Tied pub leases have been a feature of Scotland’s hospitality sector for hundreds of years, but new legislation aimed at reforming the system could mean significant changes for some publicans.
Under a tied lease, a pub owner (the tenant) rents their premises from a company (the landlord) that owns a chain of pubs and alcohol brands, commonly known as ‘pubcos’. Baked into the lease is a commitment from the tenant to purchase a set amount of product (beer, wine or spirits) from the landlord every year, usually in return for lower than market rent.
In many cases, this model works well for tenants, offering them lower rent and saving them the hassle of negotiating with other drinks brands. For some, however, it brings considerable restrictions – not all landlords offer low rent, and the requirement to purchase stock exclusively often sees tenants trapped into doing so at inflated prices.
The Scottish Pubs Code, a new set of regulations introduced last month [March 2025], aims to reform the system and address this power imbalance. It will put an imperative on landlords to provide more notice in advance of a rent assessment; it also gives tenants the option to secure a new ‘market rent only’ lease and make ‘guest beer arrangements.’
In theory, the Code levels the playing field and allows publicans to source their products at more competitive rates. Many small, independent operators, who have long been squeezed by the constraints of tied leases, will see an opportunity to gain greater control over their business; for those struggling in the wake of the pandemic and ongoing economic pressures, the ability to source cheaper stock could be vital.
However, it may not represent the sweeping reform it was originally hailed as when The Tied Pubs (Scotland) Act was enacted back in 2021. And while the prospect of breaking free from a tied lease is attractive, it is not without risk: for many publicans, there could be unintended consequences.
The model has historically operated on the premise that, because landlord pubcos profit from the guaranteed stock sales, rent is kept relatively low. As the name of the new market rent only lease suggests, it will adjust the rent to the current market rate. This will likely be substantially higher than their current rent and could end up negating any financial benefit that comes from being able to source stock independently.
The broader landlord-tenant relationship should also be considered. A pub’s success hinges on the goodwill and cooperation of the property owner – those who push too hard to exit their tied lease agreements might find landlords less accommodating when it comes to lease renewals, renovations, business support, maintenance agreements, marketing assistance or general flexibility. The risks involved in straining this relationship could be substantial.
Each pub’s situation is unique. Some tenants, especially those struggling with high stock costs under their current lease, might benefit from transitioning to the market rent only model; but others, particularly those in high-footfall locations where profitability is not a concern, may find that sticking with their tied arrangement is actually in their best interest.
Given these complexities, pub tenants should avoid having a knee-jerk reaction and seek professional advice to help them assess whether the risks of renegotiation outweigh the rewards. Tenants who do decide to renegotiate must also be prepared this to take months and should not expect an immediate fix to long-standing issues.
While the new Code seeks to create a fairer landscape for Scotland’s pub operators, it is not a one-size-fits-all solution. The decision to change the terms of a tied lease should be made with careful consideration of the potential consequences and always with what is best for the future of the business at front of mind.
