Hotel transactions are governed by a combination of statute and common law. There is no single piece of legislation governing hotel transactions; rather, a range of legal disciplines apply depending on the nature and structure of the transaction. This guide addresses the law of England and Wales and, where relevant, highlights material differences under Scots law.

Transactions are typically structured as:

• a share deal, governed principally by the Companies Act 2006, the target company’s articles of association and any applicable shareholders’ agreement; or
• an asset deal, where the transfer of real estate must comply with prescribed formalities, including execution as a deed and registration at HM Land Registry under the Law of Property Act 1925, the Land Registration Act 2002 and the Landlord and Tenant Act 1954). In Scotland, the equivalent formalities are governed by the Requirements of Writing (Scotland) Act 1995 and the Land Registration etc (Scotland) Act 2012, with registration at Registers of Scotland. The Landlord and Tenant Act 1954 does not apply in Scotland (see 3.3 Hotel Lease Agreements).

(See 2.1 Common Sale and Purchase Structures.)

In both cases, general contract law principles underpin the commercial agreements. The following legal disciplines are also regularly engaged:

• planning and environmental, including the Town and Country Planning Act 1990 and the Environmental Protection Act 1990 (in Scotland, the Town and Country Planning (Scotland) Act 1997 applies in relation to Planning matters and the administrative regime differs) (see 6. Planning, Zoning and Licensing);
• employment and immigration, including the Transfer of Undertakings (Protection of Employment) Regulations 2006 (see 7.1 Employment Law Requirements);
• tax, including stamp duty land tax (land and buildings transaction tax in Scotland), corporation tax and VAT (see 5.1 Main Tax Implications);
• licensing, principally the Licensing Act 2003 (in Scotland, the Licensing (Scotland) Act 2005) (see 6.7 Operating Licences);
• health and safety, including the Health and Safety at Work etc Act 1974 and the Regulatory Reform (Fire Safety) Order 2005 (in Scotland, the Fire (Scotland) Act 2005); and
• intellectual property, which is particularly relevant to branded and franchised hotels.

Hotel transactions are typically structured as share deals or asset deals. The choice depends on commercial, legal and tax factors, including ownership structure, the parties’ tax positions and lender requirements.

Share Deals

In a share deal, the buyer acquires the shares in the company owning the hotel property and/or operating the business, which remain within the target company. The transfer is governed by the Companies Act 2006, the target’s articles of association and any shareholders’ agreement.

Share deals suit larger transactions, particularly where assets are held in a special purpose vehicle, where the buyer wishes to preserve contractual arrangements that might otherwise require consent to assign, or where the target’s tax position is advantageous.

However, the buyer inherits all of the target company’s liabilities, including historical, contingent or unknown liabilities, making comprehensive due diligence and robust warranty and indemnity protection essential. Warranty and indemnity insurance is now commonly used in hotel share transactions to supplement or, in some cases, replace the seller’s contractual liability in this respect.

Asset Deals

In an asset deal, the buyer acquires the hotel property (freehold or leasehold) and associated business assets directly from the seller, potentially including fixtures and fittings, equipment, goodwill, intellectual property, stock and the benefit of existing contracts.

The property transfer must be effected by deed and registered at HM Land Registry (or, in Scotland, by disposition or lease registered at Registers of Scotland). Leasehold assignments typically require the landlord’s consent (see 3.3 Hotel Lease Agreements), and assignment of other contracts may require counterparty consent. Where the hotel is operated as a going concern, the Transfer of Undertakings (Protection of Employment) Regulations 2006 will generally apply, requiring the automatic transfer of employees to the buyer (see 7.1 Employment Law Requirements). The tax treatment of an asset deal differs materially from a share deal, particularly in relation to stamp duty land tax (or, in Scotland, land and buildings transaction tax), VAT and capital allowances (see 5.1 Main Tax Implications).

Asset deals are common where the buyer wishes to avoid the seller’s historic corporate liabilities or where the hotel is sold standalone from a larger portfolio.

PropCo/OpCo Structures

In many transactions, the property and operations are held by separate entities – a property company (PropCo) and an operating company (OpCo) – often for financing, tax or risk management purposes. This separation allows the property risk to be ring-fenced from the operational risk and facilitates distinct financing arrangements for each entity. The deal may involve acquiring the PropCo, the OpCo or both, and must address any lease or management agreement between them (see 3.2 Hotel Management Agreements and 3.3 Hotel Lease Agreements). Lenders will typically require detailed analysis of the intercompany arrangements and the allocation of revenue and costs between the PropCo and OpCo.

Hybrid Structures

Transactions may combine elements of both structures – for example, acquiring PropCo shares while purchasing the business from the OpCo by asset transfer. The optimal structure depends on the parties’ tax positions, lender requirements and the need for third-party consents.

Hotel transactions and their commercial terms are generally confidential between the parties. There is no statutory requirement to publish the terms of a private hotel sale, and the parties typically enter into confidentiality agreements at an early stage.

However, certain information enters the public domain. In an asset deal, the transfer of the property interest is registered at HM Land Registry (or, in Scotland, Registers of Scotland). The register is open to public inspection and will disclose the registered proprietor, the nature of the interest held, the price paid (where stated) and the terms of any registered leases or charges.

In a share deal, the identity of shareholders, directors and persons with significant control is publicly available through Companies House, but the purchase price and detailed commercial terms are not required to be disclosed.

Where either party is a publicly listed company, additional disclosure obligations may arise under the UK Listing Rules, the Market Abuse Regulation and the Disclosure Guidance and Transparency Rules, potentially requiring announcement of material transactions.

In practice, the hotel sector is a close-knit market, and details of significant transactions often become known through industry publications and market intelligence, even absent a formal announcement.

There are no general restrictions on foreign investors acquiring hotels. Overseas buyers may purchase hotel properties and businesses on the same basis as domestic buyers, with no requirement for prior governmental approval.

However, the National Security and Investment Act 2021 permits the UK government to scrutinise and intervene in acquisitions on national security grounds. While hotel acquisitions are unlikely to engage this regime, the government retains a broad call-in discretion. The hospitality sector is not subject to mandatory notification.

