Leasehold or Freehold Pub: What Changes Without the Bricks
Leasehold vs Freehold Pub Finance | Switchboard Finance
Accommodation Finance
Leasehold Pub · Gaming · Lease Term
Leasehold or Freehold Pub: What Changes Without the Bricks
Two pubs can trade the same and sell for the same, yet finance completely differently. The line that moves it is tenure. On a leasehold you do not own the bricks, so a lender secures the lease and the trade, and the lease term sets the loan term.
Quick Answer
A leasehold pub versus a freehold pub finances differently because of what secures the loan. On a leasehold you do not own the bricks, so a lender lends against the lease and the trade as a going concern, and the lease term sets the loan term.
The real question is not which tenure, it is what secures the loan
The real question on a leasehold or freehold pub is not which tenure you prefer, it is what the lender can actually secure. A freehold lends against the property and the trade together; a leasehold lends against the lease and the trade only, because on a leasehold you do not own the bricks. That single difference flows through the deposit, the loan term and the lender you end up with.
What lenders actually look at first on a licensed venue is not the postcode or the fit-out, it is the security the loan sits on. The pub trade can be identical on both sides of the fence, but a freehold gives the lender real property to register a mortgage over, while a leasehold gives it a lease that runs down to an end date. Read the deal through that lens and the rest of the structure falls into place.
Find your tenure, then read what changes
Where you sit on tenure changes the whole finance read, so start there. Pick the structure closest to your deal and see what moves on the security, the gearing and the loan term.
Select your structure
Leasehold: you finance the lease, not the land
A lender secures the lease and the trade, so the loan is read against the remaining term and the earnings, not bricks you do not own. The lease term sets the loan term, which is why a short lease with no freehold fallback is the hardest version to fund. Gaming on a lease supports the trade but is not yours to pledge.
Lease term sets the loan termRead across the three and the pattern is consistent: the more the lender can secure in real property, the further the gearing stretches and the smaller the deposit. The trap most buyers fall into is assuming a leasehold and a freehold of the same pub would borrow the same, then finding the leasehold capped inside its lease and the deposit a good deal larger.
Where a leasehold pub deal passes, and where it fails
Whether a leasehold pub funds cleanly comes down to a handful of structural tests, most of them about the lease itself and the trade behind it. These are the lines that usually decide it before a lender ever prices the deal.
Where it passes
- A long remaining lease term the loan can sit inside
- A freehold fallback or other property as supporting security
- Gaming and licence held inside the venue, transferring with it
- Demonstrated trade the earnings can be read from
- A buyer with publican experience behind the deal
Where it fails
- A short lease term with no freehold to fall back on
- Gaming entitlements being sold away from the venue
- Thin or unproven trading figures behind the price
- No supporting security when the lease will not stretch
- A first-time operator with no track record on a tight lease
The freehold version of this read sits on the bricks rather than the lease. If you are weighing a freehold venue, what a lender actually holds on a licensed freehold walks the bricks, licence and trade split line by line, and our guide to financing a freehold pub with gaming shows how that gearing is built once the going concern is valued.
Reading the structure before FY27
Going into FY27, the structure of a pub deal matters more than the calendar. With state transfer duty and land tax settings held broadly steady after the recent state budgets, and the federal changes for businesses from 1 July 2026 sitting in the background, the variable that moves a licensed-venue purchase is tenure and security, not the tax backdrop.
For a freehold buyer, that means deciding early whether to bring commercial property as supporting security to ease the deposit. For a leasehold buyer, it means pressure-testing the remaining lease against the loan term before contracts, because the lease term sets the loan term and a refinance later will not lengthen a lease. Either way, a going concern read from a specialist valuer, not a residential template, is where the deposit number really comes from. Push a single security past the comfortable band and the file moves from the major banks to non-bank and tier-2 specialists.
A leasehold pub versus a freehold pub is really a question about security. Freehold lends against the property and the trade together; leasehold lends against the lease and the trade only, so the lease term sets the loan term and the deposit follows the gearing band the tenure allows. Map the security before you fix the price, and the deal holds no surprises.
Key takeaway: decide what the lender can actually secure before you commit to a price, because on a leasehold you do not own the bricks and the lease term caps the loan.Frequently Asked Questions
What changes when you do not own the freehold is the security the loan sits on: a leasehold pub is financed against the lease and the trade, not the land and building. Because there is no freehold to fall back on, the loan is usually capped inside the remaining lease term and read more cautiously. A freehold of the same pub lends against the property and the trade together, which is why the two can borrow very differently.
Gaming entitlements affect finance by lifting the value of the trade, but on a leasehold pub they support the earnings rather than acting as security the lender can hold. The entitlements need to be held inside the venue and transfer with it, because gaming entitlements being sold separately weakens the deal. Our guide to financing a pub with gaming sets out how lenders read entitlements alongside the pub and hotel finance structure.
The lease term does set the loan term on a leasehold pub, because the lender's security ends when the lease ends, so the loan is structured to sit inside the remaining term. A short lease with no freehold fallback is the hardest version to fund, while a long remaining term gives the loan room to breathe. Renewing or extending the lease before you finance can change the borrowing picture materially.
The deposit you need differs by tenure because gearing follows what the lender can secure. A freehold with gaming, indicatively around 65 percent, varies by lender, of the going concern value gears higher than a freehold without gaming, closer to 50 percent, indicative only, while a leasehold is read against the lease and usually needs a larger cash position or supporting security. Bringing extra property as supporting security can reshape the deposit on either side.
Buying the freehold later is possible if you start on a leasehold, but it is a fresh transaction secured against the property, not an extension of the lease finance. When the freehold becomes available, a commercial property loan is the usual senior facility, sized on the going-concern valuation of the whole. Planning that path early, with the accommodation finance hub mapping where each facility fits, keeps the option open rather than forcing a rushed deal.
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