Freehold Going Concern or Leasehold: What You Are Actually Buying
Accommodation Finance
Freehold going concern · Leasehold business · Australia
Both are sold as operating businesses, but only a freehold going concern gives you title to the premises. This guide compares what you own, indicative borrowing ranges, lease-term limits, valuation, GST, duty, due diligence, settlement cash and what has to happen before you can take over and trade.
Quick Answer
A freehold going concern is the land, buildings and trading business in one purchase; a leasehold is the business plus the right to occupy the premises under a lease, with no freehold title to those premises. In Australian accommodation finance, our indicative August 2026 experience is about 60 to 70 per cent of going-concern value for freehold and about 40 to 50 per cent for leasehold, with actual terms varying by lender, asset, trading performance, lease runway and supporting security.
The decision does not end at the deposit. Before you sign, work out the usable lease years, the lender valuation, total cash to settle, finance and due-diligence protections, landlord or regulator approvals, and the working capital needed to trade from day one.
Also called: FHGC or FGC, leasehold business, going concern sale, walk-in walk-out.
What is a freehold going concern, and what is a leasehold?
A freehold going concern is a purchase in which the land, the buildings and the trading business change hands together, and a leasehold is a purchase of the trading business plus the lease over premises somebody else continues to own. Both are sold as operating businesses, both keep trading through settlement, and both are advertised with the same language, which is exactly why buyers arrive at a lender assuming the two are variations on one deal. They are not. They are two different assets with two different security profiles.
One point of confusion is worth clearing before anything else: accountants and auditors use the phrase going concern to describe whether a business is expected to keep operating through the next reporting period, and that audit sense has nothing to do with the property and business sale meaning used on this page. If you have landed here from an accounting question, the going concern explainer separates the two senses in more detail.
In the buyer sense, the distinction comes down to one question. When the deal settles, do you hold a title, or do you hold a contract?
- Freehold going concern. You take the title to the land and buildings, and you take the business operating on them. Nobody can decline to renew you, because there is nothing to renew.
- Leasehold going concern. You take the business, the fitout, the plant and the balance of somebody else's lease. Your right to keep trading from that address runs out on a date written in a document you did not negotiate.
- The hybrid nobody names. A freehold bought as a passive investment and let to a separate operator is a third case again. You own the property, somebody else runs the trade, and your income is rent rather than trading profit.
That third case matters more than it looks, because it is the one that quietly changes how a bank has to treat the loan. Section five deals with it.
What do you buy in a freehold going concern vs a leasehold?
In a freehold going concern you are buying the real property and the business as one bundle, and in a leasehold you are buying the business, the fitout and a fixed number of years. Almost every dispute that surfaces late in a going concern purchase starts with an inventory nobody wrote down at the beginning, so it is worth being literal about it.
Goodwill is usually the largest single line in a leasehold price and one of the harder ones to argue about, because the Australian Taxation Office treats goodwill as an indivisible item of property that cannot be dealt with separately from the business it attaches to (ATO, Taxation Ruling TR 1999/16, ledger-verified 13 August 2026). You cannot carve a slice of it out of the contract and leave the rest behind.
The fitout is the other line that surprises people. Shopfit, partitions, bar joinery, cabins and cool rooms are generally capital works rather than depreciating assets, and the ATO treats capital works as deductible at 2.5 or 4.0 per cent depending on the type and date of construction rather than under any instant write-off arrangement (ATO, Capital works deductions, read 20 August 2026; rates and eligibility depend on the asset and your circumstances, and this is general information, not tax advice). If your model assumed the fitout washes through in year one, it does not. The leasehold improvements entry sets out how these sit on a balance sheet.
Stock is the third. The contract determines whether it is already inside the price. A sale written as walk-in walk-out is generally intended to be an all-in price that includes the agreed stock and operating contents, while a sale written as plus stock or SAV usually has stock counted near settlement and paid on top of the headline price. Buyers need to identify which structure they have before modelling cash to complete.
| What is in the sale | Freehold going concern | Leasehold |
|---|---|---|
| The land | Included, title transfers to you | Not included, stays with the landlord |
| The buildings | Included, title transfers to you | Not included, you occupy under the lease |
| The operating business and goodwill | Included | Included, and it is the main thing you are paying for |
| Plant, chattels and fitout | Included, listed in the contract schedule | Included, but fixtures may revert to the landlord at the end |
| The lease | None over the premises you occupy yourself | The core asset, assigned to you with the landlord's consent |
| Any licence or entitlement | Transfers subject to the relevant regulator | Transfers subject to the regulator and often to the landlord |
| Stock on hand at settlement | Contract controls: commonly included in a WIWO price or paid separately where the contract says plus stock/SAV | Contract controls: commonly included in a WIWO price or paid separately where the contract says plus stock/SAV |
| What you own at the end of the term | The property and whatever the business is then worth | Whatever the business is worth to the next buyer, if the lease can be renewed or assigned |
Read the last row twice. It is the row that decides which of these two assets you are really comparing.
How is a freehold going concern valued against a leasehold?
A freehold going concern is valued as a single income-producing asset, with the land, buildings and sustainable trading earnings read together, while a leasehold is valued primarily from maintainable earnings, market evidence and the usable lease term. The remaining lease runway can materially constrain a leasehold valuation and the finance available against it, but it is not a simple straight-line cap. The two structures therefore react differently to the same trading result.
- The freehold sits on two floors. If the trade softens, the land and buildings are still there, and a valuer can fall back to a vacant possession or alternative use figure. There is a downside limit.
