Free house or tied pub? What the words on the sign mean, from the 1989 Beer Orders to the Pubs Code

Walk along any British high street and you will see two kinds of words painted above pub doors. Some signs carry a brewery's name, often in the brewer's own lettering. Others announce, with a certain pride, that this is a "free house". The difference is not about decoration. It tells you who owns the building, who chooses the beer on the bar and, quite often, how much freedom the person behind that bar really has.

Three ways to run a pub

Most pubs in Britain fall into one of three broad models, and the words used for them are older than any law.

• The tied house. The publican is bound by contract to buy some or all of their beer, and often other drinks, from one brewery or pub company. Usually that company owns the building and lets it to the publican as a tenant, who runs the pub as their own business but pays rent and buys the "tied" products from the landlord. A tie can also come with a loan: a publican who owns the pub may borrow from a brewer to buy or refurbish it and agree to take that brewer's beer in return.
• The managed house. The owner, brewer or pub company, runs the pub directly and puts in a salaried manager. The manager is an employee, not a business owner, and the range on the bar is decided by head office.
• The free house. A pub with no tie to any brewery. The owner, or a tenant whose lease carries no supply obligation, can buy beer from whichever brewers and wholesalers they choose.

"Free house" is a trade description, not a protected legal title. A pub can be part of a chain and still call itself a free house in the sense that it is not tied to a brewer, and a free house can still sign exclusive supply deals with a wholesaler if it wants to. The phrase tells you that the choice of beer is the pub's own, not that the pub is small or independent in every sense.

How the tie took hold

Tied houses go back a long way. As the big London porter breweries grew in the eighteenth century, brewers began to secure outlets for their beer by owning or financing pubs, and the practice spread across the country. For a brewer, a tied estate meant steady demand: a tied pub would not switch supplier overnight. For drinkers, the drawback was obvious when one regional brewer tied almost every pub in a district and it became hard to buy anything else. The Campaign for Real Ale later made the choice of beer in tied pubs one of its causes.

By the end of the 1980s, six national brewers dominated the beer sold in British pubs. A report by the Monopolies and Mergers Commission, The Supply of Beer, published in March 1989, found that the link between brewing and pub ownership was holding back competition, and recommended loosening it.

1989: the Beer Orders

The government's answer was two statutory instruments made in December 1989, known together as the Beer Orders. The main one, the Supply of Beer (Tied Estate) Order 1989, did two things that still shape pubs today.

1. A ceiling on brewers' estates. A brewer, or a group of companies including a brewer, that held interests in more than two thousand licensed premises had until 31 October 1992 either to sell its brewing business, or to sell the excess pubs, or to release the tie on half of the pubs above the two thousand mark. The pubs released had to be sold or let at a market rent, free of the tie.
2. The guest beer. From 1 May 1990, the tied tenants of those large brewers had to be free to buy at least one brand of draught cask-conditioned beer from a supplier of their own choice. The Order defined cask-conditioned beer as beer "which undergoes fermentation in the container from which it is served", in other words real ale, of the kind described in our article on how cask ale is kept in the cellar. The same brewers could no longer tie their tenants for soft drinks, low-alcohol beers or other drinks that were not beer.

The guest beer gave small brewers a way onto bars that had been closed to them, and it is the origin of the "guest ale" pump clip that many pubs still put up beside their regular beers, even though the legal obligation has gone.

The unexpected result: the pub company

The Orders were meant to separate brewing from pub ownership, and they did, but not in the way many people expected. Rather than selling their pubs to thousands of independent owners, the big brewers sold whole estates to new companies that owned pubs but brewed no beer at all: the pub companies, or "pubcos". Some of today's best-known pub groups were formed in the years that followed. Because the Orders' estate limit and guest-beer rule applied to brewers, not to companies that did not brew, a pubco could tie its tenants just as a brewer once had, and negotiate large discounts from brewers to supply its estate.

By the early 2000s the market looked very different from 1989, and the Beer Orders were revoked in 2003. The tie survived them. What changed was who held it.

2016: the Pubs Code

Complaints from tied tenants about rents and the prices they paid for tied beer led to years of parliamentary inquiries. The Small Business, Enterprise and Employment Act 2015 finally set up a statutory code, and the Pubs Code etc. Regulations 2016 came into force on 21 July 2016. Three points are worth knowing.

• Who it covers. The Code applies to "pub-owning businesses" that are landlords of 500 or more tied pubs, and to their tied tenants. Smaller pub companies and family brewers with modest estates are outside it.
• Two principles. The Act requires the Code to be consistent with fair and lawful dealing by pub-owning businesses, and with the principle that a tied tenant should not be worse off than they would be without the tie.
• The market rent only option. At set moments, including the renewal of the lease, a rent assessment, or a significant and unforeseeable rise in the price of tied products, a tied tenant of a large pub company can ask to go free of tie and pay a market rent instead. The new agreement may not contain any product or service tie other than one for insurance. Disputes go to an independent Pubs Code Adjudicator.

The Code and the Act extend to England and Wales, so they cover pubs in the Vale of Glamorgan as much as in Kent or Yorkshire. Scotland followed its own route, with the Tied Pubs (Scotland) Act 2021.

What it means when you walk in

• The sign is a clue, not a guarantee. A brewery's name on the fascia usually means a tied or managed house with that brewer's beers on the bar. "Free house" means the pub chooses its own suppliers, but it does not tell you how good or how varied the range will be.
• Guest ales live on. A changing guest pump is now a commercial choice rather than a legal right, and it is common in tied and free houses alike, particularly in pubs that take cask ale seriously. A Cask Marque plaque by the door tells you about the quality of the cask beer, not who owns the pub.
• The licence is separate. Whoever owns the building, the right to sell alcohol and the hours of sale come from the premises licence issued by the local council, a system explained in our short history of pub opening hours.

This guide does not say how the Old White Hart is owned or supplied today: arrangements change, and they are a matter for the inn. If you are curious about a particular pub, the simplest way to find out is to look at the pump clips, or to ask at the bar.

Sources

• Supply of Beer (Tied Estate) Order 1989, SI 1989/2390, legislation.gov.uk (the two-thousand ceiling, the half-excess and the 31 October 1992 deadline, the guest beer from 1 May 1990, the definition of cask-conditioned beer)
• Small Business, Enterprise and Employment Act 2015, Part 4, legislation.gov.uk (the two principles, the 500 tied pubs threshold, the market rent only option and its triggers); the Pubs Code etc. Regulations 2016, SI 2016/790 (in force 21 July 2016, England and Wales)
• Beer Orders (the 1989 Monopolies and Mergers Commission report, the six national brewers, the rise of the pubcos and the revocation in 2003)