Foreign buyers should note that professionals involved in hotel transactions are subject to anti-money laundering obligations under the Proceeds of Crime Act 2002 and the Money Laundering Regulations 2017, requiring customer due diligence and verification of identity and source of funds. This can add time for overseas buyers with complex structures or funds from higher-risk jurisdictions.

Additionally, the Economic Crime (Transparency and Enforcement) Act 2022 requires overseas entities owning or acquiring land to register with Companies House and disclose beneficial owners on the Register of Overseas Entities. Non-compliance prevents registration of title at HM Land Registry or Registers of Scotland.

The hotel market features a range of ownership and management structures, the prevalence of which varies by size, location and market positioning. The choice of structure is driven by a combination of commercial, financial and operational factors, including the owner’s appetite for operational risk, the availability of in-house expertise, the importance of brand affiliation and the requirements of lenders and investors.

Privately Owned Hotels

Privately owned and independently operated hotels are common among smaller, boutique and family-run establishments. The owner retains full control over the property and operations, bearing all financial risk and reward but requiring in-house or procured operational expertise. This structure offers maximum flexibility but can limit access to centralised reservation systems, loyalty programmes and brand recognition. Hotels may also be privately owned by larger groups, institutional or private equity investors as part of a wider portfolio, in which case the owner often appoints a third-party operator or management company to run the hotel on its behalf (see 3.2 Hotel Management Agreements), and may also enter into a franchise agreement to operate under a recognised brand (see 3.4 Hotel Franchising Agreements).

Hotel Management Agreements

Hotel management agreements are widely used, particularly in the upper-midscale, upscale and (less frequently) luxury segments, where the operational expertise provided by an international operator are significant commercial drivers. The owner engages a professional management company to operate the hotel on its behalf, retaining ownership of the property and the business while the operator provides day-to-day management in return for fees typically linked to revenue and profitability. The owner bears the economic risk and reward of the business, while the operator contributes expertise, systems and, in some cases, brand affiliation. This structure is favoured by institutional investors who seek exposure to hotel real estate without assuming direct operational responsibility (see 3.2 Hotel Management Agreements for further detail on typical terms).

Hotel Lease Agreements

Hotel leases are common in the mid-market and budget segments and are frequently used by large hotel operating companies seeking to expand their portfolios without acquiring the underlying real estate. The owner grants the operator exclusive possession of the property for a defined term in return for rent, which may comprise a fixed element, a turnover-based element or a combination of both. The operator assumes day-to-day management and operational risk, and is typically responsible for maintaining the property in accordance with the terms of the lease. From the owner’s perspective, a lease provides a predictable income stream with limited operational involvement (see 3.3 Hotel Lease Agreements for further detail on typical terms and regulatory considerations). The lessee may in turn enter into a hotel management agreement and/or franchise agreements in respect of the operations and branding of the hotel.

Franchise Agreements

Franchising is increasingly prevalent across all market segments. The owner or operator enters into an agreement with a franchisor to brand and operate the hotel under the franchisor’s brand, using its systems, standards and intellectual property, in return for fees and royalties. Franchising enables owners to benefit from brand recognition, global distribution and loyalty programmes. It is particularly common where an experienced owner or operator wishes to affiliate with a recognised brand while retaining day-to-day decision-making authority (see 3.4 Hotel Franchising Agreements for further detail on typical terms and regulatory considerations).

These structures are frequently combined – for example:

• a hotel property may be owned by an investor, leased to a third party, managed by an operator/manager and branded under a franchise agreement; or
• a franchisor may provide both the brand and the management of the hotel for an owner under a combined management and brand licence arrangement.

Typical Structure

A hotel management agreement is entered into between the hotel owner (or lessee) and a management company, which is appointed as exclusive operator for a specified term with authority to manage all aspects of the hotel’s day-to-day operations in accordance with the brand’s standards.

Key Terms

The principal terms typically include:

• term and renewal – an initial term (the length of which depends on the operator in question), often with renewal options;
• operator’s duties – responsibility for operation, management, marketing and staffing in accordance with brand standards and an agreed annual budget;
• owner’s obligations – funding working capital and capital expenditure (often through a reserve fund), maintaining the property and ensuring legal compliance;
• fee structure – typically, a base fee as a percentage of gross revenue and an incentive fee linked to profitability or performance;
• staffing – provisions related to employees, including the identity of the employer (typically the owner, but sometimes the operator), specific limits on headcount and senior management appointments, and the owner’s right to approve key personnel (see 7.1 Employment Law Requirements);
• performance testing – provisions entitling the owner to terminate if specified financial benchmarks are not achieved;
• budget and accounting – provisions relating to the preparation of an annual operating budget and capital expenditure budget by the operator for the owner’s approval, together with regular financial reporting obligations and the maintenance of separate accounts for the hotel;
• insurance – allocation of responsibility for procuring and maintaining insurance coverage for the hotel property, business interruption, public liability and employer’s liability;
• intellectual property and branding – if the hotel is branded under a franchise agreement, provisions governing the use of the relevant brand, trade marks and proprietary systems, and brand standards;
• owner step-in rights – provisions entitling the owner to assume operational control in specified circumstances, such as operator default or insolvency;
• assignment and change of control – restrictions on either party’s ability to assign the agreement or undergo a change of control without the other party’s consent;
• indemnities – mutual or one-sided indemnities addressing liabilities arising from the operator’s management of the hotel and the owner’s obligations in respect of the property;
• dispute resolution – provisions for the resolution of disputes, commonly by way of expert determination for financial matters and arbitration or litigation for other disputes;
• non-compete – restrictions on the operator managing competing hotels within a defined area;
• termination – on events of default, insolvency or change of control of either party; and
• key money – operators sometimes offer financial contributions to secure a management contract.

