Decision

Award summary - September 2023 - 1

Published 5 March 2024

Applies to England and Wales

1. Summary of findings

The Arbitrator found that the grant of the current tenancy to the existing tied-pub tenant (the TPT) by the Pub Owning Business (the POB) was not a renewal of a pub arrangement for the purposes of regulation 26 of the Pubs Code Etc. Regulations 2016 (the Pubs Code). Accordingly, the Arbitrator found that the TPT had no right to serve a Market Rent Only (MRO) notice under regulation 23.

2. Factual background

The TPT and POB had entered into a tenancy for a term expiring in 2023 (the original tenancy). Pursuant to negotiations to extend the TPT’s operation of the pub, the POB then granted the TPT a tenancy at will commencing on the date the original tenancy expired. Some four months after that date, the POB granted the TPT a new tenancy for a term of 5 years (the new tenancy).

The TPT then served a Market Rent Only (MRO) notice under regulation 23 of the Pubs Code on the POB. The POB responded informing the TPT that the MRO notice was invalid as the new tenancy was not a qualifying agreement under the Pubs Code entitling the TPT to request an MRO option. The TPT then referred the issue to arbitration, claiming a breach of regulation 32 of the Pubs Code.

3. Issues

The issue referred to arbitration was whether the grant of the new tenancy was the renewal of a pub arrangement for the purposes of regulation 26 of the Code and section 43(6)(a) of the SBEEA 2015, thereby entitling the TPT to serve a MRO notice.

The relevant legislation

S43(1) of SBEEA 2015 provides that the Pubs Code “must require pub-owning businesses to offer their tied pub tenants falling within section 70(1)(a) a market rent only option in specified circumstances.”

S43(6) of SBEEA 2015 provides that provisions made under s43(1) of SBEEA 2015 “…must include provision requiring a pub-owning business to offer a tied pub tenant a market rent only option—(a)in connection with the renewal of any of the pub arrangements; …”

S43(7) of SBEEA 2015 provides that “[t]he Pubs Code may specify what “renewal” means in relation to a tenancy or a licence for the purposes of subsection (6).”

Regulation 26 of the Pubs Code deals with renewals of pub arrangements. In particular, regulation 26(2) of the Pubs Code provides that “[f]or the purposes of section 43(6) of SBEEA 2015 (and so of this regulation), a protected 1954 Act tenancy is renewed between the tied pub tenant and the pub-owning business—

(a)on the day on which the tied pub tenant receives the pub-owning business’s notice under section 25(1) of the Landlord and Tenant Act 1954; or

(b)on the day on which the landlord receives the tied pub tenant’s request under section 26 of that Act.”

Regulation 26(3) of the Pubs Code provides “for the purposes of section 43(6) of SBEEA 2015 (and so of this regulation), a tenancy which is not a protected 1954 Act tenancy is renewed between the tied pub tenant and the pub-owning business on the first day on which the tenancy may be renewed under the terms of the tenancy.”

4. Arbitrator’s Findings

The Arbitrator noted that there was no dispute between the parties that none of the tenancies in question were 1954 Act protected tenancies. Furthermore, the Arbitrator found that the terms of the original tenancy were silent as to any contractual right of the TPT to renew.

The Arbitrator considered the meaning of the term “renewal” in accordance with s43(7) SBEEA 2015 and regulation 26 of the Pubs Code. The POB made submissions that, as regulation 26(2) refers to specific and identifiable dates on which an MRO event occurs in the case of the statutory renewal of a protected tenancy, then regulation 26(3) should also be specific and identifiable where the tenancy is not protected under the 1954 Act. The Arbitrator considered that the wording of regulation 26 does not clearly outline what is to happen where a tenancy is silent as to a right to renew. The POB’s submission was that the tenancy cannot be renewed in these circumstances.

In considering this matter, the Arbitrator referred to the PCA’s factsheet, “Duties of a Pub-owning Business in Connection to a renewal of a pub agreement”, in support of the POB’s position and, in particular, the following extract from the factsheet:

You have Code rights if you are considering renewing a pub agreement under either of the following: the Landlord and Tenant Act 1954 (LTA); any contractual terms in the existing agreement (not a protected LTA tenancy). The duties of the pub-owning business (POB) and your rights to information are different depending on which of the above situations apply”.

The Arbitrator acknowledged the PCA’s position on this point is that for the purposes of regulation 26, a tenancy is renewed only if it is protected tenancy under the 1954 Act, or where the existing tenancy terms specifically allow for a renewal. The Arbitrator also referenced the Parliamentary consultation report, “The Pubs Code and Pubs Code Adjudicator: A Governments Consultation – Part 1”, published prior to the commencement of the Pubs Code, which says:

Our understanding is that tenants who are contracted out under LTA do not normally have any other contractual right to renew their existing tenancy. However, were they to do so, they would be able to request an MRO offer when exercising their contractual right.

Accordingly, the Arbitrator found that the current tenancy was a new tenancy and not a renewal of the original tenancy pursuant to regulation 26 of the Pubs Code.

5. Decision

The Arbitrator accordingly found that no MRO event had taken place, and the TPT had no right to serve a MRO notice.