- The leasehold has no buyer-owned freehold floor. If the trade softens, there is no land and building owned by the operator underneath the business value. Earnings, usable lease term, rent, lease conditions and saleable chattels therefore carry much more of the valuation.
- The years are part of the arithmetic, not a footnote. A profitable business on a short remaining term is worth materially less than the same business on a long one, because the buyer behind you inherits an even shorter runway.
Valuers working on accommodation and hospitality assets generally report against the professional standards published by the Australian Property Institute, and a lender will instruct its own valuer rather than rely on the one the vendor commissioned. Our note on how a valuer splits bricks from trade walks through what that report looks like when it lands, and the going concern valuation explainer covers the method itself.
The practical consequence for a buyer is simple. A soft valuation usually increases the cash contribution because the lender works from its accepted value rather than the agent's price. On a leasehold, the effect can be more severe where the buyer has no other acceptable security or equity available to close the gap.
How does a valuer normalise the trading figures?
A valuer does not capitalise the profit shown in the accounts, it capitalises an adjusted figure built by adding back what belongs to the current owner rather than to the business. The usual adjustments run in both directions. Owner's wages, private expenses run through the business, interest, depreciation and one-off items are added back, and then a market management allowance is deducted in their place, because the next operator has to be paid for running the asset even if the current one takes nothing. On an owner-occupied motel or park where the operators live on site and draw little, this single adjustment can move the assessed earnings materially. It is also where a lender's read and a broker's read most often diverge from the marketing figure, so the earnings line on a listing is a starting point, not a valuation.
Why can a leasehold business show a higher yield than a freehold?
A leasehold can show a higher percentage return because the buyer is paying for the operating business and lease rights rather than also funding the land and buildings. That lowers the capital invested, but the operator then carries rent, rent reviews and a finite lease runway. A freehold going concern usually absorbs much more capital at settlement but keeps the property exposure and does not pay rent to a landlord.
For Australian motels specifically, ResortBrokers' Motel Report 2025 commentary says motel rents still sit around 45 per cent of adjusted net profit as a long-used industry rule of thumb, while its 2026 market update says leasehold median yields compressed to below 30 per cent nationally as buyer demand and prices rose. Those are motel-market observations, not a return forecast for an individual purchase. The buyer's real comparison is return after rent, debt service, required capex and working capital against the amount of equity tied up in the deal.
How much can you borrow on a freehold going concern vs a leasehold?
For Australian accommodation purchases, our indicative August 2026 experience is about 60 to 70 per cent of going-concern value on a freehold going concern and about 40 to 50 per cent on a leasehold going concern. These are practitioner ranges, not lender promises: actual gearing can move with the asset, location, trading performance, buyer experience, lease runway, valuation and any supporting property offered.
The percentages are not applied to the same asset. On a freehold, the lender can take a registered mortgage over buyer-owned land and buildings as well as security over the business. On a leasehold, the lender takes security over the business, chattels and lease rights, but the buyer does not own the freehold premises for the lender to mortgage. A lease itself can be an interest in land; the finance distinction is ownership and mortgageable security, not whether the lease has any property-law character.
| Finance question | Freehold going concern | Leasehold going concern |
|---|---|---|
| Indicative gearing from our accommodation files | About 60 to 70 per cent of going-concern value | About 40 to 50 per cent of going-concern value |
| What the percentage is applied to | Usually the lower of purchase price or lender-instructed going-concern valuation | Usually the lower of purchase price or lender-instructed leasehold-business valuation |
| Main security | Registered mortgage over the land and buildings, plus business security | Business, chattels and lease rights; no mortgage over the premises unless separate supporting property is offered |
| What usually caps the advance | Valuation, serviceability, asset quality and lender policy | Usable lease runway, valuation, serviceability and lender policy |
| Can another property help? | Yes. Supporting property can sometimes lift total borrowing materially, subject to valuation, serviceability and lender policy | Yes, but supporting property does not create extra years in the lease; the lease still has to support the facility term |
Before you compare any headline percentage online, make sure it is the same exposure. A business that leases its premises while the lender is separately secured by property is not the same thing as buying a leasehold going concern with no mortgage over the premises being acquired. The LVR entry explains the ratio itself.
From our broking, indicative
Based on Switchboard Finance accommodation and going-concern files in Australia, reviewed August 2026, we commonly work from about 60 to 70 per cent of going-concern value for freehold and about 40 to 50 per cent for leasehold as an early feasibility range. It is a starting point only and can move outside that range.
What most often reduces or stops a leasehold advance:
- Too little usable lease runway for the facility term being requested.
- No landlord deed of consent or right of entry agreement where the lender requires one.
- Renewal rights or option mechanics that do not satisfy the lender's credit policy, including missed or conditional exercise requirements.
- Trading figures that do not reconcile to BAS, bank activity or current management accounts.
- No allowance for stock, settlement adjustments and the first trading cycle's working capital.
Indicative only, based on deals we have worked on, not a quote, approval promise or offer. Actual terms depend on lender policy, valuation and your circumstances at the time of application. General information only.
Two accommodation businesses can have the same asking price and completely different cash-to-complete numbers. At a 1 million dollar illustrative value, a 65 per cent freehold advance would leave a 350,000 dollar price gap before costs, while a 45 per cent leasehold advance would leave a 550,000 dollar gap before stock, duty where applicable, legal and valuation costs, landlord security and working capital. Those figures illustrate the arithmetic only; they are not a lending offer or a forecast of what any lender will approve.
What is the loan to value ratio applied to?
The ratio is generally applied to the lender's accepted value, not blindly to the price on the listing, and where purchase price and valuation differ a lender will commonly work to the lower figure. On a going concern the valuer is pricing an income-producing asset, so a soft valuation increases the buyer's cash contribution unless other acceptable security is available.
