Buying Your Pub Freehold

If you already run a successful pub under a leasehold agreement, you may have wondered whether purchasing the freehold could be a beneficial next step. Buying your pub’s freehold is a significant financial investment; albeit one that can offer great returns if it is indeed the right move for your business.

In this guide, we will explain everything you need to consider before you buy your pub freehold, and the types of finance that are available to help you.

What is a freehold and why is it important for pub owners? 

Unlike other types of property, where the terms freehold and leasehold apply solely to the ownership status of a building, a freehold pub carries unique advantages. 

A freehold pub, or "Free House" - is owned outright. Not only will you own the land and building, but you'll also have true independence from any brewery or landlord. This means you will have the full freedom to make decisions or changes as and when you wish. Freehold pub owners are not beholden to specific stock choices and can therefore freely stock a wide variety of beers, wines and spirits. You'll also have full control over your food menu if you have one, and cosmetic or structural improvements that you may want to carry out.

These are key differences when compared to operating a leasehold pub business, where the trade-off of having the security of a fixed-term commitment is that you may be tied in by a brewery or pub group to stock only their products, use their suppliers, and adhere to their branding. You are responsible for all costs of running and maintaining the business, without owning the pub itself and therefore benefitting from any increase in the property price over your occupation. 

However, it is worth remembering that as a pub leasehold allows you to sell the ‘goodwill’ in the business. In the instance that you have built up a very profitable pub business you may be able to sell it on for a significant return - should you decide to call ‘time’ before the lease is up. 

Things to consider when buying a pub freehold

As you may expect, the privilege of owning a freehold pub does come at a cost. Buying a pub freehold is a considerable expense, both in the initial purchase price and ongoing maintenance, so you need to be certain that it is the right decision when you begin to research your pub finance options.  

Owning an independent pub is an exciting prospect, but you will lose the support of the owner, brewery or pub group that you are currently leasing from, and you may need to start from scratch with suppliers as you will no longer have any ties.

If you're buying the freehold from your current leasehold pub, the building may require some updating to remove any branding, or you may have plans for a full makeover to celebrate its new ownership. Then there’s the admin - from all of the legal paperwork around the purchase to planning your new food and drink stockholding options. 

When you are sure you want to proceed with buying your pub freehold, you should create a business plan before making your finance application. We'd recommend speaking to the team here at Rangewell, where our expertise in commercial properties, pub finance and the lender's market can help you make the right decisions early in the process.

Although the exact requirements will depend upon the type of finance you need, lenders will look at your personal circumstances, including your credit histories, and take into consideration any deposit you already have and other sources of financial security you have access to. They will also assess your professional history and experience, including other pubs or businesses that you own or have owned, and will typically want to see two years of trading accounts, your income projections, and your pub business plan. So there is a lot to prepare, but our team will be able to walk you through the process at every stage. 

Benefits of owning a pub freehold

There are many benefits to buying the freehold of your pub, and for many pub owners, the freedom that comes along with it is at the top of the list. With no ties to a single brewery, you will be able to choose the drinks and food that you would like to offer, and may have the power to negotiate a discount with suppliers for the privilege of stocking in your pub. 

You have autonomy over every other aspect of your pub business too, from the interior decor to the style of food service that you want to provide. It can feel incredibly liberating to own your own pub, and with no rent to pay, more of the profits could be yours to keep. Plus, you have an asset for the future. 

Buying a pub freehold is also more appealing to lenders than buying a leasehold, as it adds value and provides security over the land itself, and not solely the performance of the pub business. This security de-risks the loan for lenders, and increases the likelihood that you will receive competitive finance offers and rates.

Types of finance for buying freehold property

There are several types of finance for buying a pub freehold that are available, and the right type for you will depend upon your individual circumstances and the future plans for your business. 

One type is a Bridging Loan, which gives you short-term access to a large amount of money, and can be used to take advantage of an opportunity you do not want to miss, such as buying a pub at auction. However, these loans must be secured on a property that you already own, and repaid within a maximum of 24 months, so you may need to arrange another type of long-term finance in the meantime. 

A Business Loan is a long-term solution to buying your pub, and much like a residential mortgage, you will make repayments over a fixed period and the loan is secured on the property itself. Unlike a residential mortgage however, the loan will be arranged on an individual basis; lenders will look at your business, accounts and projections to ensure that it is viable and assess the level of risk, then set the interest rates accordingly. 

Finally, Property Development Finance is another type of short-term loan, designed to help with both purchase and build costs for commercial development projects. The loan comes in two phases: the first to fund the purchase of the property, and the second to fund the build costs, making this type of finance useful for any conversion or upgrades that your pub may require.

Finance for buying a freehold with Rangewell

Before going directly to a lender to discuss finance for your pub, speak to a business finance expert such as Rangewell first, and find out how we can make buying your pub freehold more straightforward. 

We'll guide you through the application process, and scour the whole of the finance market to secure you the right type of loan for your pub business, at the most competitive rates available. Start your application in just five minutes.