Spot a Bad Pub Tenancy Deal: 12 Red Flags

For a complete overview of the process, read our complete guide to taking on a UK pub in 2026.

Last updated: 24 April 2026

Most prospective licensees sign a pub tenancy agreement without understanding what they’ve actually agreed to until six months in — when they’ve spent their savings and can’t afford to get out. I took on Teal Farm Pub in Washington three years ago under a Marston’s CRP agreement, and I’ve seen the damage a bad deal does. The pubcos already have lawyers. You need to know what to look for before you walk in the door.

This isn’t about being paranoid. It’s about being informed. A bad pub tenancy deal doesn’t necessarily mean a dishonest one — it just means one that favours the pubco over you, with terms that make it mathematically hard to turn a profit. The most effective way to spot a bad pub tenancy deal is to understand exactly what you’re paying for, who bears the financial risk, and what happens when sales drop. This article will show you the 12 warning signs that a deal is structured against you.

Rent Based on Outdated or Inflated Trading Figures

If the rent is calculated on Fair Maintainable Trade (FMT) figures more than two years old, or on trade from a pub that was in a different market position than you’ll be in, walk away. This is the single most common mistake I see new licensees make. They inherit rent based on numbers from 2023 or 2024 — before cost-of-living changes, staffing shortages, or a change in the local demographic.

The pubco will tell you “this pub did £X in turnover last year.” What they won’t volunteer is whether that included six months of a previous licensee running events that you won’t run, or whether the numbers include cash sales that weren’t recorded. When you take on the lease, your rent is locked to those historic figures — whether you can actually achieve them or not.

I pushed back on my initial FMT calculation and got Marston’s to include trading data from the three months before I signed, not just the year before. That single move saved me thousands in avoided overvaluation. If the FMT is based on figures older than 24 months, you need recent trading data from the current operator — and even then, be sceptical about whether you’ll match it in year one.

Excessive Tie Obligations with Punitive Margins

Tied agreements are standard in UK pubs — you buy your beer, spirits, and often soft drinks from the pubco. That’s not a red flag in itself. But when the pubco’s margin on your tied products is significantly higher than the industry standard, you’re being overcharged, and you’ll absorb the cost by raising your prices or cutting your profit.

A fair tied agreement usually gives the pubco a 25–35% margin on beers and a 40–50% margin on spirits. If you’re seeing 50%+ margins on standard lagers or £4+ per litre on soft drinks when the free-trade equivalent is £1.50, that’s a bad deal. The problem is you can’t easily compare — the pubco won’t show you their cost until you’re already in the contract.

The most reliable way to assess fair pricing is to ask the current operator how much they’re paying per unit and what their current margins look like. Many won’t tell you (because they’re embarrassed), but those who will give you a real sense of what’s reasonable. At Teal Farm, I negotiated better spirit pricing once I had volume history, but I wish I’d known the baseline numbers before I signed.

No Flexibility or Rent Review Mechanism

A lease with no rent review clause or no mechanism to renegotiate if trading drops is a trap. If your rent is fixed for five years and you hit a recession, a local economic downturn, or a permanent change in trade patterns, you’re stuck paying the same rent on lower revenue.

The Pub Code regulations in the UK require that tied tenants have a right to request a rent review every five years based on current market conditions. But many leases are written to make this process so costly or difficult that licensees don’t pursue it. If your lease doesn’t explicitly define how a rent review works, who pays for a surveyor, and what happens if you dispute the valuation, that’s a warning sign.

I negotiated a clause into my Marston’s agreement that allows a rent review if my turnover drops below a certain threshold for two consecutive quarters. It’s not in the standard template, but it’s worth asking for. If the pubco refuses entirely, that tells you they’re not confident about the pub’s long-term viability — and neither should you be.

Vague or Unlimited Dilapidations Liability

Dilapidations are the repairs and improvements you’re responsible for at the end of your tenancy. Many leases are written so vaguely that the pubco can claim you owe £20,000 for “wear and tear” that is actually normal business use. I’ve heard of licensees being billed for carpet replacement, redecoration of walls stained by cooking, and even structural repairs that weren’t their fault.

