A step-by-step guide to buying leisure or licensed propertiesJuly 13, 2020
We know that every property is different, and one size does not fit all, however these ten steps are those we often advise, as most deals follow this outline. However, our commercial property team always tailor their advice to our client's individual circumstances.
Step 1 – Marketing and agreeing the sale
If you found a property that has charm and appeal, and you are convinced of the trading potential, we always recommend you gather as much financial information as possible (including weekly takings and VAT returns) to remain clear on your objectives. Once you reach a deal in principle, it is usually summarised in heads of terms or a sales memorandum. At Ince Metcalfes, our team are happy to discuss the structure of the transaction with you before sign the heads of terms.
Step 2 – The property and the contents
Have you had a good look around? With any property purchase, a thorough inspection is essential. This is also the case with operations commercial buildings such as licensed premises, as there is a lot more to inspect. Is there a trade inventory for the fixtures and fittings? It is important to have a clear list of what is included in the sale and will be left at the property on completion.
Step 3 – Legal due diligence and the title to the property
Is all the paperwork in order? The seller or landlord will normally prepare a pack of legal papers on the property. We always recommend this is subject to legal due diligence, in other words, legal scrutiny to make sure it is robust. This will typically include checking the other parties title to the property, to make sure they have legal powers to deliver on what they have promised. There could also be statutory compliance information (for example, health & safety and fire risk reports).
Step 4 – Staff and business transfer
Are you buying the business, rather than taking on a property or lease? Generally, a buyer will step into the shoes of the seller in terms of the staff, business and goodwill. The goodwill and the employees can often be a huge asset, but may need managing if returning from furlough. For information and advice on the changes to the Coronavirus Job Retention Scheme and how to bring back staff from furlough, read our latest Q&A from our Employment team here.
Likewise, the TUPE legislation will often mean careful consideration is needed about the staff and their benefits. The same is true in relation to any existing contracts or hire arrangements; which could include anything from the alarm system and CCTV, to waste management, to even the bed linen and towels in hotel rooms.
Step 5 – Premises licence
What is status of the licence? Without a premises licence and designated premises supervisors (DPS) then you cannot open the doors. If there is an existing licence in place, what is permitted under the present licensed activities? What are your intended licensed activities and do they stack up? We can obtain any existing premises licence and check the position, and report and make you aware of any conditions on trading.
Step 6 – Contract and supporting documents
Are you ready to sign on the dotted line? A lot of the detail of a deal with go into the contract. In particular, it will set out the obligations on both parties and be legally enforceable. Therefore, it is important the wording is clear and has been negotiated to include the terms you intend to be bound by. The seller’s solicitor will normally prepare a draft contract, and in the case of a lease, the landlord’s solicitor will usually draw up the first draft. Before signing the dotted line, ask yourself: are any additional promises, warranties or guaranties needed or required?
Step 7 – Reporting to you before signing
Stopping to review the final report and have a pause for breath is an important step, as you need to be clear on the overall position before you sign. We can prepare a legal report for you on the contract, our title investigation and searches.
Step 8 – Exchange of Contracts
It is normal, but not always essential, to exchange a contract (or agreement for lease). This commits the parties to complete the transaction on a set date in the future. The buyer often pays a deposit at this point. It is important to have legal support to deal with the formalities of this.
Step 9 – Completion
We can deal with the completion formalities, including helping arrange legal sign off (known as execution) of the documents. If needed, we will coordinate with those on ground concerning the stock take and the handover of keys/alarm codes.
Step 10 – Post-completion
There will be some legal tidy up after completions to register and perfect the transaction. After completion, we can deal with the necessary registration at the Land Registry. We will send you proof of the ownership generated by the Land Registry and store the deeds for safe keeping. It is likely that there will also be a need to complete a Stamp Duty Land Tax (SDLT) return; this is to account to HM Revenue and Customs for any SDLT due on the price or rents. Our team are experts at supporting you with these filings.