2020/NO.21 - A Deed of Variation (DOV) as the mode of delivery for MRO (Market Rent Only) in our view should be automatic. We have said this right from the very start way back in July 2016 and stand by what we say. Understandable that the Pub Cos should do everything in their power to resist this simple and cheap method of achieving MRO. The last thing they ever wanted was to make going free of tie that easy. Their insistence was always that their “interpretation” of the legislation could only be a new lease “for a period equal to that remaining on the current tied lease”. More often than not only five years even if you were sitting on the end of a twentyyear lease. You could apply to the Court for a longer term when the five years expired, which may or may not be opposed, but why grind through the process with yet more cost. The purpose was to make life difficult and it did just that.
Our experience of the wider market takes in private landlords who purchased Pubco leases that had a sitting tied tenant. They seemed to be generally from Punch who often sold the freehold over the head of the tenant without even giving them the chance to buy. Delightful! The tenant was offered free of tie from his new private landlord by the simple process of a two paragraph letter which contained…”you are hereby released from all supply tie obligations contained within your lease”… and Hey Presto, you were. Very much legally binding because as often as not that was then quickly followed up with a rent demand for an increased rent for being free of tie.
In case after case we continued to press for the DOV option. We were sometimes accused as being “excitable campaigners”. The Pubs Code Adjudicator (PCA) constantly said that the new lease route, although not set in tablets of stone, remained valid but that the lease terms offered were often “unreasonable” and required that the lease, not a DOV, should be modified to remove those unreasonable terms. Then the worm turned and in a few cases there was the PCA requirement for a DOV. A sprinkling of those cases have without fanfare been published by the PCA, some running to over forty pages and some much less. One such case being Food Drink Rooms Limited (Tied Tenant) - and - EI Group Plc & Unique Pub Properties Limited. This was published on 28th August 2019.
Reference ARB/10045/FOODDRINKROOMS from an arbitration award which was dated 11th April 2019.
The judgement confirmed…”The revised response is to be in the form of a Deed of Variation of the existing lease on MRO compliant terms to be determined by the arbitrator”. A DOV ensures that there are no material changes to the lease terms you currently enjoy which are not linked to the supply tie. There is then no need to have a new lease with a raft of new terms and conditions that were never in your current lease. So what is the problem?
The Pubcos and Brewers are in the main still issuing a new lease in response to an MRO application. Many tenants are told that “this is the best you will get” and do not know about the DOV option. Chris Wright has lobbied the PCA to be uniform in the question of DOV availability. Their response was that everything must be looked at on a “case by case” basis. If you don’t realise a DOV can be made available, you won’t push for it will you? The Pubcos and Brewers are still under no obligation to make available a DOV, which is cheap, efficient and easy to achieve, as the ‘go to’ solution for MRO .That is the problem.
The precedent has been well and truly set for the means of delivery of MRO to be by a DOV. We stand by that opportunity and always have done so.