A bad dilapidations clause will:

• Not specify which repairs are your responsibility and which are the pubco’s
• Not cap the total amount you could be liable for
• Not define what “reasonable wear and tear” means
• Not require the pubco to provide a schedule of condition when you take over
• Allow the pubco to claim dilapidations for up to five years after you leave

You must have a detailed photographic schedule of the pub’s condition on the day you take over, and your lease must clearly state which repairs are your responsibility and cap your total liability. Without this, you could lose £15,000–£40,000 that you don’t have.

High Ingoing Costs Without Transparent Breakdown

When the pubco quotes you an ingoing cost of £40,000, £60,000, or more, you need to understand exactly what you’re paying for. Are you buying stock? Are you paying for equipment? Are you paying a premium for the lease itself? Pub tenancy ingoing costs vary widely, but a transparent breakdown is non-negotiable.

Red flags in ingoing costs:

• A round figure like “£50,000 ingoing” with no itemisation
• Stock valued at retail prices rather than cost price (common practice, but inflates the true value)
• Equipment charges for items you could source cheaper elsewhere (fixtures, EPOS systems, till rolls)
• A “goodwill” or “key money” charge on top of stock and fixtures (this is hidden rent)
• No credit for outgoing stock or equipment left by the previous operator

I negotiated my ingoing down by 12% by asking for a line-by-line breakdown and challenging the stock valuation. The pubco had valued the beer stock at 30% above cost price. Once I pushed back, they adjusted it. If they won’t break it down, they’re hiding something.

Unclear Labour Cost Expectations and Turnover Obligations

Some leases embed a hidden expectation that you’ll run the pub to a specific turnover level or profit margin, without explicitly stating how you’re supposed to achieve it. If the rent is calculated on a pub that was doing £800,000 turnover with 30% labour costs, and you’re expected to match that, but the pubco won’t help you understand what staffing model delivers that, you’re flying blind.

Labour cost expectations should be clearly documented in your lease or the business plan, with realistic staffing numbers and opening hours that support the projected turnover. At Teal Farm, I operate at 15% labour cost against a UK benchmark of 25–30%, but that’s because I’ve optimised scheduling and I’m not trying to force an inflated turnover target. If your lease implicitly demands you hit £800,000 turnover in a venue that can’t physically handle that volume, you’re set up to fail.

Ask the current operator what their actual labour costs are as a percentage of sales. If they’re running 35% labour and the pubco is demanding 25%, the lease is probably unrealistic. Use a pub profit margin calculator to sanity-check whether the numbers in the business plan are actually achievable in a real venue with real staff costs.

No Break Clause or Unrealistic Exit Terms

A lease with no break clause is a lifetime commitment or a hugely expensive exit. If you can only leave at the end of a five-year term, and you discover in year two that the pub isn’t viable, you’re locked in. The pubco won’t let you out, and no buyer will touch a pub that’s clearly failing on your watch.

Many leases do have break clauses, but the conditions are punitive: you have to give 12 months’ notice, you have to have no breaches of covenant (which is almost impossible if the pubco has been threatening action), or you have to pay a penalty equivalent to six months’ rent.

A fair break clause should:

• Allow you to exit at year three with 6 months’ notice
• Have no financial penalty beyond outstanding rent and dilapidations
• Not require you to be breach-free (minor breaches shouldn’t trigger loss of break rights)
• Give you the right to a rent review or exit if turnover drops below a threshold

If the lease offers no break clause at all, or if the exit terms are so expensive that you’d never use them, that’s a major red flag. You need an escape hatch.

Pubco Support Promises Not Written Into the Lease

The pubco’s business development manager will promise you training, marketing support, menu design help, and ongoing advice. None of this will be in the lease. When you sign, you’re entirely dependent on the goodwill of that individual BDM — and BDMs change jobs, get promoted, or stop caring about your venue.

Any support the pubco commits to providing — whether it’s training, marketing, or financial planning — must be documented in writing as part of the lease or a separate service agreement. Otherwise, you have no recourse if it disappears in month two.

At Teal Farm, my BDM has been excellent, but I’ve worked with licensees whose BDM was allocated to 25 pubs and visited once a year. The lease they signed didn’t specify any minimum service level, so they had no grounds to complain. If the pubco is promising you something, ask to see it in writing before you commit. Understanding what a BDM actually does and doesn’t do will help you set realistic expectations.

