Can Leasehold Hotels Get Financing — Do Lenders Prefer Freehold?

Summary: Short answer — yes. Leasehold hotels can and do secure finance, but many lenders prefer freehold because it reduces property-related risk. Eligibility for leasehold hotel lending depends on the unexpired lease term, assignability, landlord consent, lease covenants (rent reviews/break clauses), the business’s trading performance and the quality of security. If you want quick guidance and tailored lender matches, complete a Free Eligibility Check and get quotes from brokers and lenders who specialise in hotels: Get Quote Now.

Short answer / TL;DR

Leasehold hotels can be financed, but lenders frequently favour freehold because it gives clearer security and resale value. Lenders judge leasehold hotel finance on: remaining lease length, landlord/ headlease terms (mortgage consent, assignability), rent/service charge burdens, trading performance (RevPAR, occupancy), operator agreements and the ability to repossess or sell security. For tailored funding options and fast quotes, start a Free Eligibility Check.

Why tenure (leasehold vs freehold) matters to lenders

Tenure affects lender risk in several ways:

• Security & repossession: Freehold gives lenders a straightforward security asset to take and sell. Leasehold adds complexity — the lender’s interest depends on the lease terms and whether it can be assigned or mortgaged.
• Lease length remaining: Short unexpired terms reduce the capital value of the property and lenders’ willingness to offer long-term mortgages. Typical market preferences are often in the 60–80 years unexpired range for mainstream commercial mortgage terms, though specialist lenders can be more flexible.
• Headlease and landlord risk: Onerous headlease covenants, punitive ground rent or restrictive change-of-use clauses can materially weaken security and cashflow.
• Cashflow impact: Ground rent, service charges, and frequent rent reviews can squeeze EBITDA and therefore borrowing capacity.
• Valuation certainty: Freehold values are typically easier to assess; leasehold values depend on lease terms, unexpired term and the cost of any necessary lease extension.

Typical issues lenders check

• Unexpired lease term and any upcoming break clauses
• Landlord consent for mortgage/assignment
• Rent reviews, ground rent and service charges
• Planning/use restrictions and compliance
• Current and forecasted hotel trading performance

What types of finance are available for leasehold hotels

Multiple finance products can work for leasehold hotels, depending on the situation and lender appetite:

Commercial mortgage / property‑secured loan

Suitable where a lease has sufficient unexpired term and the headlease allows mortgage/assignment. Lenders will usually take a first charge on the leasehold interest and may still require personal guarantees or cross-collateralisation. LTVs on leasehold are typically lower than on freehold.

Hotel business loans (term loans against cashflow)

These loans rely on the hotel’s trading performance rather than property value. They can suit shorter leases where the business is strong, although rates may be higher and terms shorter.

Bridging finance

Short-term funding to complete purchases, refinance, or fund lease extension/buy-freehold transactions. Useful when a longer-term lender needs time to underwrite.

Development / refurbishment finance

Project loans for upgrade works — lenders will scrutinise contractor proposals, cashflow forecasts and exit financing plans.

Asset & equipment finance

Finance for furniture, kitchens, boilers and other plant often does not depend on property tenure and can be an efficient way to fund CAPEX without affecting property security.

Mezzanine / equity / JV

When senior lenders limit LTVs on leasehold, mezzanine debt or an equity partner can provide the shortfall in funding.

Working capital facilities (invoice finance, overdrafts)

Useful for seasonal liquidity and operating cashflow; these facilities are sized to cash conversion and are less dependent on property tenure.