Regulatory Considerations

Hotel management agreements are governed by general contract law principles, with no specific regulatory framework. However, if the operator is granted exclusive possession, the agreement may be construed as a lease, conferring statutory protections under the Landlord and Tenant Act 1954 (see 3.3 Hotel Lease Agreements). This risk does not arise in Scotland, where there is no equivalent statutory security of tenure for commercial tenants, although the agreement may still be construed as a lease with other legal consequences. Careful drafting is therefore required to ensure the arrangement does not result in a proprietary interest being granted.

Whether or not the operator is acting as an agent for the owner is a matter of fact, depending on the degree of control retained by the owner, the authority conferred on the operator and the terms of the agreement. In most hotel management agreements, the operator acts as agent for the owner, entering into contracts (including employment contracts, supply agreements and guest contracts) on the owner’s behalf. This has significant implications for the allocation of liability, as the owner will generally be the principal party to obligations incurred by the operator in the course of managing the hotel. The agreement should clearly delineate the scope of the operator’s authority, specify any limitations on the operator’s power to bind the owner, and address the consequences of the operator acting outside its authority.

Typical Structure

A hotel lease is a contractual arrangement under which the property owner (the landlord) grants the hotel operator (the tenant) exclusive possession of the property, which includes the whole structure of the building (often a full repairing and insuring (FRI) lease) for a defined period of time in return for rent. An FRI lease is used typically where the tenant is demised the whole building and is the sole occupier; the tenant bears all the costs for property repairs, maintenance and building insurance. This shifts the financial and management burden from the landlord to the tenant.

An internal repairing and insuring (IRI) lease is a commercial property agreement where the tenant is only responsible for the maintenance, decoration and insurance of the inside of the area demised by the lease. Often used where the building is multi-let, the landlord retains responsibility for the building’s exterior, roofs, structural components and common areas, the cost of which is partially recovered through a service charge from the tenants in occupation of different parts of the building.

The tenant usually operates the hotel independently of the landlord and assumes responsibility for the day-to-day management of the business, though the tenant may in turn appoint a hotel manager for that purpose (see 3.2 Hotel Management Agreements).

Key Terms

Key terms typically include the following.

• Term – Hotel leases are generally granted for terms of between 15 and 35 years, reflecting the capital investment that the tenant is often required to make in fitting out and maintaining the property.
• Rent – The rent structure may comprise a fixed uplift by reference to the Consumer Price Index, or an open market rent review or a fixed base rent, a turnover rent calculated as a percentage of the hotel’s gross revenue, or a combination of both. Turnover rent provisions align the landlord’s return with the hotel’s trading performance.
• Alterations – The lease will specify the extent to which the tenant may carry out alterations to the property, often requiring the landlord’s prior consent for works.
• Assignment and subletting – Restrictions on the tenant’s ability to assign or sublet are standard; the landlord’s consent is typically required.
• Break clauses – The lease may include break rights exercisable by either or both parties at specified intervals, subject to compliance with conditions.

Regulatory Considerations

The Landlord and Tenant Act 1954 (the “1954 Act”) is of central importance to hotel leases in England and Wales. Part II of the 1954 Act confers security of tenure on business tenants, entitling them to remain in occupation at the end of the term and to apply to the court for a new lease. The landlord may only oppose the grant of a new lease on specified statutory grounds, such as persistent delay in paying rent, the landlord’s intention to redevelop the property, or the landlord’s intention to occupy the property itself. The 1954 Act does not apply in Scotland; there is no equivalent statutory right of renewal for commercial tenants under Scots law, and a commercial lease will simply expire at the end of its contractual term (subject to the common law doctrine of tacit relocation, under which a lease may continue on a year-to-year basis if neither party takes steps to terminate it). Therefore, in Scotland it is important to have robust management processes in place to ensure that if lease renewals are required then discussions take place in plenty of time.

The parties may agree to exclude the security of tenure provisions of the 1954 Act by following a prescribed statutory procedure. This is commonly done in hotel leases in England and Wales. However, the decision to “contract out of the 1954 Act” is a significant commercial point and is often the subject of negotiation. As noted above, this issue does not arise in Scotland.

Stamp duty land tax is payable on the grant of a hotel lease in England and Wales, calculated by reference to both the rent payable over the term and any premium paid (see 5.1 Main Tax Implications). In Scotland, land and buildings transaction tax (LBTT) applies instead and there can be significant differences in the tax payable between Scotland and England. Leases granted for more than seven years’ term are registrable at the Land Registry. In Scotland, leases granted for a period exceeding 20 years must be registered at Registers of Scotland.

Typical Structure

A hotel franchise agreement is an arrangement under which the franchisor (typically an international hotel brand) grants the franchisee (usually the hotel owner) the right to operate a hotel under the franchisor’s brand, using its systems, standards and intellectual property.

Key Terms

The principal terms typically include the following.