What does a lender want from a first-time operator?
A first-time operator can still be fundable, but the lender normally wants the inexperience covered somewhere else in the file: a stronger contribution, related industry or management experience, supporting security, a manager already in place, or a credible operating plan with enough working capital. The trade, lease and buyer are assessed together rather than as three separate yes-or-no tests.
Can you use your home instead of cash?
Equity in another property can sometimes replace part of the cash contribution by giving the lender additional mortgage security. It can materially increase total borrowing on a freehold purchase, subject to valuation, serviceability and policy, but it does not fund duty, professional costs, stock or working capital automatically and it puts that supporting property inside the risk of the deal. On a leasehold it can improve security but it cannot extend the lease itself.
What cash do you actually need at settlement?
You need more cash at settlement than the gap between the price and the loan, because a going concern sale carries a set of costs that sit outside the purchase price entirely. The deposit shortfall is the largest single number, but it is rarely the one that catches buyers out. The items below do, because most of them are not in the contract price and several are not payable to the vendor at all.
| What you pay for | Freehold going concern | Leasehold |
|---|---|---|
| The cash contribution | The gap between the price and what the lender will advance against the going concern valuation | The same gap, but wider, because the advance against a lease is lower |
| Stock if the contract is plus stock/SAV | Counted near settlement and paid on top of the base price; a WIWO contract may instead include agreed stock in the price | Counted near settlement and paid on top of the base price; a WIWO contract may instead include agreed stock in the price |
| Rent and outgoings in advance | Not applicable, you own the premises | Adjusted at settlement, and the lease sets how far in advance rent runs |
| Landlord security | Not applicable | A bank guarantee or security deposit, set by the lease and negotiated on assignment |
| Duty | Land transfer duty on the real property, in every state and territory | Depends on the jurisdiction and on what the contract transfers, see the duty table below |
| Legal and accounting due diligence | Contract review, searches, and an accountant's read of the trading figures | The same, plus a full review of the lease and its option structure |
| Valuation and finance costs | A lender-instructed going concern valuation, at your cost | A lender-instructed going concern valuation, at your cost |
| Consent and assignment costs | Not applicable | The deed of consent, the right of entry agreement, and the landlord's legal costs where the lease says you pay them |
| Licence and registration transfers | Whatever the asset trades under, transferred into your name | Whatever the asset trades under, transferred into your name |
| Working capital | Enough to fund the first trading cycle before the takings arrive | Enough to fund the first trading cycle, and rent falls due regardless of occupancy |
Two of these deserve naming on their own. Stock can be structured two ways: in a plus-stock/SAV contract it is counted near settlement and paid on top of the base price, while in a WIWO contract the agreed stock is generally part of the all-in price. Working capital is not a cost at all, it is a float, and it is the item buyers most often leave out entirely, because nothing in the contract asks for it. A going concern keeps trading through settlement, which means wages, suppliers and, on a leasehold, rent all fall due before the first month's takings clear.
Search the register too. A Personal Property Securities Register search shows whether the plant, chattels and fitout you are buying already carry a security interest registered by somebody else, which matters because those items are part of what your own lender is taking security over. Your solicitor will normally run it, and it belongs on the due diligence list rather than the settlement one, but it changes what you are actually acquiring. If the cash gap is real and the deal is sound, talk it through on our accommodation finance hub before you go unconditional, not after.
What happens between signing a going-concern contract and settlement?
Between contract and settlement, finance, valuation, due diligence and third-party approvals should run in parallel, because the slowest unresolved condition usually sets the real settlement timetable. On a leasehold, landlord consent and the lender's right-of-entry document add an extra approval path; on a freehold, title, property due diligence and the going-concern valuation carry more weight.
The Australian Government's guidance on buying an existing business says buyers should review financial records, operations and legal documents before committing, including licences, permits, leases, contracts, plant and equipment, assets, inventory, liabilities and PPSR interests. It also recommends independently checking three to five years of financial information such as tax returns, BAS, receivables, payables, balance sheets, profit and loss and cash flow records. Your lender may ask for a different or shorter set, but the due-diligence job is wider than the loan application. Our pub and hotel going-concern settlement guide walks the same sequence on a licensed venue, where the approval path is longer again.
| Stage | What happens | Freehold going concern | Leasehold going concern |
|---|---|---|---|
| Contract conditions | Finance and due-diligence conditions are drafted and deadlines start running | Allow enough time for a lender valuation and property review | Allow enough time for finance, lease review, assignment and landlord documents |
| Lender file | Contract, buyer information, financials, BAS/current trading and contribution evidence are assembled | Lender also maps the property and business security | Lender also reads the lease term, options, assignment clauses and landlord requirements |
| Valuation | The lender instructs its own valuer and works from the accepted value | Land, buildings and trade are read as the going concern | Business earnings and usable lease runway drive the leasehold value |
| Due diligence | Accountant and solicitor test the financials, legal documents, assets, liabilities, licences and PPSR position | Title, property condition and any land-specific issues matter | Lease obligations, rent reviews, make-good, options and assignment conditions matter |
| Third-party approvals | Consents and transfers are chased before the contract deadlines expire | Usually fewer landlord dependencies, although licences and regulators may still be involved | Landlord consent, lease assignment and often a deed of consent/right of entry sit on the critical path |
| Conditions satisfied | Finance and due diligence are formally satisfied or waived only after the buyer's advisers are comfortable | The loan can move to final documents once valuation and conditions are met | The lender may still require landlord documents before it will settle |
| Settlement adjustments | Stock, employee entitlements, rent/outgoings, deposits, prepaid items and other contract adjustments are finalised | No landlord rent adjustment for owner-occupied premises | Rent, outgoings and landlord security commonly add to cash required |
| Settlement and handover | Funds move, ownership/rights transfer and operational control changes hands | Property title and business transfer together | Business and lease transfer together, subject to the assignment documents |
Should you sign before finance is approved?
