Purchasing a Pub: A Guide to 3 Different Tenancy Options
If you are looking to invest in property, you may be considering taking ownership a pub which is for sale. However, owning a pub doesn't mean that you need to buy it outright at the full market value. There are a number of ways that you can become the owner of a pub. Below is a brief guide to 3 possible paths to ownership of a pub.
Pub tenancy
A pub tenancy involves signing a rental agreement with the owner of the pub, which is normally a brewery. The pub tenancy agreement will outline the amount of time you will have full control of the pub. It will also stipulate a percentage of your profits which you must pay to the owner in exchange for the tenancy of the pub. If once you have reached the end of your tenancy, you wish to extend the agreement you will have to negotiate with the owner.
If during the tenancy the owner of the pub wishes to take back control, they will have to provide you with a reasonable amount of notice. If you wish to exit the agreement before the tenancy has expired, the ownership of the pub will return to the brewery. You will also have to provide a reasonable amount of notice of your intention to leave. Depending on the terms of the tenancy, you may also lose your deposit. A pub tenancy agreement is ideal if you are running a pub for the first time, as it allows you to gain experience without having to buy a pub outright.
Pub leasehold
A pub leasehold differs from a tenancy in that the agreements can extend many years into the future. With a pub leasehold, you are effectively buying the pub as a going concern. This means that once you have reached the end of the lease, you can sell the pub on to another leaseholder rather than having to return it the original owner. You should be aware that many new leases which are being offered for the first time by pub companies and private owners will have a clause which prevents the sale or reassignment of the lease for a number of years unless you agree to pay a penalty. After this period, the lessee can sell the business on if they so wish. A leasehold agreement is ideal for those who have some experience of the trade and are seeking longer term security.
Pub freehold
If you purchase a pub freehold, you are buying it just as you would purchase any other business property. While this means that all cost associated with the maintenance of the building would be yours, it also means that you are not bound by a brewery to buy certain stock from approved suppliers, which gives you more freedom to run the pub as you see fit. Another big benefit of a pub freehold is that all profits from the business will be exclusively yours.
If you are interested in buying a pub, contact a property broker today.