MRO Q&A

Frequently Asked Questions

The Pubs Code was amended with effect from 1st April 2022, including changes to the MRO procedure.  The Pubs Code Adjudicator has produced a factsheet to help understand these changes and a copy can be found here.

Understanding my MRO options

  • “How can I find out more about MRO to help me decide if it is for me?”
    • When a rent event e.g rent review or lease renewal is due under the terms of your lease, we will visit your pub and undertake an inspection.  As part of this inspection we will explain to you the full process including MRO.  If you have any further questions, you can contact Star’s Code Compliance Office at pubscode@starpubs.co.uk
    • The Pubs Code Adjudicator (PCA) has also produced a leaflet “What Tied Pub Tenants need to know about Market Rent Only Rights” and a copy can be found here.

When you send a MRO Notice

  • “When can I serve a MRO notice relating to my rent event?”
    • Star must receive your MRO notice within 21 days of the MRO event, starting the day after the MRO event occurred. 
  • “What happens once I have sent my MRO notice?"
    • Star Pubs will confirm by letter, initial receipt of your MRO notice. Within 28 days, starting the day after Star receives your notice, you will be sent a pack by us which will contain your MRO proposal and supporting documentation. Please refer to Working with Star which contains more information. A copy of this can be found in the Pubs Code & Our Code section of the website. At any point you can speak to your Estates Manager, BDM or email pubscode@starpubs.co.uk for further information or clarification.
    • If you do not receive your proposal within the timeframe, you have 14 days, beginning with the earlier of the day after the day on which you receive a full response or the day after the end of the period of response, to make a referral to the Pubs Code Adjudicator (PCA).

