How to ensure new tied tenants go in with their eyes wide open

As the sector starts to recover post-lockdown there will be people who see taking a new tied tenancy as a business opportunity. It is a testament to the resilience of the pub trade as a whole that we can be sure that will happen.

The pubs code is there to make sure that any new tied tenants go in with their eyes wide open because they have full disclosure from their pub company. Under the code, regulated pub companies have legal duties to provide tenants with a wealth of information about running a pub.

These duties are there to ensure that new tenants – and some of those renewing their tenancies – have enough information to understand what they are signing up for, their rights and responsibilities under the tenancy, and their code rights. 

Parliament’s aim was to tackle the tenant’s lack of bargaining power and pub companies having better information than tenants in the business relationship.

New tenancy information

Broadly, the pubs code requires pub companies to advise new tenants to complete pubs entry training and to ensure that they have prepared a sustainable business plan after taking independent professional advice. 

But before a prospective tenant considers that advice and makes a decision about the tied tenancy, they must receive a range of important information.

That information includes the tenancy obligations, the condition of the pub and any repairing obligations, insurance liabilities, purchasing obligations under the tie and any advice and support available to the tenant. 

This all makes perfect business sense. But while the code sets out the duties an issue remains: does the prospective tenant read and understand all the information provided?  

For new tenants there is a vast amount of paperwork to complete, and important messages can become lost in the initial stages of the tenancy. 

In practice, the array of information the pub company provides may not be fully understood or retained for when it is actually needed. 

So, it is important that providing this information is not just a box ticking exercise. Presenting it in the best way for tenants to understand it is what I want to see.

Pub company responsibilities

Plainly, it is in the interest of pub companies that their new tenants’ businesses are successful, so up-front investment of time and effort should be a win-win. 

Pub companies need to check not only that tenants do the training and receive complete information, but also that they understand it. This way they can see where they can make improvements. 

I have already begun engaging with code compliance officers (CCOs) about this. That engagement is ongoing as it is important CCOs ensure their businesses have effective plans in place showing they can measure new tenant understanding. 

I am continuing my work in this area to make sure the pub companies take appropriate steps in complying with the code so that they can set the new tenant on the right path for their business journey with them. 

At the heart of that effective business relationship is the tenant having a realistic and achievable business plan. 

For this reason, I expect pub companies to consider whether this business plan is being used appropriately to shape discussions with tenants about the performance of the business, and not just before the start of the tenancy. 

PCA Response

There is also much the pubs code adjudicator (PCA) can do. 

The user research​ I commissioned has made it clear that tenants want direct communication from the PCA about the code and I am looking at how I can do more of that. 

Tenant participants also told me that during pubs entry training they face a very large amount of new information and as a result tended to focus on that which was immediately applicable. 

I want to design PCA communications to help tenants identify the key events in their business lives when code rights come into play and when they need to find more detailed information. 

I am committed to continuous improvement in the way the PCA communicates with tied tenants, and I am making it a priority for the pub companies to do the same. 

This column is intended to aid industry understanding about the pubs code and its impact. Nothing in it should be understood as a substitute for the pubs code legal framework.​