You can sign before formal finance approval, but the risk depends on the conditions in the contract. A finance clause and a due-diligence condition are separate legal protections, not broker paperwork: satisfying one does not automatically satisfy the other. Your solicitor should draft or review both and make sure each deadline matches the time needed for valuation, credit assessment, lease review and any landlord approvals. Going unconditional before those pieces are resolved can turn a finance delay or an adverse due-diligence finding into a deposit or completion problem.
What will the lender ask for?
Expect the lender to want enough material to prove three things: the business can service the debt, the buyer can operate it, and the security can be sold if the loan fails. That commonly means the signed contract or heads of agreement, recent financial statements and tax returns, current BAS and management figures, business bank activity where required, the lease for a leasehold, details of buyer experience, assets and liabilities, evidence of the cash contribution and details of any supporting property. A clean data room speeds up both finance and due diligence because the same documents are being tested from different angles.
What needs to work on day one after settlement?
The finance can settle perfectly and the takeover can still fail operationally if the handover is incomplete. Before day one, confirm access to bank and merchant facilities, POS and booking systems, payroll and super processes, suppliers, utilities, insurance, licences, keys and security codes, domains and phone numbers, employee rosters, forward bookings and customer deposits, opening stock and enough working capital to cover the first trading cycle. The purchase contract transfers the asset; it does not create an operating buffer. If the working capital gap is real, map it before you go unconditional on our accommodation finance hub, not after.
Does freehold vs leasehold change for motels, caravan parks, pubs or management rights?
The freehold and leasehold logic holds across every accommodation asset, but what a lender is actually securing against changes from one asset class to the next, and that changes the deal. A motel, a caravan park, a pub and a management rights business are all sold as going concerns and all read differently to a credit team. The differences below are structural, not pricing, and each asset has its own page where the lending detail sits.
| Asset class | What the freehold sale includes | What shifts the lending question |
|---|---|---|
| Motel | Land, buildings, the trade, and usually an attached manager's residence inside the going concern | The residence is valued and secured inside the going concern, not as a separate dwelling, and living on site changes how a valuer reads the wage line. See motel finance. |
| Caravan park | Land, sites, cabins, amenities and the trade | The mix of permanent, annual and tourist sites changes how stable the income reads, and cabins may be chattels rather than fixtures. See caravan park finance. |
| Pub or hotel | Land, buildings, the trade, and any gaming entitlements attached to the venue | Gaming entitlements are a separate class of asset with their own transfer rules, and whether a venue holds them is the single largest fork in how a pub is funded. See pub and hotel finance. |
| Management rights | Not a freehold or leasehold in the sense used above: a caretaking and letting agreement, usually bought with a manager's unit on its own title | The purchase splits into a real property component and a business component, and a lender treats the two separately. See the management rights guide. |
The tenure question still comes first in every one of them. What changes is what sits inside the going concern once you have answered it, and that is where the asset-specific pages pick up the detail this guide does not carry.
Why are freehold going concerns and leasehold businesses funded differently?
The two are funded differently first because the lender has different security and recovery options, and for APRA-regulated banks the prudential classification of the exposure can also differ. A freehold gives the lender mortgageable land and buildings; a leasehold-business purchase gives it the business, chattels and lease rights unless the borrower offers separate supporting property.
Under APS 112, a property exposure is an exposure secured by immovable real property, and the risk-weight treatment then changes according to factors including whether repayment materially depends on cash flows generated by that property. A pure leasehold-business acquisition with no mortgage over separate immovable real property does not have that freehold mortgage security and can instead fall under non-property corporate treatment. The exact classification is the lender's prudential decision on the actual security package.
The regulatory numbers behind the difference
Risk weights are the capital an Australian bank must hold against a loan under APRA's prudential standards. Which table applies turns on where the lender expects repayment to come from. They shape what a lender can do, not what any individual borrower will be offered.
Mapped onto the three cases in section one, the picture is this. An owner-operated freehold going concern gives the lender immovable-property security but repayment comes from the operating business; a passive freehold let to an operator is more directly dependent on property rent; and a leasehold business with no separate property mortgage lacks the buyer-owned freehold security that anchors the first two cases. Add a supporting property mortgage to a leasehold file and the security package changes again, which is why prudential labels should never be inferred from the sale advertisement alone.
The honest caveat, and it matters: which table a lender applies to a specific deal is that lender's classification decision, not something a broker or a borrower can assert in advance. What you can take from it is the direction of travel, which is why a commercial property loan and a business loan come back with such different structures on deals that looked identical in the advertisement. Our note on the freehold split on a motel purchase shows the same logic applied to one asset class.
| What the lender looks at | Freehold going concern | Leasehold |
|---|---|---|
| What the loan is secured against | Registered mortgage over land and buildings, plus the business | The business, its chattels and lease rights; no mortgage over the premises unless separate supporting property is offered |
| What the valuation is done on | The going concern value of property and trade together | The business alone, on a multiple of adjusted earnings |
| What sets the ceiling on the advance | The valuation and the serviceability of the trade | The remaining lease term, before the valuation is even reached |
| What sets the loan term | Standard commercial terms against the property | Aligned to the current term plus any renewal options the lender is prepared to recognise under its policy |
| What the lender needs from a third party | Usually nothing beyond the valuer and the regulator | Landlord consent and a right of entry agreement before settlement |
| Where the capital treatment sits | Commercial property, with the table turning on where repayment comes from | Can sit under non-property corporate treatment where there is no separate immovable-property mortgage; lender classification controls |
Why does the remaining lease term cap your loan?