Approach to MRO Proposal and Negotiations

  • “Will my MRO have to be via a new lease, or can it be a deed of variation?”
    • Star’s initial proposal will be via a new lease. We believe a new lease is a simpler and clearer approach. However, in certain instances we are able to offer a deed of variation, but there are significant drafting, tax, and legal cost implications of a deed of variation which need to be considered. Your Estates Manager will contact you to discuss the MRO proposal within two weeks of it being sent by us, and they can discuss this option with you at that time.
  • “I’ve been told that MRO can be achieved by just deleting my tied clauses from my existing lease”
    • This is not correct. A MRO lease and a tied lease are used to document quite different commercial relationships. Multiple changes would be required to be made to your current lease in order to ensure the new MRO lease is compliant.
  • “How long will my MRO tenancy be?”
    • The new MRO lease must be at least as long as the remaining term of your existing tied lease. In some situations, you may be offered a longer MRO lease (up to 10 years), however this is at our discretion and will be assessed by us on an individual basis.
  • “Will the terms in the MRO proposal be the same as those in my tied tenancy?”
    • No, there will be multiple changes to the terms. The two leases document very different commercial relationships.
  • “How will MRO negotiations be carried out?”
    • Our Estates Managers negotiate MRO leases. Your Estates Manager will have a meeting with you to discuss your tied and MRO options before the initial tied rent proposal is sent to you (this starts the MRO timetable). They will then contact you within two weeks after we’ve sent you your MRO proposal.
    • Thereafter, the MRO resolution period commences, which is a 3 month period that allows you to consider the proposal and, where relevant, negotiate with Star with regard to the terms and rent. During this time we will continue to work with you to reach an agreement. 
  • "Who will manage my MRO negotiations? Will it be my BDM?”
    • The Estates Manager will manage the negotiations. The Estates Manager and BDM will meet with you before the rent review / MRO process commences. At that initial meeting the Estates Manager will explain the process and where to get further information.
  • “Will I be required to have a business plan?”
    • A business plan is not required if you decide to opt for a MRO lease. In some situations, if you take a new tied lease you may be required to provide a business plan.
  • “Will I be required to change my rent and deposit payment dates? Will my deposit level change?”
    • Rent payment dates in a MRO lease are either quarterly or monthly in advance, depending on a number of factors (type of pub, level of rent, etc), which therefore may be different to your current tied lease. Most Star tied leases require 3 months rent deposit and this is the same as the deposit requested in Star’s MRO lease proposal. If the level of deposit required under the MRO lease is more than your current deposit, you will be expected to top the deposit level up, if it’s less, then the balance will be returned to you.
  • “Will my repairing liabilities and benefits change under a MRO lease?”
    • A MRO lease is offered on a full repairing basis and may be different to your current tied lease.
  • “Will there be any upfront costs if I go MRO?”
    • It depends on your current circumstances. There will be legal costs incurred to document any new MRO lease (either by new lease or deed of variation). You may be required to pay for any fixtures and fittings owned by Star, repay any loans, increase deposit payments and additional rent in advance. You may be refunded deposit balances, and any overpaid rent if applicable.
  • “Will I have to pay for any dilapidations if I request MRO?”
    • You will not be required to pay for dilapidation survey fees. There is an expectation that you will remedy any dilapidations (carry out repair work), before the first rent review or expiry of the new MRO lease (whichever is first), unless any identified dilapidations are considered necessary to be undertaken sooner (due to health and safety reasons or where the dilapidations are likely to cause further substantial damage to the pub).  We provide you with a copy of the dilapidations report with your MRO offer so that you can understand what obligations you have. The scope of works required to meet the dilapidations will be contained in the MRO lease that you sign.
  • "I believe Star’s MRO agreements contain a Stocking Requirement – why is it in your agreements and what is it?"
    • Some pub-owning businesses are also producers of beer and cider products. The legislation underpinning the Pubs Code – the Small Business, Enterprise and Employment Act 2015 – allows a pub-owning business which produces beer and cider to include a "stocking requirement" in its MRO agreements.
    • A stocking requirement is a contractual term that requires you to stock a proportion of beer and cider that is produced by a pub-owning business.  It does not require you to buy that beer or cider from a particular supplier, and may include reasonable restrictions on – but must not prevent – the sales of beers or ciders produced by other brewers.
    • Star is part of a brewing company (Heineken UK), which produces beer and cider.  This means that we can include a stocking requirement in our MRO agreements.  As detailed below, this will require you to ensure that a proportion of your products for sale in your outlet include Heineken beer and cider brands.  However, the stocking requirement will not require you to buy those products from us (this is what differentiates the obligation from a "tie"), and will not prevent you from selling competitor products.
  • "Does the stocking requirement apply to all beer & cider that I may stock?"
    • The stocking requirement only applies to beer and cider as defined in the Alcoholic Liquor Duties Act 1979.
    • These definitions exclude some Heineken products that are defined as a "made wine" e.g. Strongbow Dark Fruits.  Made wine is not considered as a beer, cider, wine or spirit and sits in a separate categorisation: many "fruit ciders" fall into the made-wine categorisation.
    • Alcohol-free products such as Heineken 0.0 are also excluded from the stocking requirement as they do not meet the beer and cider definition in the Alcoholic Liquor Duties Act 1979.
  • "What are the principles of a stocking requirement?"
    • Our stocking requirement is structured into 3 categories of products being draught keg, packaged and cask.
    • For draught keg, you will be required to stock Heineken products on a number of your draught keg beer and cider taps. For example, 5 out of 11 taps.  If you install any further keg taps at the property after completion of your MRO agreement, you will also be required to stock Heineken products from a proportion of those additional taps.
    • For packaged, you will be required to stock Heineken products as a percentage of your packaged products. For example, 50%.
    • For cask, you may be required to stock one cask line.
    • The stocking requirement is just one part of the MRO agreement and as such any stocking requirement we propose must be reasonable and MRO-compliant.
  • "How is my MRO stocking proposal devised?"
    • The level of stocking will depend upon the individual circumstances of the outlet.  The stocking requirement will be discussed with you when we visit you to talk about your rent event or trigger event.
    • As part of the visit Star’s Estates Manager will undertake a full inspection of the outlet, including the current stocking.  They will record the number of taps on the bar(s), the brands stocked and a plan of the bar space.  You will be asked for your views on how the current brands are performing and if there are any brands which you think would be suited to your outlet.  Star will also conduct a brand review of competitor outlets.
    • Subsequently, Star will also review and analyse the following further information:
      1. A copy of the customer information pack, which includes a record of the purchasing history of the outlet.  This is on a brand-by-brand basis and shows the volume of product purchases over a 13-week period, along with year-on-year trends and performance reviews.
      2. Business review sheets.
      3. Local demographics data.
      4. Information from CGA – this data is based upon market segmentation of the outlet along with location.  CGA are the leading provider of independent industry data for the on-trade.  The data is independent and gives the most accurate and detailed picture of the total on-premise market across all drinks categories and it analyses consumer, customer and category information.
      5. Any discussions with you in terms of any specific brand stocking requests.
    • Utilising all of the above information, Star will compile a stocking table which will be sent to you with the MRO agreement. The stocking table will contain the details of the proposed stocking requirement and the supporting reasoning for it.
    • Whilst Star believes that any proposed stocking requirement issued will be reasonable based on the process above, the terms of the stocking requirement which is proposed are not fixed, and the estates manager will contact you once the MRO agreement is issued. This will allow further discussion with the aim of reaching an agreement in the spirit of ensuring fair and lawful dealing.
  • "What if I disagree with the proposed stocking requirement"
    • We will engage with you at each stage of the process and we would hope to be able to negotiate and reach an agreement.  If we are not able to reach an agreement for any reason you are able to refer the matter to the PCA within the procedure and timescales set out within the Pubs Code.
  • “If I initially buy beer & cider from Star / Heineken can I change in the future?”
    • Yes you are free to switch suppliers of Heineken products at any time – subject to the terms of any supply agreements you may have.
  • “I still wish to purchase my product from Star, who do I speak to?”
    • Please speak to your BDM.
  • “If I choose a MRO agreement, does any part of the tie remain?”
    • No, a MRO lease doesn’t contain a tie. However, you will be required to enter into a stocking requirement (see above answers). You will also be required to pay some property costs (e.g. insurance costs) and in some situations a service charge.
  • “What happens to my stocking obligations if Heineken sells my pub”
    • Your stocking obligation ends if Heineken sells the pub and you will be free to stock any beer and cider.
  • “I have a long lease at present. What term do you have to offer me on renewal or at rent review if I opt for MRO?”
    • The new MRO lease must be at least as long as the remaining term of your existing tied lease. In some situations you may be offered a longer MRO lease (up to 10 years), however this is at our discretion and will be assessed by us on an individual basis.
  • "Will I still be tied for Gaming Machines?”
    • No.
  • “I have received my MRO proposal, but I am concerned about the terms on which it is being offered.  What can I do?”
    • Speak to your Estates Manager / BDM in the first instance or email pubscode@starpubs.co.uk.  The Pubs Code provides a three month resolution period to enable negotiations to take place and we will always endeavour to try and reach an agreement with you.
    • At the end of the three months we may issue to you an Updated Full Response to reflect any changes agreed during negotiations.  We must issue this to you within 7 days, beginning the day after the resolution period ends.
    • You can refer the full response or updated full response to the PCA if you believe our response has not included all that is required, which includes if you believe the response to be non complaint. You must make the referral within 21 days after the end of the Updated Period of Response
    • If you are going to make an arbitration referral you must notify Star in writing, likewise if we are going to make a referral we will notify you.

