Pub tenants could request parallel free-of-tie rent assessment

Pub tenants who are getting squeezed by high rental prices will have the option to get a fair rent review, according to government officials. This review, known as a parallel free-of-tie rent assessment allows for a pub tenant who is tied to a major pub company to petition for a valuation to determine whether it might be cheaper for them to go independent.

The move affects the largest companies that have at least 500 pubs under their control. It could result in a higher number of independent pubs, or it could serve to improve profits for existing pubs.

At issue is the requirement that a public house may be held captive by big pubcos that require that they purchase all supplies through them. The pub has very little leverage and few options, often resulting in very thin profit margins.

The parallel free-of-tie rent assessment would allow pub tenants to determine whether they are being overcharged for rent. They can request information about how proposed rent increases were calculated to see if they believe the increases were fairly determined.

The largest pubcos may have to consent to a final ruling from an adjudicator when a pub tenant does not agree with rent assessments. As a pub tenant, the first priority is to come to an agreement with the pub company on rent increases. The process is a negotiation, and both parties may provide evidence to support a certain outcome. If a suitable compromise is not reached, then the pub tenant may request a parallel free-of-tie rent assessment from an adjudicator.

The cost of a review by an adjudicator would be paid by the pub tenant, which was determined to cost £200. Given the potential savings over the life of the tenant-landlord agreement, this could be a game changer.

The government has tied this provision solely to larger pubcos representing at least 500 pubs. There is no indication that the ruling will be expanded to smaller operators at this time.

This is truly a win for small pub tenants who struggle to keep their doors open. Many have indicated that they are earning so little that they could do better by leaving for a minimum wage job.

Still, many pub tenants believe that the government did not go far enough. Roughly 3/4ths of respondents surveyed by the Publican’s Morning Advertiser believe the proposal could have been stronger.

It is impossible to keep everyone happy. At least pub tenants would finally have enhanced ability to negotiate a better rent agreement.