Lease Renewal and Hybrid Agreements: Information for Tied Pub Tenants
The Pubs Code Adjudicator (PCA) has written to the six regulated pub companies regarding the use of ground (g) in section 30 of the Landlord and Tenant Act 1954 to oppose business tenancy renewals in reliance on certain hybrid agreements. This article sets out matters that tenants should be aware of in these circumstances.
Background
Tenants who hold business tenancies protected under the 1954 Act have a statutory right to renew their tenancy when it expires. A pub company can only refuse renewal on specific legal grounds set out in that Act.
One of these is known as “ground (g)”, which permits a pub company to oppose renewal where they intend to occupy the premises themselves in a business context - typically by running the pub directly, for example through an employed manager.
Ground (g) and hybrid agreements
Ground (g) has in some circumstances been invoked where the pub company proposes an alternative agreement type for the pub’s continued operation. Such agreements may be entered into with the existing tenant or with a different tenant, and may be described as hybrid; operator; manchise; or profit/turnover share agreements.
The PCA’s position
On 13 March 2025, the PCA published a statement in which it said it was minded to the view that some of these agreements may fall within the definition of a “tied pub” for the purposes of the Pubs Code. A pub can only be covered by the Pubs Code if it is occupied under a tenancy or licence.
Where a hybrid agreement is being used as the basis for opposition to the renewal of a protected tenancy, the PCA’s statement of 13 March 2025 implying that some of these agreements may be tenancies or licences may be of relevance. The PCA is concerned that tenants and the court should be aware of this statement where it is relevant, and that tenants should have the opportunity to take legal advice where appropriate. Whether ground (g) can be relied upon in any particular case is ultimately for the courts to determine, and not the PCA.
Pub company obligations
Under the Pubs Code, Business Development Managers (BDMs) must deal with tenants fairly and lawfully. The PCA has written to the regulated pub companies to remind them that where they intend to oppose a tenancy renewal on ground (g) in reliance on one of these alternative agreement types, the BDM should:
- Explain the pub company’s intentions clearly and transparently; and
- Keep appropriate records of discussions which are then shared with the tenant, recording where the tenant has been made aware of the PCA’s position statement of 13 March 2025 on hybrid agreements and its letter to pub companies on this issue.