• Grant of rights, term and fees – The franchisor licenses its trade marks, brand name, reservation systems, loyalty programmes and operating standards, typically for ten to 20 years with renewal options. The franchisee pays an initial fee and ongoing royalties (usually a percentage of gross room revenue), marketing contributions and reservation system fees.
• Intellectual property – The franchise agreement governs the franchisee’s use of the franchisor’s trade marks, trade names, logos, proprietary software and know-how, with detailed restrictions on use and obligations to protect the franchisor’s intellectual property rights.
• Brand standards and property improvement – The franchisee must operate in accordance with the franchisor’s quality standards and may be required to undertake periodic refurbishments.
• Quality assurance and inspections – The franchisor retains the right to conduct periodic inspections and audits of the hotel to verify compliance with brand standards, and may impose remedial action plans or, in cases of persistent non-compliance, exercise termination rights.
• Training and support – The franchisor typically provides initial and ongoing training programmes for the franchisee’s management and staff, together with operational support, pre-opening assistance and access to centralised procurement arrangements.
• Marketing and reservation systems – The franchisee contributes to a centralised marketing fund and participates in the franchisor’s global reservation and distribution systems, loyalty programmes and digital platforms, which are a key commercial driver of the franchise relationship.
• Technology and data – Obligations relating to the franchisee’s use of the franchisor’s proprietary technology platforms and property management systems, together with requirements for compliance with applicable data protection legislation in respect of guest data and other personal data processed in connection with the hotel’s operations.
• Reporting and accounting – The franchisee is typically required to provide regular financial and operational reports to the franchisor, including revenue data, occupancy statistics and guest satisfaction scores, and to maintain books and records in a specified manner.
• Insurance – The franchisee is generally required to maintain specified levels of insurance coverage, including property, public liability and business interruption insurance, in accordance with the franchisor’s requirements.
• Territorial protection – The franchisor may be restricted from granting competing franchises within a defined area, although such provisions are not always offered.
• Non-compete and exclusivity – The franchisee may be restricted from owning, operating or having a financial interest in competing hotels within a defined area during the term and, in some cases, for a specified period following termination.
• Confidentiality and restrictive covenants – Obligations on the franchisee to maintain the confidentiality of the franchisor’s proprietary information, operating manuals and know-how, both during and after the term, together with any post-termination restrictive covenants.
• Key money and financial incentives – The franchisor may offer financial contributions or incentives (such as key money or fee holidays) to secure the franchise, particularly for flagship or strategically important properties.
• Indemnities and limitation of liability – Mutual or one-sided indemnities addressing liabilities arising from the franchisee’s operation of the hotel, together with any agreed caps on or exclusions of the franchisor’s liability for losses suffered by the franchisee.
• Assignment and transfer – Restrictions on the franchisee’s ability to assign the agreement or transfer ownership of the hotel without the franchisor’s prior written consent, often subject to the incoming party meeting the franchisor’s approval criteria.
• Sale of the hotel – Provisions addressing the consequences of a sale of the hotel property, including the franchisor’s right to approve the incoming owner, any right of first refusal in favour of the franchisor, and the circumstances in which the franchise agreement may be terminated on a change of ownership.
• Dispute resolution – Provisions for the resolution of disputes between the parties, whether by mediation, expert determination, arbitration or litigation, together with the governing law and jurisdiction.
• Termination and de-branding – The franchisor may terminate for breach of brand standards, fee defaults, insolvency or failure to complete required property improvements; the franchisee’s termination rights are generally more limited and may be subject to early termination fees or liquidated damages. On termination, the franchisee must cease using the brand, remove all signage and branded materials, disconnect from the franchisor’s reservation and technology systems, and complete de-branding of the hotel within a specified period.

Regulatory Considerations

There is no franchise-specific legislation: franchise agreements are governed by general contract law. The franchisor’s trade marks will be registered with the relevant intellectual property authorities, with the franchise agreement containing appropriate contractual protections as between the franchisor and franchisee. The British Franchise Association publishes a voluntary code of ethical franchising, widely regarded as a sector benchmark.

Franchise arrangements are separate from management arrangements (see 3.2 Hotel Management Agreements), although franchisees do in some cases also provide management services.

In addition to straight equity acquisitions (through a single party or joint venture), the following are the key available forms of financing.

• Secured debt funding – This most commonly takes the form of senior secured debt but can be funded through (or through a combination of) senior and mezzanine debt, stretched senior/whole loan funding and bridge finance. Secured debt can be used in this way for both investment and development transactions.
• Sale and leaseback – A hotel owner sells the property to an investor and then leases it back on a long-term basis and continues to operate the hotel.
• Forward funding – An investor takes an interest in the land from a developer at the start of the build programme and funds the development on a phased basis. It is useful in development transactions where traditional lenders will not fully underwrite operational/investment risk.

Secured debt is most commonly seen and is available where there are high/reasonable levels of confidence in the development or investment, underpinned by long-term operational agreements (a management lease is preferred by lenders) and strong brands.

There are broadly no restrictions on overseas lenders providing debt financing for hotel transactions. Overseas banks, funds and other financial institutions are permitted to lend to borrowers in England and Wales and Scotland and to take security over hotel properties on the same basis as domestic lenders. However, a few points should be flagged in particular.

• Foreign financing is subject to general sanctions and anti-money laundering laws, which can prohibit English companies and persons from borrowing monies from (or having business dealings generally with) entities which are based in countries subject to UK sanctions (or where those entities are themselves subject to specific sanctions).
• Regulatory controls can still arise when lending to borrowers in England and Wales or Scotland, but only on the same basis that a domestic lender would be similarly controlled. Typically, in hotel financings, commercial (rather than consumer) lending is involved and these types of transactions are therefore unlikely to engage this requirement, but it should be considered.
• In particular, an overseas lender should consider whether its jurisdiction would mean that UK withholding tax would likely arise on any interest payments made by a UK borrower. Typically, the lender would want to ensure that it is based in a jurisdiction which offers treaty relief (in full) from any withholding tax, but other options may be available to mitigate this position and (in any event) the loan documentation should also address the apportionment of this risk.

The tax profile of hotel transactions is primarily driven by structure (ie, asset or share sale – see 2.1 Common Sale and Purchase Structures) and operational model (see 3.1 Common Hotel Ownership and Management Structures). The headline tax considerations include stamp duty land tax (SDLT) (or, in Scotland, land and buildings transaction tax (LBTT)), stamp duty on shares, VAT and corporation tax (CT).

In asset deals, buyers typically pay SDLT (or LBTT in Scotland) on the hotel property acquisition. VAT may arise on the business and asset transfers, although transactions qualifying as transfers of a going concern (TOGC) fall outside the scope of VAT (so no VAT is payable) where the relevant conditions are met. Sellers are typically subject to CT on gains made on the disposal of capital assets (the main rate being 25%). Capital allowances on plant and machinery are also a key commercial driver.

In share deals, there is no SDLT on the underlying real estate acquisition; instead, stamp duty is charged at 0.5% on the consideration for the share transfer. Sellers may benefit from CT reliefs (eg, the substantial shareholding exemption) on the sale; however, buyers inherit the company’s historic tax liabilities, making thorough tax due diligence essential. Common risk areas include historic compliance with the Construction Industry Scheme, correct operation of the VAT reverse charge on construction services, and how the property has previously been held (eg, as trading stock versus an investment asset).

