Exploring the MRO Option: Giving Tied Pub Tenants More Control

What is the MRO option?  

 If certain events occur, the Pubs Code allows a tied tenant to request an offer of a free of tie tenancy at a commercial rent from their pub company - this is called the Market Rent Only (MRO) option. 

The MRO option gives tied tenants the right in certain circumstances to compare and choose whether they wish to stay tied to their pub company or become free of tie. This can give tenants strength in their negotiations with their pub company and help them make the best choice for their business.   

Tim Tomlinson, MD of the Hand Pulled Pub Company, spoke candidly about his experience with MRO. For him, it’s made a real difference: 

“The MRO has given me a deal that’s broadly as good as being free of tie, and that's what the aim is meant to be. You choose whether you want to be free or tied – they both should have benefits, and they did have.” 

Tim also highlighted the leverage the MRO gave him, marking a shift in power dynamics in the tied relationship that the MRO facilitates: 

“Tied deals had the disadvantage of the cost of beer. Now I’m given two deals, and I can make a decision after negotiating. The pros and cons are down to you — not down to the fact that you’re far outweighed by the opponent you are negotiating with, but because its fair and you have the Pubs Code on your side.” 

Strengthening the Tied Tenant’s Voice 

The MRO option gives tied tenants crucial leverage when negotiating with pub companies and can be instrumental in shaping sustainable, successful business models. 

There are four circumstances under the Pubs Code where you have the right to ask for the MRO option. The Code calls these 'MRO events' (also known as MRO gateways). They are:  

1. You receive a Rent Assessment Proposal. This will usually be at contractual rent review - the Code says you must have one of these at least every 5 years. 
2. Renewal of your pub arrangement (e.g. your lease). This will apply if your agreement is protected under the Landlord and Tenant Act 1985 (or you have a contractual right to renew). 
3. You are notified of a significant increase in the price at which a tied product or tied service is supplied to you. The Code sets out what this means. 

4. You show that a trigger event has occurred – this is, an event that will have a significant impact on the trade of your pub which meets certain conditions set out in the Code. 

    

Under an MRO tenancy, a tenant is free to buy alcohol and other products and services on the open market and will pay an agreed or independently determined market rent. 

A core principle of the Pubs Code is that tied tenants should be no worse off than if they were trading free of tie. The ability to compare the tied and free of tie options is an important element in delivering this right. Not every tenant who requests the MRO option will end up taking that option, and many choose to use their negotiating power to obtain a better tied deal with their pub company.