Rent

  • “Will my rent change if I go MRO?”
    • It is likely to change. Typically MRO rents are higher than equivalent tied rents due to the change in the commercial relationship. The level of change will depend on your current level of tied rent – which could also change up or down depending on the situation surrounding your pub.
  • “How will the MRO rent be assessed?”
    • By comparing rents of other “free of tie” pubs in the location and adopting a profit based valuation. Both free of tie and tied rents are governed by rules and guidance set down by the Royal Institute of Chartered Surveyors (RICS).
    • As part of the MRO proposal SP&B will issue out the MRO Rent Assessment Proposal and Shadow Profit and Loss Report. This will be accompanied by a Rent Proposal Justification form (RPJ), which sets outs detailed justification of the elements which have formed the offer.
    • In reference to rent payable in advance SP&B refer to and reflect the payment terms as stipulated within the current agreement eg.  rent to be paid monthly. For Deposit Accrual we will look at the deposit currently held, and the deposit required under the new agreement. When considering the MRO offer SP&B takes into account individual cash flow circumstances; and based on all factors a deposit build up period will then be agreed.
  • “What can I do if I do not agree with the MRO rent provided?”
    • The Pubs Code provides that the rent can be determined by an Independent Assessor – an independent expert valuing free of tie pubs. Your Estates Manager can provide further details and discuss how to agree on the appointment of the Independent Assessor, or how to ask the Pubs Code Adjudicator to appoint one. You can do this by providing written notice to us within the referral period – namely the period of 21 days beginning with day after the latest of the day on which the Updated Period of Response ends, or the day on which you receive a received a revised response from us. 
    • The PCA has published a factsheet “What Tied Pub Tenants need to know about MRO and Independent Assessors” a copy of which can be found here.
  • “I have an outstanding rent review.  What will happen with that?”
    • There are a number of potential outcomes. In most situations it is better to understand the outcome of the tied rent review, so we will negotiate this in parallel with the MRO option. In most situations we offer the PIRRS scheme to independently determine the tied rent review.  Please refer to the Working with Star and  documents which contain more information.

