Requirement to offer market rent only leaseS
5(1)The code must require a pub-owning business—S
(a)to offer to enter into a market rent only lease with a tied-pub tenant who requests that the offer be made (but see sub-paragraph (3)(b)),
(b)to make that offer by offering to modify the terms of any existing agreement only to the extent that is necessary for the lease in relation to the pub to be a market rent only lease (but see sub-paragraph (3)(c)),
(c)to use its best endeavours to enter into a market rent only lease with the tenant as soon as possible following the tenant's request that the business offer to enter into such a lease.
(2)A market rent only lease means a lease that—
(a)sets the rent payable in respect of the tenant's occupation of the pub at—
(i)an amount agreed between the landlord and the tenant in accordance with a procedure described in the code, or
(ii)in the event that no agreement is reached in accordance with that procedure, the market rent,
(b)imposes neither a product tie nor a service tie in relation to the pub,
(c)complies with any requirements set out in the code as to the terms that a lease must contain in order to be a market rent only lease, and
(d)does not contain any unreasonable terms.
(3)The code may specify—
(a)descriptions of terms that are to be regarded as unreasonable for the purpose of determining whether a lease is a market rent only lease,
(b)circumstances in which a pub-owning business need not offer to enter into a market rent only lease with a tied-pub tenant (including, for example, where an agreement to invest in a tied pub has been entered into),
(c)circumstances in which a pub-owning business—
(i)need not offer a market rent only lease by making an offer in the terms described by sub-paragraph (1)(b), but
(ii)may make the offer in another way (including by offering to modify the terms of an existing agreement in a way other than that so described or by offering to enter into a new lease).
(4)In this paragraph—
“lease” includes any agreement between the landlord and the tenant of a pub that relates to the tenant's occupation of the pub or the activities carried on in the pub,
“market rent” means the estimated rent which it would be reasonable to pay in respect of the occupation of the pub under a tenancy, assuming that—
(a)the hypothetical tenancy is entered into—
(i)on the date the estimate of the rent is being carried out,
(ii)in an arm's length transaction,
(iii)after proper marketing,
(iv)between parties who are all acting knowledgeably, prudently and willingly, and
(b)the pub will continue to be a pub,
“product tie” means a contractual obligation which—
(a)requires that a product to be sold in a pub must be supplied by—
(i)the landlord of the pub, or
(ii)a person nominated by the landlord, and
(b)is not a stocking requirement (as defined in section 20(2)),
“service tie” means a contractual obligation which requires that the tenant of a pub receive a service, other than insurance, from—
(a)the landlord of the pub, or
(b)a person nominated by the landlord.
(5)References in sub-paragraph (4) to the landlord of a pub includes any person who is a group undertaking in relation to the person who is actually the landlord.