The operational structure adopted also has tax implications.

• Managed hotels (see 3.2 Hotel Management Agreements) – The owner is subject to CT on trading profits; management fees are generally deductible but can carry VAT considerations.
• Leased hotels (see 3.3 Hotel Lease Agreements) – The operator is taxed on trading profits, with rent being a deductible expense. The landlord is taxed on rental income. VAT may be chargeable on rent if the landlord has exercised an option to tax.
• Franchised hotels (see 3.4 Hotel Franchising Agreements) – Franchise fees and royalties are generally deductible expenses for CT purposes, but are subject to VAT. In cross-border arrangements, it is necessary to consider the UK withholding tax rules.

Under a PropCo/OpCo structure (see 2.1 Common Sale and Purchase Structures), it may also be necessary to consider the UK Non-Resident Landlord Scheme, especially if UK rental income has been historically, or will in future be, earned by landlords based overseas.

There are generally no specific tax incentives, abatements or grants for hotel projects, although general reliefs (including capital allowances) are often key considerations in transaction structuring.

The planning system does not operate on the basis of formal zoning classifications in the manner of some other jurisdictions. Instead, the use of land and buildings is regulated through the Town and Country Planning Act 1990 and the Town and Country Planning (Use Classes) Order 1987 (the “Use Classes Order”) in England and Wales. In Scotland, the equivalent legislation is the Town and Country Planning (Scotland) Act 1997 and the Town and Country Planning (Use Classes) (Scotland) Order 1997.

Under the Use Classes Order, hotels fall within Use Class C1 (Hotels), which covers use as a hotel or as a boarding or guest house where no significant element of care is provided. In Scotland, hotels fall within Class 7 (Hotels and Hostels). A change of use from another use class to C1 (or Class 7 in Scotland) generally requires planning permission, unless the change falls within the scope of permitted development rights under a General Permitted Development Order to allow the change of use without the need for a planning application (see 6.5 Restrictions on Conversion).

Local planning authorities prepare local plans (sometimes referred to as development plans) which set out the policies and site allocations for their areas. These plans identify areas where hotel development is encouraged, such as town centres for example. Proposals for hotel development in locations that are not identified for such use in the local plan may face greater scrutiny and may be refused if they conflict with the plan’s policies.

Changing the Use Classification

Where a proposed hotel use does not fall within the existing planning permission for a site, the developer must apply for planning permission for a change of use. The application is determined by the local planning authority having regard to the development plan and any other material considerations. The process typically involves public consultation, and the local planning authority must determine the application within eight weeks (or 13 weeks for major developments), although in practice the process often takes longer.

The applicant may appeal if planning permission is refused.

Alternatively, the developer or landowner may seek a change to the local planning authority’s planning policies to support the development of a site for a hotel when a review comes up.

Planning permission (focusing on amenity and city planning impacts, including height, density, floor ratio and parking requirements) is required.

Building control approval is required from the relevant local authority and depends on compliance with the Building Regulations 2010 (as amended). This relates to health and safety, including fire protection, disability and accessibility. In Scotland, a building warrant must be obtained from the local authority under the Building (Scotland) Act 2003 and the Building (Scotland) Regulations 2004 before work commences, and a Certificate of Acceptance of Completion (or in some cases a Certificate of Temporary Occupation) must be issued before the building can be occupied.

In England and Wales, it may be the case that a hotel is classified as a “Higher Risk Building” for the purposes of the Building Safety Act 2022 (where it contains at least two (non-hotel) residential units). In these circumstances it would be necessary to obtain approval from the Building Safety Regulator rather than the relevant local authority. For information, the current definition of a “Higher Risk Building” is a building which is 18 metres in height (or at least seven storeys) and contains at least two residential units. The Building Safety Act 2022 does not apply in Scotland, which has its own building standards regime.

The developer should seek advice from a technical consultant (such as a building surveyor) in relation to the precise requirements of these regulations and the relevant legislation.

The construction of a new hotel, the material refurbishment of an existing hotel or a re-purposing of a building to a hotel will generally require both planning permission and building regulations approval. These are separate processes administered by different bodies.

An application for planning permission is submitted to the local planning authority. The application must be accompanied by detailed plans, a design and access statement, and any supporting assessments required by the authority (which may include transport assessments, environmental impact assessments, flood risk assessments and heritage impact assessments, depending on the nature and location of the proposal). The application is subject to public consultation, and statutory consultees (such as the Environment Agency, Historic England and the highways authority) may also be consulted.

The local planning authority is required to determine the application within eight weeks for minor developments or 13 weeks for major developments. In practice, the determination period is frequently extended by agreement between the applicant and the authority, and complex hotel development proposals may take significantly longer to determine. If the application is approved, planning permission may be granted subject to conditions (eg, requiring the submission and approval of detailed design, landscaping or construction management plans before development commences). The planning permission will be at risk of a judicial review challenge for six weeks after its grant; it is prudent to delay implementation until this period has passed and no challenge has been made.

Building regulations approval is obtained either from the local authority’s building control department or through the appointment of a (private sector) registered building control approver. The relevant building control body reviews the detailed design and construction information for compliance with the Building Regulations and carries out inspections during the works. On satisfactory completion, a completion certificate or final certificate is issued, as applicable.

The overall duration of the process from initial planning application to the issue of all necessary approvals and completion of construction will vary considerably depending on:

• the scale and complexity of the project;
• the available resources of the local planning authority to deal promptly with the planning application;
• whether the scheme receives objections from either the public or from statutory consultees during the planning process;
• whether there are any other consents that are required (in connection with drainage, access and servicing); and
• whether or not the Building Safety Act 2020 “gateway” regime will apply.

As such there is no “average duration” for the process but a period of 12 to 36 months from submission of planning to commencement of construction would not be uncommon for a new build hotel.

