any pubco free-of-tie offers. Moreover, the tenant in question must have the option to reject arbitration and proceed straight to the independent rent assessment.
Will of parliament flouted
“It is now apparent, from the operation of the pubs code and tenants’ experiences of trying to get an MRO option that there is no genuine MRO option available and that tenants and MPs have been betrayed and duped,” Mulholland explained.
“As the person who pushed the MRO option through parliament, it was always clear that it meant the simple right for tenants to be able to change from a tied lease to a lease with the rent set by an independent assessor on a free-of-tie basis.
“This is not what we have in the pubs code and so tenants do not have the right they were promised by ministers.
“The pubs code in operation and in drafting fails to deliver and honour the intent and principles of the legislation. This flouts the will of parliament and it means that thousands of hard-working tenants have been duped and betrayed.
“We are now advising all tied tenants of this fact and calling on all campaigning organisations who supported the MRO option – and the Fair Deal for Your Local campaign – to campaign for what was promised and what it is now certain we do not have.”