How lenders assess leasehold hotels — key underwriting checkpoints

Lenders combine property, legal and trading analysis. Key checkpoints include:

• Remaining lease length: lenders set minimum unexpired terms depending on loan term; common guidance is 60–80 years, but specialist funds may accept less with mitigating factors.
• Headlease terms & landlord consent: can the lease be assigned or charged? Are there onerous rent reviews or break clauses?
• Trading performance: historic accounts, management accounts, and forecasts (RevPAR, ADR, occupancy) — lenders want to see stable or improving metrics.
• Operator/management agreements: franchise or operator contracts can be assets (brand strength) or liabilities (rigid fee structures).
• Condition survey & capex: the condition of the building and imminent refurbishment needs affect valuation and lending decisions.
• Valuation approach: valuers may split value between leasehold property interest and goodwill; both matter to lenders.
• Security enhancements: personal guarantees, cross-company charges, or higher interest rates where lease security is weaker.

Documents typically required: full lease and headlease, title documents, recent accounts, management accounts, business plan, forecasts, property survey and operator agreements.

Valuation & security differences: leasehold vs freehold

Valuation for hotels usually blends property value and business cashflows. With leasehold:

• The leasehold interest is valued by reference to the unexpired term — shorter leases reduce capital value.
• Onerous ground rent or restrictive covenants are discounted by valuers.
• LTVs are commonly lower than freehold lending; for example, where freehold LTVs might range higher, leasehold lending could be capped more conservatively — exact ranges vary by lender and case.

Mitigations include lease extension, headlease renegotiation, purchasing the freehold, or adding alternative security (personal guarantees, asset security).

Real‑world examples

Example A — Leasehold hotel refinanced with mortgage

40‑room leasehold hotel with 85 years unexpired. Landlord agreed mortgage consent after negotiation. Strong historic trading and a modest personal guarantee secured a commercial mortgage at a competitive rate. Lesson: robust trading and early landlord engagement make lending achievable.

Example B — Short lease, bridging then refinance

60‑room hotel with 25 years unexpired was declined for a long-term mortgage. Owner took a bridging loan to fund a lease extension (and minor capex) and then refinanced with a specialist lender once the lease had 60+ years. Lesson: short-term bridging + lease extension can unlock mainstream borrowing.

Common obstacles and how to mitigate them

Practical steps to improve eligibility:

• Extend the lease or buy the freehold: Where feasible, this directly improves security and valuation.
• Secure landlord consent early: Involve solicitors and demonstrate strong operator credentials to speed consent.
• Improve trading evidence: present clear management accounts, cashflow forecasts and RevPAR trends.
• Use non-property finance: asset finance, invoice finance or mezzanine can cover shortfalls without depending on lease security.
• Engage specialist hotel lenders or brokers: they understand hospitality metrics and lease nuances.

Need help assessing your hotel’s eligibility? Start a Free Eligibility Check and we’ll match you with experienced brokers and lenders.

Alternatives if traditional lenders say no

• Asset finance: funds equipment and fit-out, often tenure-agnostic.
• Bridging loans: short-term capital for deals or lease extension work.
• Mezzanine or equity investment: brings in partners for growth or purchase of freehold.
• Invoice finance / merchant cash advance: solves seasonal cashflow gaps without property security.
• Grants or local funding: available for specific refurbishment, sustainability or accessibility projects.

Compare options tailored to hotels — Get Quote Now.

How UK Business Loans helps

We don’t lend. We connect hotel owners and operators with lenders and brokers who specialise in hospitality finance — including lenders that understand leasehold complexities. Our service is free to use and no obligation. Typical steps:

• Complete a short enquiry (takes around 2 minutes).
• We match your request to lenders/brokers that understand hotels and leasehold issues.
• Partners contact you with tailored quotes and next steps; you decide whether to proceed.

We commonly help businesses seeking loans from around £10,000 upwards. For a quick match, complete a Free Eligibility Check and receive tailored lender/broker contacts quickly.

For sector-specific guidance on hotel funding options, see our hotels page: hotels business loans.

FAQs

Can a leasehold hotel be mortgaged?

Yes — subject to lease length, headlease terms and landlord consent. Lenders also weigh trading results and security.

How long a lease do lenders usually want?

