EXCLUSIVE: Heineken instruct lawyers in bid to deny tenant MRO who ‘never received’ Section 25 notice

Last week the Publicans’s Post revealed why it came as no surprise that Star Pubs & Bars, the pub-owning business owned by Heineken, would seek to deny their Market Rent Only (‘MRO’) free of tie tenants rental support during the Covid-19 closures.

Since the Pubs Code Legislation was introduced, we revealed that Heineken went to extreme lengths to impose onerous stocking demands upon pub tenants, which eventually caught the attention of the Pubs Code Adjudicator (‘PCA’) – for which they are formally under investigation (pending an outcome).

We demonstrated why a ‘stocking requirement’ differentiated their MRO agreements from a typical commercial lease, thereby contradicting their position that Heineken have no interest in the success of a MRO tenant’s business. 

It would seem the topic hit a nerve, as we’ve been contacted by a number of Star tenants, with similar stories of frankly appalling behaviour by Heineken in their pursuit to prevent sites breaking the lucrative beer tie.

One such case is a site in Greater London – we are unable to name the pub as the case is still ongoing. 

The tenant was served a Section 25 notice on his lease, which is the legal process to bring about the expiry of a lease agreement (under the Landlord & Tenant Act 1954). Star did not oppose the grant of a new lease, and set out the proposed terms within their notice. 

The Section 25 notice was alleged to have been sent by recorded mail back in August 2019, but it was never received by the tenant. We’ve checked the tracking information provided by Royal Mail, which shows that the notice was never signed for by the tenant.

The tenant was not aware of the notice having been served, until it was mentioned in a later conversation with his Business Development Manager (‘BDM’). As the tenant never received the notice, the BDM hand delivered a copy at their next meeting, which was minuted. It was also acknowledged by Star that the original notice had gone missing. 

Having now received a copy of the notice, the tenant served a MRO notice – wishing to consider a free of tie lease alongside the tied lease renewal. 

However, Star rejected the MRO notice (which must be served within 21-days of receiving the Section 25 notice) claiming that the tenant was now out of time. 

In a letter seen by the Publican’s Post, Star provided the following response:

The Pubs Code etc Regulations 2016 (Part 5, clause 23) sets out detailed criteria which must be met to ensure an MRO notice is valid. Your request was not received within the timescale set out in this legislation and therefore cannot be accepted as a valid MRO Notice under the Pubs Code etc 2016 Regulations.

The s25 notice was served by recorded delivery and first class post on 16th August 2019, this is highlighted on the first page of the letter attached to the notice (enclosed). Under the rules of service that apply to s25 notices, regardless of whether the notice was actually received, the notice is deemed served on the date it is sent by recorded delivery.

The tied rent proposal previously issued to you is still available and a further copy is enclosed for your information.

So in other words, according to Heineken – the fact that the tenant never received the notice is irrelevant – and Heineken have never sought to deny that the tenant didn’t receive the notice.

However, through no fault of his own, he is now being denied the right to consider a MRO agreement – despite waiting over 4 years for an opportunity.

Naturally the tenant was not prepared to accept this – and referred the matter to the Pubs Code Adjudicator. An arbitrator has since been appointed, and Heineken have instructed global law firm DLA Piper to represent their case. We understand at least two legal directors from the firm are instructed on this matter. 

The case will likely take 6-12 month to conclude, during which time the tenant’s lease will expire. So far Heineken have agreed to extend the expiry deadline whilst the case is ongoing. If they don’t agree to extend, he could also be required to apply to the court to grant a new lease at further expense.

Money no object

The tenant must now contemplate spending thousands of pounds to put forward a case against the global law firm. 

However, money is no object for Heineken in the pursuit of MRO avoidance. The Publican’s Post is aware that on one single case we referenced in our previous article, where the tenant was awarded a single line stocking requirement (which took over a year to conclude, they wanted 60%) – the arbitrator’s final bill exceeded £30,000. This is not including Heineken’s own legal costs, along with the claimant’s costs on top.

For a global businesses with a turnover exceeding £1 billion in the UK alone, this is no big deal. But for a tied pub tenant with a turnover of around £400,000 this was a serious financial risk. David and Goliath doesn’t even cut it.

We would expect a similar cost in terms of arbitrator and legal fees on this case, and this is just for the tenant to be able to even consider a MRO agreement – he still has the onerous stocking requirement to look forward to if successful. 

Once again this all serves to demonstrate how Heineken view their MRO tenants, and we can only hope that the Pubs Code Adjudicator, who are meant to enforce the Pubs Code – take the necessary action to prevent this behaviour from reoccurring.