More time to negotiate MRO under new pubs code rules

By Gary Lloyd contact

- Last updated on GMT

MRO rules: government-led changes to the pubs code will come into effect on 1 April 2022 (credit: Getty/Jamie Garbutt)
MRO rules: government-led changes to the pubs code will come into effect on 1 April 2022 (credit: Getty/Jamie Garbutt)

Related tags: Licensing, Legislation, Finance, Property, Pubco + head office, Tenanted + leased, Multi-site pub operators

Changes to the pubs code, including allowing more time for market-rent-only (MRO) option negotiations, will come into effect from Friday 1 April.

The pubs code allows a tied tenant to request the option of a MRO tenancy for their pub at certain points in a tenancy, including at renewal or at a rent review – if operating under pubs code rules.

This involves a longer period to negotiate before the deadline to make a referral for arbitration in relation to any dispute about the compliance of the MRO terms. Additionally, the tied tenant can end negotiation earlier if preferred, for example, the terms are agreed but the tenant wants to refer the rent to an independent assessor.

The new rules include starting the 21-day period in which the tied tenant must send their MRO notice to the pub company after the MRO event rather than on the day the event happened.

Three-month resolution period

The pub company must send an offer for the amount of rent payable as part of the MRO proposal. If it fails to do so, the tenant has 14 days to make an arbitration referral to the pubs code adjudicator (PCA).

If the pub company disagrees there has been a MRO event, the tenant has 14 days to make an arbitration referral and if the pubco fails to send any response, the tenant has 14 days from the end of the 28-day period of response to make an arbitration referral.

A tied tenant who receives an MRO proposal will have a three-month resolution period to consider and negotiate with the pub company about the terms and rent. Within seven days of the resolution period ending, the pub company can send an updated MRO proposal to reflect the negotiations.

The tied tenant can end the resolution period earlier than three months after receiving the MRO proposal by giving the pub company seven days’ notice but the resolution period must last for at least 21 days.

The tied tenant has 21 days after the end of the updated period of response to either refer the pubco’s proposal to the PCA for arbitration if they do not consider the terms are MRO-compliant or refer any dispute about the MRO rent to an independent assessor.

Significant increase in prices

Other changes to the pubs code include tied tenants’ right to request MRO and/or a rent assessment if there is a significant increase in the price of tied products or services and this ‘comparison period’ in determining whether there has been a significant increase in price will be 12 months apart instead of 13 months.

An ‘extended protection’ policy will allow the tied tenant to keep their rights under the pubs code for a period of time (except the right to the MRO option) when a pub company sells a tied pub and from 1 April, the pubco must give details to the PCA of who they have sold the tied pub to so the PCA can contact the new landlord and ensure the continuing rights of those tied tenants are protected.

Meanwhile, the period for which a pub company operating under the pubs code must own 500 or more tied pubs in the previous financial year (in order to become regulated and have to comply with the pubs code) is being reduced from six months to three months, allowing tied tenants to be protected by the code sooner.

Related topics: Licensing law

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