How to buy a pub and get the legal side right

Buying a pub can be an exciting investment, but it comes with a wide range of legal considerations. From checking the title and licence position to understanding planning restrictions and tied agreements, there are key risks you need to address before completing a purchase.

In this first part of our two-part series, we focus on the legal steps involved in buying the pub premises. Our second article looks at the business side — including staffing, contracts, and regulatory compliance.

If you're buying a pub and have questions about the legal process, contact our solicitors for clear, practical advice tailored to your plans.

Introduction

The decline in pubs over the last decade has been well-publicised. The hospitality sector entered a storm in 2020 with the rise of Covid-19 and lockdowns, and five years later, it still shows no sign of abating.

Pubs have traditionally been the centre of the local community in villages and towns for generations, but their numbers have declined as drinking and living habits change.

Over the past five years, over 2,000 pubs have closed – the equivalent of nearly eight a week. However, this allows for exciting opportunities for new ventures and investments.

From the craft beer revolution and microbrewery concepts to vegan kitchens, sourdough pizza, destination dining, and creative repurposing of historic buildings, many entrepreneurs are reimagining what a pub can be. Whether you're looking to revitalise a community hub, create a new food-led venture, or transform a listed property, there's often potential for those ready to invest.

Purchasing a pub involves various legal considerations. Understanding the key aspects of the transaction is crucial to avoid unexpected liabilities, such as retained staff contracts, licensing issues, or costly obligations.

This guide provides an overview of the process, from the property transaction to essential business considerations—helping you navigate the complexities of purchasing a pub.

Step 1: Heads of Terms and the start of the transaction

During the preliminary stages of the purchase, an agent will put together the main terms of the lease transaction to set out what the parties have agreed upon. This document outlining some key terms agreed in principle is called the Heads of Terms. It is always advised to consult a solicitor before agreeing to the Heads of Terms to ensure full appreciation of what you are agreeing to.

Drawing up Heads of Terms at the outset of the transaction will determine a guideline for each party's understanding of the agreement and help prevent misunderstandings that can be easily identified before the formal drafting.

Heads of Terms can also provide evidence that each party intends to enter into a formal agreement. Once the parties have agreed on the basic terms of the transaction, they can instruct a solicitor to draft the agreement encompassing the Heads of Terms provided. This will prevent delays or disputes later on within the transaction when the parties have already committed a significant amount of time and legal fees spent drafting a detailed contract/lease.

Heads of Terms do not have to be accepted outright and can be negotiated. Clauses such as alienation, rent-free periods, break clauses, service charge and insurance provisions, covenants to repair, alterations to the property, and other provisions can be outlined in the hots.

For more information, see our in-depth Heads of Terms briefing note.

If the purchase of a pub is a freehold or assignment, the respective document is known as a sale memorandum. A memorandum of sale is a document summarising the key details of a property sale after an offer has been accepted. It acts as a record of the agreed terms before the transaction becomes legally binding - but is not legally binding itself.

Step 2: Title review

Freehold or leasehold - This should be the first consideration for any property purchase, and a pub is no different. Your solicitor will be able to review title documents to ensure the title confirms that the seller has a right to sell the pub. They will also highlight if there are any problems with the legal title to the land you are going to buy or lease. The potential 'problems' are too numerous to list but could include being unable to use the land for a particular use (e.g. a restaurant) or paying a third party for the use of some part of the property.

If you are purchasing a leasehold interest in a pub, you must bear in mind the lease terms, as the landlord may have very specific requirements about how the pub is run. Further to this, if the property is a leasehold, you will only own the interest in the property for a fixed period of time.

For example, when purchasing a leasehold pub, it is important to check the lease length, including renewal options and any restrictions the leaseholder imposes.

A preliminary factor when purchasing a leasehold interest (which should also be set out in the hots or if an existing leasehold, the sale memorandum) is confirming whether the lease is to be within The Landlord and Tenant Act 1954 (LTA 1954).

The LTA 1954 was enacted in relation to commercial premises affording greater rights to the lessee. The most important right conferred by the LTA 1954 is security of tenure.

Under the LTA 1954, tenants who meet the qualifying criteria have an automatic right to renew their lease upon its expiry. This right applies unless the landlord can successfully demonstrate one of the statutory grounds for opposing renewal. A tenant can lose security of tenure by not responding to any notice, so they must seek legal advice as soon as possible.

If a tenant wishes to remain in occupation of the premises after the expiry of their lease term, they should serve a valid section 26 notice on the landlord. Service of a section 26 notice will not oblige the tenant to take the lease. The section 26 request is simply the trigger to initiate the renewal process.

If security of tenure is excluded, then you, the tenant, must vacate the property at the expiry of the lease (and in accordance with its terms) unless you have negotiated a new lease with the landlord separately. This gives the landlord complete discretion regarding offering you a new lease. To agree a lease outside the LTA 1954, prior to completion of the lease:

1. The landlord must first serve a notice on the tenant prior to completion of the lease; and
    
2. The tenant must sign a declaration to agree to taking a lease outside of the LTA 1954.
    
3. Even small technical errors in giving notice can render it invalid; the consequences can be severe.
    
4. Specialist legal advice should always be sought when deciding whether a lease is to be inside or outside the LTA 1954 and the procedures to be followed.
    
