It can provide an interim solution to stop a pub closing, or allow the tenant to see if the business is the right fit for them – a ‘try before you buy’ period. A tenancy at will can be ended by either party at short notice, and does not have a fixed term, though other short agreements do.
The pubs code exists to protect tied tenants in their business relationship with the largest tied pub companies (Admiral, Greene King, Marston’s, Punch Pubs, Star Pubs, Stonegate).
If you are partnering with one of these companies to run a tied pub on a tenancy at will or other short agreement, or thinking of doing so, you should know your pubs code rights and about the agreed standards for how you’ll be dealt with by your pub company which go above and beyond those rights.
Pub code rights
The first thing to make clear is that most of the pubs code does not apply to those on short agreements, including ‘tenancies at will’. This includes the right to a rent assessment and to request the market-rent-only (MRO) option.
The pubs code does however require the pub company to give certain information to anyone negotiating to take on a short agreement, including about the tied obligations, rent and deposit payable, arrangements for paying utility bills, maintenance and repairs obligations, responsibility for safety certificates, transfer of employments rights for pub staff and any liability for fees, charges and penalties.
The pub company must also advise new or inexperienced operators to complete pubs entry training. Information about these rights can be found in the PCA’s Short Agreements Factsheet.
Initial works
Often a pub let on a short agreement will have been refurbished by the pub company. Sometimes this will not be the case, and there will be works of repair and improvement outstanding at the pub, or a major capital investment pending, and in this situation the tenant taking on a short agreement has important rights which mirror those negotiating for substantive agreements.
Before letting a pub on a short agreement, where the pub company is aware that initial works of maintenance repair or improvements must be carried out, it must provide a list of those works and a schedule specifying the condition of the pub prepared before they are carried out. It must also provide the prospective tenant with information on the obligations of both parties in relation to those initial works.
The pub company must explain who is responsible for carrying out the works, whether this must happen before or after the short agreement has begun, the completion date where this is after the tenant takes on the pub, any penalty for delay.
Code compliance
If you are on a short agreement and concerned about initial works to your pub, you can speak to your business development manager (BDM) in the first instance, and your code compliance officer (CCO) is available to deal with queries related to your pubs code rights. The PCA welcomes information about how pub companies are complying with their duties to tenants on short agreements and can be contacted via the webform on our website.
Getting full pubs code rights
The pubs code provides greater protections for those who are negotiating to take on a substantive tied tenancy.
So, if you are on a short agreement, the minute that you begin discussions with your pub company about taking on a longer tied tenancy, you become fully protected under the code, including being entitled to all the new tenant information you need to prepare a sustainable business plan, and an evidenced rent proposal based on a reasonable profit forecast for the pub. You can find out about the rights of new tenants in the PCA’s factsheet.
Full protection under the code is also a right if you occupy the pub for 12 months or more under any short agreement, or are entitled to do so because the terms of successive short agreements add up to a term of that length.
Fair dealing while you on are on short agreement
In supporting the business relationship between tied tenants and pub companies, many pubs code requirements also represent good commercial practice.
While duties on pub companies towards tenants on short agreements are limited, the potential to promote a healthy and effective partnership through applying code principles voluntarily is not.
This is something I have been discussing with CCOs from the regulated companies. Each has its own business practices, and we have been working to bring these together into clear, common and consistent approaches for dealing with short agreements which reflect the way the pubs code operates for tenants on substantive agreements.
I am pleased to say that the result of this work has been the agreement of minimum standards when dealing with tenants on short agreements, now published on the PCA website.
Many of these commitments represent existing individual business practices, which exceed what the pub companies are required by law to do, such as making clear that tenants on short agreements get notes of meetings with their BDM and the opportunity to check they are accurate, just as substantive tied tenants do under the code.
Pub companies also commit to giving advice in writing that tenants taking on a short agreement should not invest their own capital in the pub. It is so important that keen new operators do not risk laying out their own money on the pub when their agreement can be terminated on short notice. This cannot be over emphasised.
This article is intended to aid understanding of the pubs code and its impact. Nothing in its should be understood to be a substitute for the pubs code legal framework.
