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Small Business, Enterprise and Employment Act 2015

Section 43: Pubs code: market rent only option

287.This section provides for a Market Rent Only option to be offered to tied tenants of pub-owning businesses covered by section 70(1)(a), i.e.: existing tenants of the business but not to prospective tenants who are negotiating to take on a tenancy or licence.

288.Pub-owning businesses will be required, in circumstances to be specified further in the Pubs Code, to offer their tied tenants the right to pay no more than a ‘market rent’ and to release them from all product or service ties, other than for the insurance of the tied pub. These circumstances must include the renewal of the pub’s arrangements for renting or taking a licence or with regard to any of its tie arrangements; rent reviews or reviews of the assessment of money paid by a tenant in lieu of rent; a significant and unexpected price increase in a tied product or service; or a ‘trigger’ event. A ‘trigger’ event will also be defined in the Pubs Code but must be one which is beyond the tenant’s control, not reasonably foreseeable and one having a significant impact on the level of trade that could reasonably be expected at the tied pub.

289.Subsection (2) has the effect that a tenancy or licence will be ‘MRO-compliant’ if the rent is either one agreed between the pub-owning business and the tied tenant that is in accordance with the MRO procedure or, failing such agreement, a market rent which it would be reasonable to pay for occupation of the particular premises based on the five assumptions set out in subsection (10)(a) and (b).

290.Subsection (4) says that a tenancy or licence will be ‘Market Rent Only compliant’ if it complies with the description of terms and conditions to be set out in the Pubs Code. However, it must not contain any unreasonable terms or conditions, must not be a tenancy at will and must be considered together with any contractual arrangement between the tied tenant and the pub-owning business that relates to the tenancy, licence or alcohol tie.

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