5. Information on the LTA 1954 is also contained in our briefing note on Heads of Terms and our briefing note on security of tenure in commercial leases.
    
6. For more details on commercial leases, see our guide on understanding commercial leases.
    
7. Further provisions of the LTA 1954 include statutory grounds for opposition, whereby Landlords can oppose lease renewal on specific statutory grounds, such as redevelopment of the property, the landlord's intention to occupy the premises for their own business, or persistent tenant breaches and compensation for non-renewal, in cases where the landlord opposes lease renewal successfully, the tenant may be entitled to statutory compensation for the loss of their tenancy, providing a measure of protection against arbitrary eviction.
    
8. Some pub leases will also have restrictions about what alcohol can be sold and where stock is purchased from. Pubs which have these restrictions are known as "tied" pubs; those without are known as "free of tie" pubs or "free houses". In contrast, a freehold pub is likely to have far fewer restrictions and should allow you much more freedom to run the business.

Step 3: Due diligence

A thorough investigation of the property and surrounding area is essential. This includes:

Searches

Your solicitor will also need to conduct a number of 'searches', normally to check whether any other interests or restrictions are affecting the property that you would otherwise be unaware of. You will normally need to carry out environmental, local, water and chancel searches.

Other searches may be necessary depending on the transaction, but below is a brief summary of the standard searches:

• Local authority searches – Identifying any planning restrictions, proposals, or legal orders affecting the property.
   
• Environmental searches – Determining if the land is contaminated (i.e., contains hazardous substances that could affect human health or the environment).
   
• Flood risk, drainage, and water searches – Assessing potential flooding hazards and water supply conditions.

Commercial property standard enquiries (CPSEs)

The CPSEs are a set of standardised questions to facilitate a commercial property transaction, answered by the seller, providing key information about the property, including:

• Legal title: Details about the property's ownership and any encumbrances or restrictions.
   
• Existing tenancies: Information about current leases, tenants, and their rights.
   
• Environmental issues: Potential contamination or other environmental concerns.
   
• Planning compliance: Whether the property's use and any development comply with planning regulations.
   
• Physical condition: The property's current state and any known defects.
   
• Disputes and notices: Any ongoing disputes, legal notices, or other issues affecting the property.
   
• Tax matters: VAT and capital allowances related to the property.

While not legally mandatory, providing CPSE replies is considered good practice and demonstrates transparency, which can help the transaction proceed more smoothly.

The CPSEs offer valuable insight into what you are acquiring and allow you to negotiate terms based on the responses. Your solicitor will then be able to review these and raise any further enquiries should any information provided within CPSEs be insufficient or unanswered.

Planning permission and regulatory compliance

If you plan to change the use of the premises or make structural alterations, you may need:

• Planning permission from the local council. This ensures the pub's current planning permission allows for your intended use, as changes like adding a restaurant or accommodation might require new permissions.
   
• Listed building consent (if the pub is in a heritage area). Owning a listed property comes with restrictions and responsibilities due to its architectural or historical significance, including the need for listed building consent for most alterations and potential higher maintenance costs.
   
• Compliance with building regulations. Building regulations safeguard occupants and users by providing minimum standards on structural integrity, fire safety, and adequate sanitary facilities. They aim to minimise the risk of accidents, fires, and other potential hazards, creating a safe and secure environment.

Your solicitor will also undertake the necessary due diligence to ascertain whether any existing works or trading have complied with necessary planning permission and building regulations, as upon completion, you will become liable for any historic breaches.

Buying a pub for redevelopment

Commercial properties are categorised into "use classes" which determine the type of activities permitted. A change of use within the same use class may not require planning permission. If you are buying a pub with the intention of converting the premises into a different commercial use, you will likely need to apply for planning permission to change use of property.

If you change a commercial property's use without necessary planning permission, you risk enforcement action from the local planning authority, potentially leading to a requirement to undo the changes or face penalties. A breakdown of the potential issues are as follows:

1. If you proceed with a change of use without planning permission, the local planning authority (LPA) can serve an "enforcement notice". An enforcement notice could require you to revert the property to its original use or undo any alterations made. Ignoring an enforcement notice is illegal, and you could face legal action.
    
2. Depending on the severity of the breach, the LPA may impose fines, and you may be responsible for the LPA's legal costs incurred in pursuing enforcement action.

Even if you do not need planning permission for a change of use, you might still require approval from building regulations for any construction or alterations. Failure to comply with building regulations can lead to further issues and potential enforcement action.

While some changes of use may fall under permitted development rights (PDRs), meaning they don't require full planning permission, these rights have limitations and restrictions. Understanding the specific rules and conditions associated with PDRs is crucial to ensure your proposed change of use is within their scope.

Even within PDRs, local authorities can still impose conditions or refuse permission in certain circumstances.

Some pubs are protected under Article 4 directions relating to permitted development rights, which are described in The Town and Country Planning (General Permitted Development) (England) Order 2015. An Article 4 Direction is a planning tool used by local authorities to remove or restrict "permitted development rights" in specific areas or for certain types of development, requiring planning permission for works that would otherwise be allowed under those rights.

