PubCo tenants have nothing to fear and everything to gain from invoking the Scottish Pubs Code to demand a Market Rent Only lease free of the beer tie.
That’s the message from Anna Lagerqvist Christopherson, co-owner of The Green Room on Edinburgh’s William St, who last week held a ‘Freedom Party’ to celebrate the venue’s release from its landlord Admiral Taverns’ tied purchasing contract.
Christopherson is making a point of publicising her dealings with Admiral and Scotland’s pub code adjudicator, highlighting what she sees as a positive outcome for her venue, and advocating that other tied licensees embrace the opportunities that the Scottish Pubs Code creates for them.
Having formally requested a Market Only Rent for the modest 46-seat wine bar in the capital’s west end, Christopherson claimed that her landlord’s initial response was to suggest a rent ‘30% higher’ than her beer-tied rent.
After five months of unfruitful direct negotiations, an appeal was lodged with Scottish pub code adjudicator Sarah Havlin, a process which ultimately cost around £7000, jointly paid for by both Christopherson’s business and Admiral Taverns.
The outcome of that adjudication is that The Green Room’s rent has risen £57,000 p.a to £58,500 – a £1500 annual increase that Christopherson reckoned will be covered within a month by the extra sales arising from cheaper prices at her bar, where she can now offer a pint of lager for £5.20 rather than the previous beer-tied £6.90.
“We wish all pub owners that are currently tied to a PubCo request a MRO,” said Christopherson. “Don’t be intimidated by the landlord’s threats or high proposed rent – take it to the adjudicator if the negotiation with the landlord doesn’t lead anywhere.
“We felt like William Wallace in Braveheart when we signed the contract after going through the Market Rent Only determination. Freedom!
“Now we can buy our beer from anywhere we want and at prices that are not 100% higher than normal free market prices,” she claimed. “Will that reflect in the price of a pint in The Green Room? Yes it will!”
Christopherson suggested that amidst the outcry over the ‘death of the British pub’ under the burden of non-domestic rates, VAT and reduced consumer spending, the big pub companies’ role in the sector’s downturn was being underestimated.
“They recharge rent, they sell their beers with great margins, and they also ask the publican to do all renovation of the property,” she said. “And if the pub goes well they increase the rent, if the inflation goes up they increase the rent, if you are not selling enough of their overpriced beer they say that you are not a ‘Reasonable Efficient Operator’.
“The PubCos are not thinking long term, they are just thinking about their profits and making money and increasing property values,” said Christopherson.
“Back in the day when breweries delivered straight to the bar, one pint only had two companies depending on it, the brewery and the pub,” she added. “Now it is too often four businesses that need to make money off a pint – the brewery, the property company, the delivery company and lastly the publican.
“It is just punishing – punishing the customers because we have to have such high prices, and punishing the publicans because they don’t have any margin to live on.”
The Green Room was one of the first bars in Scotland to request a Market Rent Only lease, although Christopherson reckoned that four or five other Edinburgh premises have now been through the process.
“I know other places that have had a reduction on their rents, plus being free of tie,” she claimed.
“The Scottish Tied Pub Code is a great initiative and not advertised enough for all the struggling pub owners out there. Scotland would have a much more vibrant pub culture if this new law would be more widely used.
“There would be more businesses surviving and being able to keep their pubs open, employees in jobs and taxes paid.”
“So I say go for it, 100%.”
Speaking from the Pubs Advisory Service, director Chris Wright – who has represented dozens of pub tenants and lessees at arbitration since the inception of the English Pubs Code in 2016 – welcomed The Green Room’s willingness to exercise its new rights under the Scottish Pubs Code, and agreed that many more Scottish tied pub licensees should follow suit.
“The beer tie in Scotland is anti-competitive,” said Wright. “It leads to less choice and higher prices, and that very clearly breaches the Competition Act.
“When someone like Anna gets out from that tie and gets to see from the outside how one-sided the arrangement was, it is no wonder they want to throw a party to shout about it.”
However Wright said that the full impact of the Scottish Pubs Code’s terms had yet to be fully exercised against the PubCos.
Specifically, he noted the Code’s key objective of ‘rebalancing risk and reward’ in the contract between landlord and licensee – and suggested that the legal basis was there for tenants who had successfully moved to an MRO lease to seek compensation for the years during which they had paid ‘over the odds’ under a beer tie.
“Just because a licensee gets moved to an MRO and gets free of the overcharging for beer under the tie, all the money they paid out in the tied years of their lease is still missing from their business. The risk and reward of their business arrangement with the landlord is still out of balance.
“So there is an undeniable case for compensation.”
SLTN has approached Admiral Taverns for comment on the outcome of The Green Room adjudication.