Any person may submit representations (including objections) in response to a planning application for the construction or refurbishment of a hotel. There is no requirement for the objector to own property in the vicinity of the proposed development or to demonstrate a direct personal interest. All representations received during the consultation period are material considerations that the local planning authority must take into account in determining the application, although the weight given to each representation is a matter for the authority’s judgement.

Common grounds of objection to hotel development proposals include:

• concerns about the impact on the character and appearance of the area;
• traffic generation and parking;
• noise and disturbance (particularly from late-night operations);
• loss of privacy; and
• the impact on heritage assets.

In addition to representations from members of the public, statutory consultees and other bodies (such as parish and town councils, civic societies and amenity groups) may also submit objections or raise concerns.

Strategies for Limiting Objections

Developers and hotel operators can adopt a number of strategies to manage and mitigate objections:

• pre-application engagement – engaging with the local planning authority, statutory consultees and the local community at an early stage, before the formal planning application is submitted, can help to identify and address potential concerns in advance;
• community consultation – conducting public exhibitions, information events or online consultations to explain the proposals and gather feedback can build support and reduce opposition;
• design quality – ensuring that the proposed development is of high design quality and is sensitive to its context can address concerns about visual impact and character, including incorporating changes from concerns raised in the consultation; and
• planning conditions and obligations – offering to accept planning conditions or to enter into planning obligations (under Section 106 of the Town and Country Planning Act 1990 or Section 75 of the Town and Country Planning Scotland Act 1997) to mitigate identified impacts (eg, by funding highway improvements or restricting hours of operation) can help to overcome objections.

The applicant may appeal if planning permission is refused. Alternatively, the applicant may seek to negotiate amendments to the proposal and submit a revised application.

The conversion of a hotel to another use, or the conversion of another building to hotel use, generally requires planning permission. However, permitted rights relating to hotels are limited. In England, eg, permitted development rights have been granted allowing the change of an agricultural building to a small hotel of up to 1,000 square metres.

A change from Use Class C1 (Class 7 in Scotland) to another use class, or vice versa, is not permitted without the consent of the local planning authority, unless the change falls within the scope of permitted development rights.

Permitted Development Rights

The General Permitted Development Order grants certain permitted development rights that allow changes of use without the need for a full planning application. Otherwise, a full planning application is therefore required for such conversions. Additionally, even if a change of use is permitted development, external works to convert the building may still require planning permission. However, as noted above, permitted rights relating to hotels are limited.

Local Plan Policies

Many local planning authorities have adopted policies in their local plans that seek to protect existing hotel stock, particularly in areas where there is strong demand for visitor accommodation. These policies may resist the loss of hotel accommodation to other uses unless the applicant can demonstrate that the hotel is no longer viable or that there is no demand for hotel accommodation in the area. Such policies are particularly common in London (where the London Plan includes specific policies on the protection of visitor accommodation) and in other major tourist destinations.

Conversely, the conversion of other buildings to hotel use may be encouraged in certain locations, particularly in town centres and areas of economic regeneration, where local plan policies support the provision of new visitor accommodation.

Many hotels occupy buildings of historic or architectural significance, and heritage protection is a significant material consideration in hotel developments.

Listed Buildings

Buildings of special architectural or historic interest are designated as listed buildings by the Secretary of State of Communities and Local Government (in England) or the Welsh Ministers (in Wales). Listed buildings are classified into three grades: Grade I (buildings of exceptional special interest), Grade II* (particularly important buildings of special interest) and Grade II (buildings of special interest). In Scotland, listing is carried out by Historic Environment Scotland, and buildings are classified as Category A, B or C. A significant number of hotels, particularly in historic city centres, spa towns and coastal resorts, occupy listed buildings.

Listed building consent is required for any works that would affect the character of a listed building as a building of special architectural or historic interest. This applies to both external and internal works, including alterations to the facade, interior layout, fixtures and fittings. Carrying out unauthorised works to a listed building is a criminal offence. The requirement for listed building consent is in addition to any requirement for planning permission. In Scotland, listed building consent is governed by the Planning (Listed Buildings and Conservation Areas) (Scotland) Act 1997.

It is important to recognise that Listed Building Consent is granted separately to any planning permission that may be issued; and the grant of planning consent does not carry with it the grant of Listed Building Consent.

Conservation Areas

Hotels located within designated conservation areas are subject to additional planning controls. Demolition of a building within a conservation area requires planning permission, and the local planning authority must also pay special attention to the desirability of preserving or enhancing the character or appearance of the conservation area when determining planning applications for development.

Scheduled Monuments

In rare cases, hotel sites may include or adjoin scheduled monuments (sites of national archaeological importance). Scheduled monument consent is required for any works within its designated boundaries.

Practical Implications

Heritage protections are usually stringent and can have significant implications for hotel development and refurbishment projects. For example, the requirement to preserve the character of a listed building may limit the scope for internal reconfiguration, the installation of modern building services, and the provision of accessibility features. Early engagement with the local planning authority and, where appropriate, Historic England (in England), Cadw (the adviser to the Welsh Ministers in Wales) or Historic Environment Scotland (in Scotland) is advisable to understand the constraints and to develop proposals that are sensitive to the heritage significance of the building.

In some cases, heritage protection may also affect the valuation and financing of a hotel property, as the restrictions on alteration and use may limit the property’s development potential and future flexibility.

Operating a hotel does not require a single overarching “hotel licence”. Instead, operators must comply with several licensing requirements, overlapping regulatory frameworks, and general laws.

Alcohol and Entertainment

If a hotel wishes to carry out any of the four licensable activities under the Licensing Act 2003 (sale of alcohol by retail, supply of alcohol, late night refreshment (sale of hot food and drink between 11pm and 5am), or regulated entertainment), an application will need to be made to the local licensing authority for a premises licence to authorise these activities. In Scotland, the sale of alcohol is regulated by the Licensing (Scotland) Act 2005, under which a premises licence must be obtained from the relevant Licensing Board. Late night refreshment and regulated entertainment are not licensable activities under the Scottish regime, although separate permissions may be required (for example, a late hours catering licence under the Civic Government (Scotland) Act 1982).

