Pub tenants will have a big decision to make as and when abolition of the brewery tie completes, Bernard Shepherd, a consultant at Black Country law firm Clark Brookes Turner Cary, has warned.
The economics of whether to opt out or stayed tied are sure to need careful study, he predicts.
Controversial legislation allowing tenants greater freedom of choice, bitterly opposed by the big pub companies, has now received the Royal Assent, but it will be next year before it is fully implemented.
Mr Shepherd, who advises many in the sector, said:
“It will be 50:50 for a lot of tenants. They will need to work out what is best for them – the choice is far more complex than is being made out.”
Thousands of UK pubs have been lost in recent years but it is reckoned about 51,000 remain.
Some are managed direct by a brewery; some are free houses able to buy supplies of alcohol and food from whoever they like but paying a commercial rent; and others are run by tenants under a tie agreement whereby they rent the premises at a figure typically lower than the actual market rate but must buy beer and other supplies from the brewery or pub company that owns their establishment.
It is thought that about 13,000 pub tenants are tied.
Some claim they can’t make a living or effectively compete because drink prices set by the pub companies are so high.
Now, under the new legislation, a market rent only option will be available to tied licensees of companies with more than 500 pubs – including Enterprise, Punch and Marstons.
Licensees will need to decide whether to pay an open market rent and have the freedom to purchase drink and food from wherever, or stay tied to their Pubco.
Mr Shepherd said:
“It could be a tight call – each will have work out what is the right business decision for them. I will be writing to tenants across the Midlands strongly suggesting they take expert advice first. Much is still up in the air – it is possible pub companies may restrict investment and seek where possible to restrict leases to five years. The fall-out is unclear. The jury is still out on whether these reforms will ultimately prove good or bad for the industry and the public.”