The remaining lease runway caps your loan because the lender needs its facility to fit inside rights that can support an orderly sale or refinance. Start with the years left on the current lease term, then separate any contractual renewal options from a mere hope of negotiating a new lease. A valid option can bind the landlord when it is exercised correctly; whether a lender gives an unexercised option full value is a separate credit-policy question.
That distinction is where many leasehold deals get their haircut. A lease showing five years remaining plus two five-year options may be a genuine fifteen-year contractual pathway, but the lender still checks whether the options are enforceable, when and how they must be exercised, whether tenant defaults can defeat them, what happens to rent, and whether its own policy recognises the unexercised periods. The buyer sees a printed option; credit sees usable runway.
- The loan term compresses to fit. Shorter term, same borrowing, higher repayment, and serviceability is tested against the compressed figure rather than the one the buyer modelled.
- The exit compresses too. Whoever buys from you inherits fewer years again, which is a live issue for your own exit strategy from the day you settle.
- A valid option is a contractual right; a new lease beyond it is a negotiation. The lender still decides how much value it gives an unexercised option for credit purposes.
Our comparison of leasehold against freehold on a motel loan works the same mechanic through one asset class end to end.
A buyer of a regional accommodation business had modelled the purchase over a standard commercial loan term and had already agreed a price on that basis. The lease had fewer years left than the term they had assumed, and the option periods had not been confirmed by the landlord. Nothing about the business was wrong: the trade was sound and the figures reconciled. What had to change was the structure. The term came back to fit the lease, which lifted the repayment, which pulled serviceability tight, which meant either a larger contribution at settlement or a conversation with the landlord about committing to the next option in writing before finance could be confirmed. Deals like this are usually rescuable, but only if the lease is read before the price is agreed rather than after.
Do option periods count towards the term?
They can, but legal enforceability and lender recognition are different questions. The Queensland Small Business Commissioner says an option exercised in accordance with the lease usually binds both tenant and lessor, and the Victorian Small Business Commission says a landlord must renew where the lease contains an option and the tenant validly exercises it. A lender may still discount an unexercised option because it is testing future saleability, exercise conditions and its own maximum term policy, so have the lease lawyer and the credit team answer their separate questions before you price the deal.
Which lease clauses can reduce financeability or resale value?
The clauses most likely to change finance or resale are the ones that alter usable time, fixed cash outflow, the lender's recovery rights or the buyer's ability to transfer the business. They matter together: a long lease with an aggressive rent review can be weaker than a slightly shorter lease with predictable rent, clean assignment rights and lender access. Whether state retail-leasing legislation overlays the contract is jurisdiction- and premises-specific, so have the solicitor confirm the regime that applies to the actual site rather than assuming every accommodation lease is a retail lease.
| Lease item | Why it matters to finance or value | What the buyer should check |
|---|---|---|
| Remaining term and options | Sets the usable runway for the facility and for the next buyer | Expiry date, option periods, exercise windows, defaults that can defeat an option and whether the lender recognises unexercised periods |
| Rent and rent review | Changes maintainable profit and serviceability over the hold period | Current rent, CPI/fixed/market review method, review dates, any ratchet or floor and outgoings that move separately |
| Assignment and landlord consent | A buyer cannot assume the lease can simply be transferred to the next operator | Consent test, information the landlord can demand, timing, costs and any conditions on the incoming operator |
| Lender deed of consent or right of entry | Many lenders need contractual rights to preserve and sell the business if the borrower defaults | Whether the landlord will sign the lender's required form and who pays the landlord's legal costs |
| Repairs, maintenance and capital works | Large tenant-funded works can reduce cash flow even when trading is strong | Who pays for structure, plant replacement, statutory upgrades, refurbishment and damage not covered by insurance |
| Make good, fitout and fixtures | End-of-term reinstatement can create a large exit cost and the buyer may not be able to remove everything it paid for | Condition report, reinstatement wording, removal rights and what becomes the landlord's property at expiry |
| Redevelopment, demolition or relocation rights | Can shorten practical occupation or disrupt the operating location before the expected exit | Trigger conditions, notice periods, compensation and whether the clause can operate during an option period |
| Permitted use, licences and security | The business must be legally able to keep trading and the lease can require cash to be tied up in a guarantee | Permitted use, licence dependencies, insurance, bank guarantee/security deposit and any top-up mechanism |
For motel leases, Mahoneys notes that landlord consent is normally a live settlement step, while Business Queensland highlights make-good and redevelopment clauses as potential end-of-lease or early-termination risks. The legal effect always comes back to the signed lease and the legislation that applies to that premises.
What is a leasehold worth as the lease runs down?
All else equal, a shorter usable lease runway can reduce a leasehold's value and financeability, but it does not mechanically lose the same amount every year. Stronger maintainable earnings, a validly exercised option, a negotiated extension or better lease terms can offset some or all of the effect. The resale problem appears when the next buyer's lender has fewer usable years to work with: a long-runway leasehold can sell to a funded buyer, while a short-runway leasehold may face a smaller buyer pool, a shorter facility or a larger equity requirement.
What happens to goodwill, fitout and chattels when the lease expires?