It is also essential to check whether the pub is listed as an 'asset of community value', defined as a building or other land that furthers the local community's social wellbeing or social interests. If the pub is deemed an asset of community value, the community has the right to bid for property and the sale may be delayed.

It is also important to ensure the pub is a permitted development, meaning formal planning permission is not required, before proceeding with any alterations. A solicitor can help you assess these factors early on so you know whether redevelopment is feasible and steps need to be taken before proceeding with the purchase.

You also need to be aware that local authorities may require Section 106 agreements to ensure the development does not have an adverse effect on the community. A Section 106 agreement, also known as a planning obligation, is a legally binding agreement between a local planning authority and a developer, ensuring that certain obligations are met as part of planning permission, such as contributions for infrastructure or affordable housing.

Check the property and its contents

It is essential to instruct a competent surveyor to check the building. If, for example, the roof or foundations are damaged, this can be very expensive to fix and upon completion, liability for such rectification will become your liability. Even if you are leasing the building and the landlord is directly liable for the cost of these maintenance issues (and you are not indirectly liable via a service charge), these problems can still cause severe disruption to the business and lose you a lot of money.

The surveyor will also be able to advise you on the condition of the contents being sold with the business (if any). For example, you would not want to pay the seller for pumps if they will need replacing within a couple of months.

Further to the above, you will also want to ensure you have checked and obtained the following:

• Ensure you have sight of gas and electric safety certificates and asbestos reports to comply with regulations and avoid potential hazards.
   
• Determine what fixtures and fittings are included in the sale, such as the beer-raising equipment, till system, and pub furniture.
   
• Investigate any equipment leased from a third party, like pool tables or gaming machines, and how those arrangements can be transferred or terminated.

Step 4: Other considerations

Pubs are subject to strict licensing regulations. You will need to check:

• Premises licence – To sell alcohol at a pub in England and Wales, the owner or occupier of the pub will need to apply for a premises licence from the local authority. This licence will set out restrictions on trade, such as opening hours and whether the venue can play live music. If you are purchasing a pub that is already trading, it is likely this licence will already be in place. You should check the restrictions carefully to ensure they fit with your plans for the property and that the seller provides their consent to transfer the licence into your name.
   
• Personal licence – As well as the premises itself being licensed, an individual at the pub will need a personal licence to authorise the sale of alcohol. This person is known as the Designated Premises Supervisor (DPS), and will usually be the owner or pub manager. If you have gambling or gaming machines at the pub, you may also need a permit from the local authority, and you should make enquiries with the local authority.
   
• Licensing hours and conditions – Restrictions may apply; for example, a 9 PM closing time may limit business potential. You must check that the range of licensable activities permitted by the licence and the hours in which they are allowed are suitable for your intended use of the property. You must also check that the conditions attached to the licence do not have an adverse impact on your plans for the property.

It is also a good idea to speak with your local licensing, environmental health and police officers to see whether there have been any recent or ongoing licensing or enforcement issues with the property (e.g. noise abatement notices) which could affect your ability to vary the licence further down the line (e.g. to extend trading hours).

Tax and financial considerations

Include Stamp Duty Land Tax (SDLT), which may be payable on the purchase price; some transactions may be subject to VAT and business rates, which is a key cost factor once you take over operations.

Step 5: Examine and negotiate on the transactional documents

The seller's solicitor will send the contract for the sale of the pub. A draft lease will also be sent if a new lease is granted. If you are buying the freehold, draft documentation necessary to transfer the freehold title will be sent.

If you are purchasing an existing lease, draft documentation to assign the leasehold interest will be sent from both the assignor and landlord's solicitors. Your solicitor will invariably need to amend these documents to cater to your business needs. It will also usually be necessary to negotiate various terms. Your solicitor will explain the implications of the contract and lease/transfer documents.

The transactional documents may differ if a business element is contained within the transaction, and we will provide further insight into this in Part 2.

Once you are happy with the terms of the draft documents, then 'engrossments' (i.e. final versions) will be produced for you to sign.

Summary

Before proceeding with the purchase, it is essential to:

• Understand the full legal position of the property.
   
• Review all compliance requirements, including fire safety, food safety, and staff obligations.
   
• Ensure the sale contract includes all agreed terms, warranties, and disclosures.

Step 5: Complete the pub purchase

If there is to be an exchange of contracts, normally signed contracts and the deposit funds must be sent to your solicitor. Your solicitor will then exchange contracts and send the signed contract with the deposit funds to the seller.

After exchange of contracts, completion will take place. This is when the balance of the purchase funds is sent to the seller, and you officially become the new owner of the pub and the new tenant or freehold owner of the land – cheers!

Contact our solicitors

From complex leasehold arrangements to listed buildings, tied pub restrictions, and licensing risks, our solicitors have experience guiding clients through every stage of a pub purchase. Whether you're buying your first premises or expanding a portfolio, we'll help you avoid the common pitfalls and move forward with confidence.

Get in touch with our legal team to discuss your plans.