Hotel transaction volumes in Scotland have reached £431million as investors surge to the central belt, with 58% of hotel transactions across Scotland taking place in Edinburgh, as reported in January 2025 by Savills.
Edinburgh remains a top destination for hotel investment, with high occupancy rates and tourism; it makes it an attractive location for hotel expansion. In recent years, the high street landscape has undergone a significant transformation, with a number of highly anticipated hotel openings, and most recently the arrival of The Hoxton in Edinburgh’s West End.
As the pace of development in the hotel sector continues to grow, here are some key considerations for buyers as they enter this dynamic market:
Planning and Use Class
For anyone considering hotel acquisition in Scotland, one of the first and most critical steps is understanding the property’s Use Class designation. Governed by the Town and Country Planning (Use Classes) (Scotland) Order 1997 (as amended), this classification system determines how a building can legally be used. Hotels fall under Use Class 7. If a property is not already designated as Use Class 7, an application for planning permission for a change of use may be required. Such a process can be quite complex, especially for historic or architecturally significant buildings (of which there are many in Edinburgh). In recent years, Scotland has seen a wave of creative conversions, with office blocks and retail spaces being transformed into boutique hotels and luxury accommodations. One standout example is the redevelopment of the iconic 1895 Jenners department store in Edinburgh, which is being reimagined as a high-end hotel with a mix of retail use.
It’s essential to establish early on whether a property is a Listed Building, as this designation significantly impacts both the scope and cost of any proposed works. Listed status means that the building is legally protected due to its architectural or historic significance, and any alterations, including repairs, renovations, or improvements, require Listed Building Consent. These works are often subject to stricter regulations and must preserve the building’s special character, which can substantially increase costs compared to non-listed properties.
Title Conditions
In the early stages of conveyancing, your solicitor will ensure that the Title Deeds have no restrictions on use of the property operating as a hotel. This is an important step, as there may be some serious exclusions in place. For example, the prohibition on using the property as a licenced establishment for the sale or consumption of alcohol. Such a restriction could significantly affect the commercial viability of the acquisition. If any such restrictions are identified, at Thorntons, we can advise on the options available for removal or variation and assist with the process.
However, most established hotels will already have a Premises Licence granted by the local authority, which permits the sale of alcohol and other regulated activities. As part of a purchase, the licence must be transferred to the new owner. At Thorntons, our Licensing and Commercial Property team is experienced in managing this process and can guide you through the legal requirements to ensure a smooth and compliant transfer.
LBTT
Another key consideration is Land and Buildings Transaction Tax (LBTT) which is Scotland’s equivalent to Stamp Duty Land Tax (SDLT) in England. LBTT applies to property transactions in Scotland and is administered by Revenue Scotland, not HMRC. Importantly, LBTT liabilities should be calculated and considered at the outset of the transaction, as they can represent a significant additional cost particularly for high value hotel acquisitions or those involving lease arrangements. Apportionment of the purchase price between the hotel property itself and any moveable items including fittings and fixtures and any stock must be undertaken, as this will impact the LBTT payable.
Statutory Compliance
In any hotel acquisition there will be a number of statutory compliance considerations which will need careful review. For example, most commercial lenders financing Property will require an Energy Performance Certificate (EPC). In Scotland, sustainability is high on the agenda for the real estate industry, with new regulations being introduced in 2026 by the Scottish Government (look out for updates on our website and Linkedin). A non-domestic building over 1000m² will require an Action Plan detailing measures to improve energy performance, which could include upgrading insulation, replacing inefficient heating systems or energy-efficient LED lighting. For hotel purchasers, this is particularly relevant, as many hotel buildings are older and may require substantial upgrades to meet future standards. These improvements can be technically complex and financially significant, especially when retrofitting systems or improving insulation in heritage or listed properties.
When acquiring an already operating hotel, purchasers must be aware of their obligations under employment law, particularly in relation to the Transfer of Undertakings (Protection of Employment) Regulations 2006, commonly known as TUPE. These regulations ensure that existing employees are transferred to the new owner on their current terms and conditions, preserving their continuity of employment. TUPE can be complex and time consuming, involving consultation requirements, potential liabilities, and strategic workforce planning. At Thorntons, our expert Employment team works closely with our Commercial Property team to provide seamless support throughout the transaction. We help guide clients through the TUPE process, helping to manage risk, ensure compliance, and facilitate a smooth transition for both the purchaser and the hotel’s staff.
If you are considering purchasing a hotel in Scotland, our experienced team at Thorntons is here to support you every step of the way. From property due diligence, licensing to employment law, tax planning, and regulatory compliance, we offer a fully integrated service-all under one roof.
Call us on 03330 430350 to find out how we can help make your hotel acquisition a success.