They do not all have the same answer. Business goodwill can still have value where the trade can be sold with renewed premises rights or moved, but goodwill tied heavily to a particular location becomes harder to realise if occupation ends. Moveable chattels remain separate assets subject to the contract, security interests and the lease. Fixtures and fitout are different again: the lease and property law determine what can be removed, what must be reinstated and what stays with the premises.
LegalVision's 2026 commercial-lease guidance notes that tenant-installed fixtures can become part of the premises at lease end unless the lease preserves removal rights, and that a general make-good clause does not automatically answer every fitout-removal question. The practical buyer rule is simple: do not pay for fitout on the assumption you can sell or remove all of it later. Have the lease lawyer identify the exit rights and make-good liability before you put a value on those items.
What landlord consent do you need for a leasehold business purchase?
On many financed leasehold purchases there are two separate landlord issues to resolve: consent to you becoming the incoming tenant where the lease or law requires it, and any deed of consent or right-of-entry terms your lender requires before settlement. Those are not the same approval. Buyers routinely budget time for the lease assignment and are then blindsided by the lender document, which can become the slower path.
The deed of consent and the right of entry agreement
A landlord deed of consent, often combined with lender right-of-entry provisions, is the document in which the landlord acknowledges the lender's security and gives the lender specified rights if the borrower defaults. The exact document and rights vary by lender and lease, but the commercial purpose is to stop the lender's security over the leasehold business becoming unusable because it has no practical way to preserve or sell the business from the premises.
You will hear deed of consent and right of entry used together, but do not assume every transaction uses one identical document. The lender's solicitor and the landlord's solicitor settle the required form. Institutional landlords may have a standard process; a private landlord who has never been asked before may take longer, may require its legal costs to be paid and may refuse terms it considers unacceptable.
Assigning the lease
Assignment is the separate step in which the existing lease is transferred from the vendor to you, and it usually requires the landlord's consent as well. The landlord will commonly assess your financial standing and your experience running that kind of business. Where retail-leasing legislation applies it may also prescribe parts of the consent process or timeframes, but that coverage varies by state, premises and use. Expect to hand over much of the same material you gave the lender, and expect the landlord to take its own view of it.
Practically, the sequence that works is to run consent, assignment and finance in parallel from the day the contract is signed, not in series. Our note on leasehold against freehold in pub finance covers what a licensed venue adds to that timetable, and the settlement guide for a licensed going concern sale maps the whole sequence.
Is the sale GST-free as a going concern?
The sale can be GST-free as the supply of a going concern, but only where a set of cumulative statutory conditions is met, and meeting them is a drafting job done before contracts are exchanged rather than a status the deal acquires on its own. Getting this wrong is expensive in cash terms even when it is recoverable later, because the tax has to be funded at settlement.
Section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 sets the conditions. The supply of a going concern is GST-free where the supply is for consideration, the recipient is registered or required to be registered, and the supplier and the recipient have agreed in writing that the supply is of a going concern. A supply is a supply of a going concern where the supplier supplies all of the things necessary for the continued operation of the enterprise, and the supplier carries on, or will carry on, the enterprise until the day of the supply (GST Act, section 38-325, and ATO, Selling a going concern, both read 20 August 2026). Whether any particular sale satisfies them is a question for your accountant and solicitor on the facts of your contract, not a matter of general guidance.
- The written agreement is not optional. A shared assumption between agents is not an agreement in writing between supplier and recipient.
- Registration cuts both ways. The buyer has to be registered or required to be registered, which is a live issue where a new entity is being formed to hold the business.
- Everything necessary means everything. A vendor who retains a licence, a key contract or the premises can break the concession without intending to.
- Trading has to continue to the day of supply. A business that closes its doors before settlement is a different supply.
If the concession does not apply, the tax has to be funded at settlement and recovered later, which is a working capital event rather than a tax event. The GST and going concern entries cover the terms, and the going concern valuation explainer shows where the treatment interacts with the price.
What duty do you pay on a business sale, and does it change by state?
Duty on a going-concern purchase is not a single national rule: it changes by state or territory and by the assets the contract transfers. Goodwill, lease rights, land, fixtures and premiums can be treated differently, so the right question is not simply “what is the stamp-duty rate?” but “which parts of this deal are dutiable here?”
The differences are material. New South Wales expressly excludes goodwill while treating interests in land as dutiable. Queensland includes goodwill within its business-asset regime and treats a transfer of lease as a transfer of an interest in land. Victoria does not separately charge duty on the sale of a business, although land, significant fixtures and some lease arrangements can still attract duty. South Australia and the ACT have removed ordinary business goodwill from the categories that once attracted business-sale duty, while Western Australia includes goodwill among business assets that can be dutiable.
Duty is a settlement-day cash cost and belongs in your capital stack alongside the deposit, the stocktake and the first cycle of working capital, not in a note at the back of the model. If you want a read on how the whole cash requirement stacks up before you sign anything, check your eligibility and we will work it through with you.