Restrictive Equipment and EPOS Terms

Some pubcos demand that you use their approved EPOS system, their approved payment processor, or their approved suppliers for specific categories of goods. This isn’t inherently a red flag — many tied agreements include tie arrangements for beverages. But when it extends to your till system, your card payment processing, or your waste disposal, it often costs you money and locks you into contracts.

If the pubco’s EPOS provider charges £50–£100 per month in rental fees, doesn’t allow you to change the contract without 12 months’ notice, and won’t let you integrate with a modern accounting system, that’s a bad deal. You’ll end up paying for a system you could replace with something cheaper and better.

The same applies to payment processors. If the pubco’s preferred processor charges a higher transaction fee than the market rate, and you’re not allowed to use an alternative, you’re bleeding margin on every card transaction. Ask about EPOS terms and payment processing fees before you sign. If you’re currently using the best pub EPOS systems available, you’ll want clarity on whether you can keep them or if you’ll be forced to switch.

Hidden Fees: Service Charges, Audits, Compliance

Some leases include clauses that allow the pubco to bill you for:

• Annual business rates appeals or disputes
• NSF audits or regulatory compliance checks
• General maintenance on shared facilities (if you’re in a multi-unit property)
• Insurance administration or broker fees
• Rent review surveyor fees (even if you don’t request the review)

These charges aren’t always in the main lease — they’re often buried in schedules or in separate service agreements. They add up to hundreds or thousands per year and are charged whether the pubco’s audit finds anything or not.

Any fees the pubco can unilaterally charge you must be capped, clearly defined, and subject to a maximum annual total. If the lease allows unlimited “reasonable costs” for audits or compliance, you could be billed for expensive external surveyors or consultants without your consent. I passed my NSF audit in March 2026 with no issues, but the audit itself cost time and attention. Know in advance whether the pubco will absorb that cost or charge you for it.

Missing or Weak Dispute Resolution Clauses

If you and the pubco disagree about something — say, whether you’ve breached the covenant or whether the dilapidations list is fair — what’s the process? A good lease will include a structured dispute resolution process: first, negotiation; second, mediation; third, independent arbitration or expert determination.

Many leases skip this and go straight to the pubco’s right to forfeit (take back) the lease or pursue court action. This puts enormous pressure on you to settle unfairly because fighting through court is expensive. A clause that requires independent mediation before either party can escalate costs makes the process fairer.

Before you sign, ask your solicitor whether the lease includes a mediation or arbitration clause. If it doesn’t, ask the pubco to add one. Most will, because they benefit too from avoiding court costs.

Pressure to Sign Without Independent Review

This is the biggest red flag of all. If the pubco is pushing you to sign quickly without giving you time for independent legal review, that’s a warning that they know the deal isn’t in your favour and they want to get your signature before you figure it out.

Legitimate pubcos will give you time to take the lease to a solicitor who specialises in pub law. They’ll accept reasonable amendments that don’t change the fundamental commercial terms. If they’re resisting either of these, you’re dealing with a pubco that prioritises protecting itself over making the deal fair.

Every lease I’ve seen can be improved by a specialist solicitor. You should budget £1,000–£2,500 for legal review — it’s the cheapest insurance you can buy. If the pubco is pressuring you and telling you that “everyone signs this as standard” or “there’s no time to waste,” get a lawyer and slow down. A good opportunity will still be good in two weeks. A bad deal will be bad forever.

What to Do If You’ve Spotted Red Flags

If you’ve identified one or more of these warning signs in a lease you’re considering, your options are:

• Negotiate amendments. Most pubcos will compromise on specific terms if you can justify why they’re unfair. Use trading data, comparable leases, or industry benchmarks to support your case.
• Request independent expert determination. If you disagree with the FMT valuation or dilapidations schedule, you can ask for an independent surveyor to review. This costs money but is worth it if the figures are significantly out.
• Walk away. Not every pub is a good deal. If the pubco won’t budge on terms that would leave you with no margin for error, you’re better off waiting for another opportunity.

The most important thing you can do before signing anything is to know your numbers. Use financial planning tools to understand exactly what turnover you need to hit to cover your rent, borrowing costs, and living expenses. If the lease is structured such that you can’t realistically hit those numbers, no amount of hard work will save you. Pub Command Centre gives you real-time financial visibility from day one, so you know whether your deal is actually working. It costs £97 once, and it’s the difference between flying blind and knowing exactly where you stand.

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