The application requires supporting documentation, including an operating schedule and a plan showing the layout of the premises. The application is subject to a 28-day consultation period and public advertisement. Licences are usually granted indefinitely.

If alcohol is being sold, a designated premises supervisor (DPS) who holds a personal licence must be appointed. In Scotland, a premises manager who holds a personal licence under the Licensing (Scotland) Act 2005 must be specified in the premises licence.

Any subsequent changes to the premises (eg, layout or licensable activities) may require a variation application.

Licensing authorities maintain a public register of all premises licences.

Music

If the hotel wishes to play music on site (eg, via radio, TV or CD), it may need a PPL (Phonographic Performance Limited) licence. The licence provides blanket cover for the majority of commercial music from the UK and worldwide. There are limited circumstances where a PPL licence is not required, including where music is covered by a non-charging service.

Licences are obtained through the PPL PRS website, which provides guidance to ensure the correct licence is obtained. The licence is renewed annually.

TV Licence

If a hotel has TVs in either communal areas or bedrooms, the premises must also hold a TV licence. This includes where live television is being watched, recorded or streamed, including using online services.

Licences are obtained from the TV Licensing website. The standard licence covers 15 units and additional units can be added for an extra fee. The licence is subject to annual renewal.

Pavement Licence

If a hotel wishes to place outdoor furniture on a public highway, it may need to apply to the local licensing authority for a pavement licence. In Scotland, a permit for tables and chairs on a public road is obtained from the local authority under the Roads (Scotland) Act 1984. The licence permits a range of outdoor furniture to be placed on the highway, including tables, chairs and benches.

Each authority will have its own specific requirements, but generally there must be at least two clear metres between the edge of the highway and any furniture. Licences are usually granted for between six months and two years. Authorities maintain a register of issued pavement licences.

Food Safety and Hygiene

If a hotel is serving food, the premises must be registered as a food business with the local authority at least 28 days before opening. Compliance with food hygiene legislation, including HACCP-based safety procedures, is required. Premises are inspected and given a Food Hygiene Rating (mandatory display in Wales and Scotland, and voluntary in England). Ratings are published publicly.

There are a number of other regulatory requirements that a hotel may need to comply with, including the following.

• Fire safety – Hotels are subject to regulation under the Regulatory Reform (Fire Safety) Order 2005 as non-domestic premises (in Scotland, the Fire (Scotland) Act 2005 applies) (see 6.2 Building and Development Regulations).
• Health and safety – Operators must comply with the Health and Safety at Work etc Act 1974 and associated regulations (see 6.2 Building and Development Regulations).
• Equality and accessibility – Hotels are expected to make reasonable adjustments to ensure that premises are accessible for disabled persons (see 6.2 Building and Development Regulations).
• Data protection – Hotels must also comply with the UK General Data Protection Regulation and Data Protection Act 2018, particularly in relation to guest data and CCTV.
• Gambling – If a hotel provides gambling machines it may require specific authorisation under the Gambling Act 2005, dependent on the number and type of machines.

There is no mandatory sustainability certification specific to hotels. However, a number of voluntary certification schemes and regulatory requirements are relevant to the environmental performance of hotel buildings and operations.

• BREEAM – The Building Research Establishment Environmental Assessment Method (BREEAM) is the most widely used sustainability assessment standard for buildings in the United Kingdom. BREEAM assesses the environmental performance of buildings across a range of categories, including energy, water, materials, waste, pollution, health and wellbeing, and management. Hotels may be assessed under the BREEAM New Construction or BREEAM Refurbishment and Fit-Out schemes, and ratings range from pass to outstanding. While BREEAM certification is voluntary, many institutional investors and hotel brands require a minimum BREEAM rating as a condition of investment or brand affiliation, and local planning authorities may require a specified BREEAM rating as a condition of planning permission for new hotel developments.
• LEED – The Leadership in Energy and Environmental Design (LEED) certification, developed by the US Green Building Council, is an internationally recognised sustainability standard. While less commonly used in the United Kingdom than BREEAM, some international hotel brands require or encourage LEED certification for their properties.
• Energy Performance Certificates – All commercial buildings, including hotels, are required to have a valid Energy Performance Certificate (EPC) when constructed, sold or let. The EPC rates the energy efficiency of the building on a scale from A (most efficient) to G (least efficient). Under the Minimum Energy Efficiency Standards (MEES) regulations in England and Wales, it is unlawful to let a commercial property with an EPC rating below E, and the government has indicated its intention to raise the minimum standard to B by 2030, which will have significant implications for older hotel buildings. Scotland has its own EPC regime and separate provisions governing minimum energy efficiency standards for non-domestic buildings, which should be considered independently.
• Part L of the Building Regulations – Part L of the Building Regulations sets out requirements for the conservation of fuel and power in new buildings and in existing buildings undergoing renovation. These requirements apply to hotel construction and refurbishment projects and cover matters such as insulation, heating and cooling systems, lighting and renewable energy provision.
• Other environmental considerations – Hotel operators must also comply with environmental legislation relating to waste management (including the duty of care under the Environmental Protection Act 1990), water usage, and the control of emissions and discharges. Hotels with swimming pools, spas or other water features must comply with specific regulations relating to water quality and legionella prevention.
• Simpler Recycling – The Environment Act 2021 introduced requirements, commonly referred to as “Simpler Recycling”, which mandate that all non-domestic premises in England separate their waste into specified recyclable streams. Since 31 March 2025, larger businesses (including hotels with 250 or more employees) have been required to arrange for the separate collection of paper and card, plastic, glass, metal, food waste and garden waste. From 31 March 2027, these obligations will extend to smaller businesses. For the hospitality sector, the food waste separation requirements are particularly significant, given the volumes of food waste generated by hotel restaurants, bars, room service and conferencing operations. Hotels must ensure that appropriate waste segregation infrastructure is in place and that staff are trained on the new requirements. Failure to comply may result in enforcement action by the relevant waste collection authority. These requirements do not apply in Scotland, which has its own waste segregation obligations under the Waste (Scotland) Regulations 2012.
• UK Deposit Return Scheme – The UK government has confirmed its intention to introduce a Deposit Return Scheme (DRS) for drinks containers in England, Wales and Northern Ireland, which is expected to commence in October 2027. Scotland launched its own DRS in August 2025 under the Deposit and Return Scheme (Scotland) Regulations 2020 but implementation of that scheme is currently suspended and it remains to be seen whether Scotland will have a separate regime or whether it will fall into line with England and Wales. Under the DRS, a deposit will be charged on single-use drinks containers (including plastic and metal containers) at the point of sale, which will be refunded when the container is returned to a designated return point. Hotels that sell drinks in qualifying containers, whether through bars, restaurants, minibars or vending machines, will be required to participate in the scheme as retailers and may be required to host return points. The DRS will necessitate operational changes for hotel businesses, including adjustments to point-of-sale systems, the provision of collection infrastructure and compliance with reporting and labelling obligations under the scheme.
• B Corp certification – B Corp (or B Corporation) certification, administered by the non-profit organisation B Lab, is a voluntary certification awarded to businesses that meet verified standards of social and environmental performance, accountability and transparency. While B Corp certification is not specific to the real estate or hospitality sector, a growing number of hotel operators and hospitality businesses have obtained or are pursuing B Corp status as a means of demonstrating their commitment to sustainability and responsible business practices. The certification process requires businesses to complete the B Impact Assessment, which evaluates performance across governance, workers, community, environment and customers. For hotel operators, achieving and maintaining B Corp certification may involve changes to supply chain management, employment practices, energy and waste management, and community engagement. Although B Corp certification carries no legal obligation, it is increasingly regarded by investors, guests and corporate clients as a meaningful indicator of a hotel business’s sustainability credentials.
• Science Based Targets initiative (SBTi) – The Science Based Targets initiative (SBTi) provides a framework for companies to set greenhouse gas emissions reduction targets that are consistent with the goals of the Paris Agreement. Companies that commit to the SBTi are required to set near-term and, where applicable, long-term science-based targets covering their scope 1, scope 2 and, in many cases, scope 3 emissions. For hotel operators and owners, SBTi commitments have significant operational and capital expenditure implications, as achieving science-based targets typically requires investment in energy efficiency measures, the transition to renewable energy sources, and the reduction of emissions across the value chain, including from construction, refurbishment, food and beverage supply chains, and guest transportation. A number of major hotel groups have committed to science-based targets, and institutional investors in the hospitality sector increasingly expect portfolio companies to set or commit to SBTi-validated targets as part of their climate transition strategies.