Steps following negotiation

  • “What do I do if I do not agree with the rent being offered?  What will happen if I ask for the MRO rent to be sent to an Independent Assessor?"
    • We will endeavour to agree a mutually acceptable rent with you. However, if this is not possible an Independent Assessor can be jointly appointed or, if we cannot agree this, the PCA will appoint one. Information needs to be provided to the Assessor by both parties. The Estates Manager can discuss this further with you at the appropriate time.
    • The PCA has published a factsheet “What Tied Pub Tenants need to know about MRO and Independent Assessors” a copy of which can be found here.
  • “Do I have to take a MRO lease if I request it?”
    • No. You can decide not to pursue the MRO lease at any time. There are strict time limits that apply during the various stages of the process and it’s important that you adhere to them as otherwise you will lose your MRO rights. 
  • “What happens if I want to accept the MRO lease?”
    • Once you accept the MRO lease legal documentation is prepared and the new lease entered into.
  • “What happens if I do not want to accept the MRO lease?”
    • You carry on with the tied lease arrangement and any rent reviews or lease renewals concluded.
  • "What can I do if I disagree with any of these points?”
    • In the first instance you should write to pubscode@starpubs.co.uk. Ultimately if we are unable to resolve any disputes you can refer the matter to the Pubs Code Adjudicator’s Office (please be aware of timescales to do so). 

CCOs and BDM roles

  • "How can the CCO help?  When and how can I contact the CCO?"
  • “When I request a MRO lease will my relationship with my BDM change?”
    • The relationship with the BDM will not change during the MRO process. If ultimately you decided to enter into a MRO lease the relationship with Star will be more an arm’s length Landlord and Tenant relationship. The BDM will visit less regularly and conversations will be focused on lease obligations. However, the BDM will still give advice in relation to Heineken brands covered by the stocking requirement, but not broader business development due to the change in the commercial relationship.
  • “If I enter into a MRO lease, will I be able to access Business Builder, business development, discounts and other benefits I currently enjoy?”
    • No, these benefits are only available to tied tenants. You will still be able to access qualifying benefits offered to Heineken stockists that are relevant to the way you purchase your Heineken products (i.e. like direct Independent Free Trade Customers).

Advisors

  • "Should I appoint an advisor to help me with my options?"
    • The MRO process can be complicated and Star recommends that you take independent advice to help you with the process and advise you of which options are best for you.
  • “Who is best to advise me?”
    • Star cannot endorse advisors. However, you need to consider what services the advisor is offering. Chartered Surveyors with experience in pubs are able to offer advice on agreements and rent, however sometimes more specialist legal advice may be required from a solicitor. Accountants may also give advice on the business aspects of your decision.
  • “Where can I get further help / information?”
    • Members of the BII (British Institute of Innkeepers) have access to some initial free advice through the network of advisors they have accredited. Membership of the BII is available to all tied tenants free of charge as part of your tied support package. Further details can be found here. The RICS and Law Society can also advise of members that specialise in pubs and MRO cases.
  • “When appointing an advisor what should I look for?”
    • The most important aspect to consider is their experience and impartiality. Have they dealt with pubs and MRO before? Consider what they are advising on - rent, legal agreement or broader business advice? Are they interested in the best outcome for me or are they pushing for a fee?
  • “Will I have to pay for advice?”
    • Some advisors may offer some initial free advice. You should expect to have any proposed fees clearly explained, and the circumstances in which those fees and any additional fees become payable.
  • “Is there anything I should watch out for”
    • Avoid large upfront payments or open ended subscriptions (payment of a sum each month either indefinitely or until the MRO is resolved). Some advisors receive commissions from third parties depending on the outcome of your case - in this situation you should think carefully about their impartiality. Do they carry professional indemnity insurance (PI Cover) – if they give poor advice can you make a claim against them? And do they have insurance cover to pay any compensation? Are they part of a professional body i.e. Law Society or RICS and therefore covered by professional standards and minimum performance standards?

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