| Jurisdiction | Is goodwill dutiable | Is a lease assignment dutiable | Where to check |
|---|---|---|---|
| NSW | No, expressly not dutiable | Yes, treated as an interest in land | Revenue NSW |
| VIC | No separate duty on the sale of the business or goodwill itself; land and significant fixtures can still be dutiable | An ordinary business-sale assignment for nominal consideration is generally not dutiable under the lease provisions; duty can apply where consideration is paid for valuable land rights | SRO Victoria: land and business; lease provisions |
| QLD | Yes, goodwill is a Queensland business asset and its existence can make the business-assets transaction dutiable | Yes, a lease is an interest in land and a transfer of lease is dutiable, subject to any applicable exemption | QRO: business assets; transfer of lease |
| WA | Yes, business assets expressly include goodwill | Check with the revenue office | Government of Western Australia |
| SA | No, goodwill is non-dutiable property | Duty attaches where land as defined is transferred | RevenueSA |
| TAS | Check with the revenue office | Goods become dutiable when transferred with other dutiable property | State Revenue Office Tasmania |
| ACT | No for current transactions; the former business-asset provisions for goodwill were repealed from 1 July 2006 | Ordinary rent is not a premium; commercial lease duty can apply where a lease premium exceeds the statutory 25 per cent above-market-rent threshold over the term | ACT Duties Act 1999; ACT Revenue: commercial lease duty |
| NT | Check with the revenue office | Leases of land given for valuable consideration are dutiable | NT Department of Treasury and Finance |
This table is an asset-category map, not a duty calculation. The final liability can change with the contract allocation, land and fixture values, any lease premium, aggregation rules, exemptions, related-party rules and the transaction date. Have the solicitor acting on the purchase confirm the treatment for the state or territory before you sign or budget the cash to settle.
What transfers with a going concern business sale?
More transfers with the business than most contracts make obvious, and employee entitlements are the line buyers miss most often. Where a business transfers, the incoming employer must recognise some accrued entitlements of transferring employees, and where the new employer is not an associated entity of the old one it may decide not to recognise service for certain purposes, notably untaken annual leave and redundancy pay (Fair Work Act 2009 (Cth), sections 22, 91 and 122, read 20 August 2026). Which way that lands changes the settlement adjustment, so it is a contract question with a cash answer.
- Accrued leave. Either the vendor pays it out and you start fresh, or you take the liability and the price adjusts. Silence in the contract is not a third option, it is a dispute.
- Superannuation timing. Payday Super has applied since 1 July 2026, so super now moves with the pay cycle rather than quarterly. That shifts the working capital profile of a business you have just bought, particularly a staff-heavy one.
- Stock at settlement. Counted on the day and paid over and above the price. Budget it as cash, not as part of the purchase.
- Contracts, bookings and deposits. Forward bookings held by the vendor are somebody's money. Establish whose before settlement, not after.
- Licences and entitlements. These transfer on the regulator's timetable, not the contract's.
Who takes forward bookings and guest deposits at settlement?
The contract should allocate both the booking and the money attached to it. A vendor can receive a deposit or prepayment before settlement for a stay that the buyer will have to deliver afterwards, so the settlement process needs to identify forward bookings, customer deposits, gift vouchers, cancellation rights and any prepaid packages, then allocate the corresponding cash or liability. The booking ledger should be reconciled before settlement rather than treated as ordinary pre-settlement revenue.
Where the business is a management rights operation, the transfer package is different again and is dealt with in our management rights explainer and the management rights guide. For a licensed venue, the going concern settlement guide sets out the order the pieces have to land in.
A buyer had the purchase price funded and the duty allowed for, and treated everything else as noise. The contract was plus stock at valuation rather than WIWO, so the settlement stocktake produced a separate cash number payable on the day, and the accrued entitlements of the transferring staff turned into a negotiation about the settlement adjustment that nobody had opened until the week before. Neither item was hidden. Both were in the contract. Neither was in the cash model, and together they consumed the buffer that was supposed to fund the first trading cycle. The business was fine. The buyer's first quarter was not. If you are working through a purchase where the trade needs turning around as well, the guide on buying an underperforming accommodation business covers what that buffer has to carry.
Should you buy a freehold going concern or a leasehold business?
Buy the freehold going concern if you want to own the property and the trade and you can fund the larger contribution, and consider the leasehold if you want to own the trade at a lower entry cost and you accept that occupation, rent and renewal rights are governed by the lease. Neither is the right answer in the abstract. The question is which capital requirement, control profile and exit runway fit your plan.
From the underwriter's seat, the split usually comes down to time horizon. A buyer planning to run the business for a decade and sell it as an asset is served badly by a lease with seven years left. A buyer testing an industry, or buying a trade they intend to build and move on from within the term, is served badly by tying up their whole deposit in bricks.
The freehold suits you when
- You can fund the larger contribution without stripping working capital
- You intend to hold for longer than a typical lease term
- You want the option to let the trade out to an operator later
- You want a security position that survives a soft trading year
- You want the exit to be a property sale as well as a business sale
The leasehold bites when
- The remaining term is shorter than the loan you need
- The option exercise conditions or lender policy leave less usable lease runway than you assumed
- The landlord will not sign a deed of consent for your lender
- Most of the price is goodwill and your state treats goodwill as dutiable
- You have budgeted the price but not stock payable under a plus-SAV contract, the entitlements and the first trading cycle
Can you buy the freehold later?
Sometimes, but the right has to exist before you rely on it. An option to purchase can give the tenant an exclusive contractual right to buy the freehold during a defined period at a fixed price or pricing formula if the exercise conditions are met. A right of first refusal is weaker: it generally gives the tenant the first opportunity to accept or match a sale opportunity if the owner decides to sell, but it does not force the owner to put the property on the market. NSW Land Registry Services treats an option to purchase and a first-refusal right as distinct lease rights, and the distinction should be drafted by the buyer's property solicitor.
If owning the freehold later is part of the investment plan, negotiate that pathway before buying the leasehold rather than assuming the landlord will sell after you have increased the site's trading value. Many leases contain neither right. See the NSW Land Registry Services lease guidance for a clear example of the distinction.
Where a vendor is prepared to help bridge the gap, vendor finance and the vendor finance guide set out how those arrangements are structured and what a lender makes of them.
