Scottish Pubs Code for tied pubs

In the Scottish Pubs Code, there are a number of exemptions where pub-owning businesses are not required to offer Market Rent Only (MRO) leases to tenants. These exemptions were included following earlier consultation on the content of the code.

One of the exemptions is that MRO need not be offered by a pub-owning business where either the tenant or the pub-owning business has served a valid notice to bring the lease to an end.  It is recognised that both parties should have the right to end the contractual relationship.

There has been concern from some stakeholders that this exemption could lead to notices to quit being issued very early upon entering an agreement, allowing almost the whole lease length to be exempt from MRO. It has also been suggested that there are only specific circumstances when a notice to quit can be served by pub-owning businesses, i.e. in relation to substantial breaches of lease agreements, and so this is a function of the lease rather than an issue for the code.

The draft code contains protection for the tenant in the form of regulation 3:

“A pub-owning business must not subject a tied-pub tenant to any detriment as a consequence of the tenant exercising, or attempting to exercise, any right under this code.”

We are proposing to amend this regulation to make it clearer that the MRO exemption only applies where a pub-owning business or tied pub tenant has not served a notice to bring the lease to an end before a specified period of time before the end date of the lease