In addition, there is growing market and investor demand for hotels to demonstrate their environmental credentials through sustainability reporting, carbon reduction targets and alignment with frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD), the Global Real Estate Sustainability Benchmark (GRESB), B Corp certification and the Science Based Targets initiative (SBTi). The cumulative effect of the regulatory developments described above, including Simpler Recycling, the Deposit Return Scheme, Minimum Energy Efficiency Standards and the Building Regulations, together with the increasing adoption of voluntary sustainability frameworks, is that environmental compliance and sustainability performance are now material considerations in the acquisition, financing, development and operation of hotel assets.

There are no hotel-specific employee retention rules. The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) may apply on an asset acquisition, the transfer of part of a hotel business, or a change in hotel operator where there is a transfer of an economic entity that retains its identity. It may also apply on a service provision change, which is often relevant in the hospitality sector where functions such as maintenance or security are outsourced, brought in-house or moved between contractors.

Where TUPE applies, employees assigned to the transferring business or service transfer automatically to the buyer or incoming operator with continuity of employment preserved, together with most rights, liabilities and obligations connected with their employment. Employees may object to the transfer, but that would bring their employment to an end on the transfer date without any obligation to pay compensation.

TUPE also imposes procedural obligations prior to the transaction. The transferee must provide information to the transferor as to any measures it proposes to make in relation to the employees. The transferor must then inform, and consult with, appropriate representatives of affected employees about the transfer and proposed measures.

If employees are dismissed by reason of the transfer, they may be entitled to bring a claim for automatic unfair dismissal unless there is an economic, technical or organisational reason for the dismissals entailing changes in the workforce. At the time of publication of this guide (24 June 2026), to issue an unfair dismissal claim employees must have two years’ continuous employment; from 1 January 2027, this requirement will reduce to six months.

Employees’ terms and conditions cannot be varied following a business transfer if the reason for the change is the transfer itself. Unless the changes are for an economic, technical or organisational reason entailing changes to the workforce, the variation will be void, even if the employee had agreed to it. In addition, all liabilities in relation to transferring employees pass to the transferee: therefore, buyers and incoming operators will inherit all employment liabilities, such as for any underpaid wages or employment tribunal claims. For that reason, employee due diligence is a material part of any hotel acquisition or operator transition, including a review of employee terms and conditions, national minimum wage compliance, holiday pay practices, working time compliance and any live or anticipated claims.

A further point to consider in hotel transactions is the identity of the employer and, therefore, who bears liability in respect of the employees. The employer will generally be the person or entity that exercises control over the employees and the manner in which they perform their work. This can create risk for operators where employees are formally employed by the hotel owner but day-to-day control is in fact exercised by the operator. In those circumstances, the operator may be treated as the employer for legal purposes. Owner and operator agreements should therefore address clearly which party is responsible for employment-related liabilities and obligations.

Alongside employment law requirements, there are immigration law requirements. Employers must ensure compliance with right to work requirements, including carrying out prescribed checks to establish a statutory excuse against illegal working. Historic right to work breaches may give rise to liability which can pass to a buyer, potentially resulting in significant financial and reputational exposure. Where a sponsor licence is held, it must be properly maintained in line with Home Office requirements, as non-compliance can result in suspension or revocation, preventing the business from sponsoring workers and potentially leading to the curtailment of existing sponsored workers’ visas. Additionally, sponsor licences are not transferable. Where a transaction results in the change of direct ownership, a new licence must be obtained to retain any sponsored workers within the business.