There’s no single rule. Many mainstream lenders prefer 60–80 years unexpired at the end of the mortgage term; specialist lenders may accept shorter terms depending on trading strength and mitigation plans.

Will lenders accept short leases if trading is strong?

Sometimes. Strong trading, a credible operator, and plans to extend or buy the freehold can persuade specialist or mezzanine lenders to lend.

Does landlord consent cost money?

Yes — obtaining consent usually involves legal fees and sometimes a landlord’s administration charge. Build these costs into your funding plan.

Will submitting an enquiry affect my credit score?

Submitting an enquiry via UK Business Loans does not affect your credit score. Lenders may perform credit checks later as part of underwriting.

Still unsure? Get a Free Eligibility Check and we’ll outline practical options for your hotel.

Next steps & legal

If you operate or own a leasehold hotel and need funding, the fastest way to explore options is to complete our short enquiry form. We’ll match you with lenders or brokers who understand hotels and leasehold nuances, and you’ll typically hear back by phone or email with relevant quotes.

Start your Free Eligibility Check — it’s free, takes around 2 minutes, and won’t affect your credit score.

Legal & trust

UK Business Loans is an introducer that connects businesses with lenders and brokers. We do not lend money or provide regulated financial advice. Submitting an enquiry is free and no obligation. Any offers you receive are subject to lender underwriting, checks and terms. Always seek independent legal and tax advice before entering any loan or lease extension agreement. For our full terms and privacy policy see our website.

Images (suggested)

• Hero image: “Leasehold hotel exterior at dusk” — alt=”Leasehold hotel exterior — financing considerations”
• Diagram: “How lenders assess leasehold hotels” — alt=”Flowchart showing lease term, landlord consent, trading performance”
• Photo: “Hotel reception with guests” — alt=”Hotel reception illustrating trading performance and borrower presentation”

1. Can leasehold hotels get finance? — Yes; many commercial and specialist hotel lenders will finance leasehold hotels where the unexpired lease term, headlease permissions and landlord consent are satisfactory and trading/security are strong.

2. Do lenders prefer freehold over leasehold? — Generally yes, because freehold offers clearer security and resale value, but leasehold deals are routinely done with lease extensions, landlord consent or alternative security.

3. How long does a lease usually need to be for a commercial mortgage on a hotel? — Mainstream lenders commonly look for around 60–80 years unexpired at the end of the mortgage term, although specialist lenders may accept shorter terms with mitigating factors.

4. What documents do lenders require when applying for leasehold hotel finance? — Typical requirements include the full lease and headlease, recent accounts and management accounts, business plan and forecasts, property survey/valuation and any operator or franchise agreements.

5. Will enquiring via UK Business Loans affect my credit score? — No — completing a Free Eligibility Check with UK Business Loans does not affect your personal credit score, though individual lenders may run checks later in the process.

6. What types of finance are available for leasehold hotels? — Options include commercial mortgages on the leasehold interest, cashflow-based hotel business loans, bridging finance, development/refurbishment loans, asset/equipment finance, mezzanine/equity and working capital facilities like invoice finance.

7. Can strong trading performance offset a short lease when seeking hotel finance? — Sometimes — robust RevPAR, occupancy, a credible operator and plans to extend or buy the freehold can persuade specialist lenders to lend on shorter leases.

8. How much can I borrow (LTV) on a leasehold hotel? — LTVs are typically lower than on freehold properties and vary by lender and case, with more conservative caps applied where lease length, rent reviews or covenants weaken security.

9. Does landlord consent cost money and how is it obtained? — Yes — landlord consent usually involves legal fees and often an administration or consent charge, and is secured by negotiating terms and providing the landlord with solicitor and lender documentation.

10. What are alternatives if traditional lenders decline leasehold hotel finance? — Alternatives include asset/equipment finance, bridging loans to fund lease extensions or purchases, mezzanine or equity investment, invoice finance or targeted grants for refurbishment or sustainability projects.