For some reason pub tenants are typically reluctant to seek advice, but in doing so they don’t take advantage of opportunities that come their way. Getting professional advice can give A4 Drinking Property tenants a lot of benefits.
One of these is better understanding how the Market Rent Only (MRO) can positively affect their business. The MRO legislation that came into effect in July 2016 allows A4 drinking property tenants in England and Wales to cut ties with their landlords. This relieves them of obligations that they may currently be under, most importantly, to do with rent payments and product orders.
If tied to their landlord, A4 Drinking Properties are under an obligation to pay a certain level of rent to the pub company, regardless of the level of income the pub receives. They are also required to buy the majority of their beer from a particular pub company or brewery.
Our Advice to Pub Tenants
Although seeking professional advice may be alien to your way of thinking, the MRO legislation is having a big impact on the industry. So it’s best to seek professional advice so you know the advantages and disadvantages of MRO and what it means to be free of a tied arrangement with your landlord.
Pub tenants whose rent review or lease renewal falls after the introduction of the code should definitely consider requesting an MRO option. Key things to consider in opting for an MRO:
How much is my market rent on a free of tie basis?
What are the financial benefits of being able to purchase products free of tie?
What is the value of my leasehold commercial property vs the free of tie arrangement?
What issues or challenges could arise as a result of the MRO option?
How do the potential positive gains measure up?
A professional advisor can often secure a better deal at rent review or lease renewal, sometimes in the vicinity of £3,000 per annum. This is a £15,000 saving over a five-year review. The fee charged by the advisor is often a small, insignificant charge compared with the savings to be had.