Where to go next by asset class. For a motel, see motel finance. For a pub or hotel, see pub and hotel finance. For a caravan or holiday park, see caravan park finance, which covers both tenures. For management rights, see management rights finance. Where the deposit gap has to be bridged on a short timetable, private lending is the honest description of what that costs. The accommodation finance hub and the property lending hub hold the rest.
A freehold going concern gives you the property and the trade; a leasehold gives you the trade plus a finite right to occupy the premises. That one distinction flows into the whole transaction. As an indicative August 2026 accommodation range, we commonly see about 60 to 70 per cent gearing on freehold and about 40 to 50 per cent on leasehold, but the buyer still has to test the lender valuation, usable lease runway, rent and review mechanism, cash beyond the deposit, finance and due-diligence conditions, GST wording, state duty, stock, employee and booking adjustments, landlord and licence approvals, make-good exposure and the working capital needed after settlement. The right tenure is the one whose capital requirement, operating control, lease economics and exit runway fit the buyer's actual plan.
Key takeaway: choose the tenure, then test the runway, valuation, rent, cash to complete and approvals before you go unconditional. Settlement is not the finish line; the business still needs enough cash and operational access to trade on day one, and the lease still needs to be saleable when you eventually exit.Frequently Asked Questions
Freehold going concern means the land, the buildings and the operating business are sold together as one transaction, so the buyer takes the property title and the trade at the same time. It is the opposite of a leasehold sale, where the business changes hands but the premises stay with the landlord. The freehold going concern entry sets out the term, and it is unrelated to the accounting sense of going concern used in audit reports.
Neither is better in the abstract, because they solve different problems: a freehold gives you ownership of the land and buildings as well as the trade and usually requires much more capital at settlement, while a leasehold gives you the trade at a lower entry cost but your right to occupy is governed by the lease term, options and their conditions. The deciding factors are usually how long you intend to hold, how much cash you can commit without stripping working capital, and how much usable lease runway a lender and the next buyer will recognise. Our comparison of leasehold against freehold on a motel loan works the trade-off through one asset class.
The main disadvantages of a freehold going concern are the size of the cash contribution at settlement and the fact that your capital is tied up in property rather than in the trade. You also carry the building: structural maintenance, compliance and capital works are yours, not a landlord's. Against that, you hold a security position that survives a soft trading year, which is why lenders treat it differently, as set out in commercial property loans.
The downside of a leasehold is that the value and financeability of the business are tied to the lease runway. A valid renewal option can bind the landlord when it is exercised correctly, but a lender may still discount unexercised option periods under its own credit policy. That means the lease expiry, option mechanics, rent review, assignment rights and landlord consent all affect your loan term, resale market and exit.
It means the property is sold with the business still operating on it, so the buyer takes a trading enterprise rather than an empty building. The seller has to keep carrying on the enterprise until the day of the sale for it to be a supply of a going concern, and the parties have to agree in writing that it is one. The going concern explainer covers what that means for the buyer, and the GST conditions are set out in section eight above.
A going concern property is real property that is sold together with the business trading from it, such as a motel, a pub or a caravan park sold with its operations intact. The valuation is done on the property and the trade as a single income-producing asset rather than on the bricks alone. Our note on how a valuer splits bricks from trade shows what that report looks like when a lender reads it.
The condition written into the legislation is that the recipient, meaning the buyer, is registered or required to be registered for GST, and that the supplier and the recipient agree in writing that the supply is of a going concern. The supplier also has to supply everything necessary for the continued operation of the enterprise and to carry on the enterprise until the day of the supply. Whether a particular contract meets all of the conditions is a question for your accountant and solicitor; the GST entry covers the term itself.
A walk-in walk-out sale is an all-in business-sale structure where the agreed operating assets, contents and stock are generally included in the stated price so the buyer can take over without a separate plus-stock adjustment. The contract still controls exactly what is included, any minimum stock level and what must remain at settlement. The walk-in walk-out entry sets out the term.
For Australian accommodation purchases, our indicative August 2026 experience is commonly around 40 to 50 per cent of leasehold going-concern value, compared with about 60 to 70 per cent for freehold. A short or weak lease can reduce the leasehold result further because the facility has to fit the usable runway. Actual terms vary by lender, valuation, trading performance, buyer experience, lease conditions and any supporting property.
Sometimes. An option to purchase can give the tenant a contractual right to buy the freehold during a defined period if its conditions are met, while a right of first refusal usually only gives the tenant the first opportunity if the owner decides to sell. Many leases contain neither. If owning the freehold later matters to the deal, negotiate the right before buying the leasehold and have the property solicitor draft the price or valuation mechanism, exercise process and deadlines.
More than the deposit gap, because a going concern settles with several costs that can sit outside the purchase price. If the contract is plus stock/SAV, stock is counted near settlement and paid on top of the base price; if it is genuinely WIWO, agreed stock is generally already included. On a leasehold you may also settle rent and outgoings in advance and provide the landlord's bank guarantee or security deposit. Then there are duty where it applies, legal and accounting due diligence, the lender-instructed valuation, consent and assignment costs, licence transfers, and working capital for the first trading cycle. Working capital is the one most often left out, because nothing in the contract asks for it.
Yes. Equity in another property can sometimes replace part of the cash contribution by giving the lender additional mortgage security, and on some freehold purchases it can lift total borrowing materially subject to valuation, serviceability and policy. It does not make duty, legal costs, stock or working capital disappear, and the supporting property becomes exposed to the deal. On a leasehold it can strengthen the security package but it cannot extend the lease runway.
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