If you are considering buying or leasing a bar or restaurant, you should obtain specialist legal advice as there are many issues to consider. We appreciate that this will be a very important transaction for you and we briefly comment on some of the essential issues below:
How much are you paying to the seller?
This is a matter for negotiation with the seller. If you are buying a going concern, the amount you pay might usually consist of premiums for the following:
- The property from where the business is run;
- The fittings and stock; and
- The goodwill of the business.
It is obviously important you pay the right price, so you may wish to have your own valuation carried out.
The type of premises – freehold or leasehold
Whether the property is leasehold or freehold is likely to have a significant impact upon your business.
If the property is freehold, there may be a much larger premium to pay when you purchase, but there will not be any rent payable once you are in occupation.
Conversely, if the property is leasehold, the premium payable when you purchase is likely to be smaller, but there will be commercial rent to pay that could be substantial. Additionally, if the property is leasehold, a buyer will have to consider all the obligations and ramifications of entering into a commercial lease (please see our page about commercial leases for further information).
Stamp Duty Land Tax may be payable. This is assessed on the price paid for the property and, in the case of newly leased properties, the level of rent. Goodwill may also be subject to Stamp Duty Land Tax if the goodwill is intrinsic to the property from where the business is run.
Often a brewery will lease a pub to a tenant. In addition to the usual obligations of a commercial lease, the tenant will be under an obligation to buy the majority, if not all, the drinks they sell from that brewery at prices set by the brewery. In addition, there may be set minimum quantities of drinks that the tenant must buy.
The terms set by breweries for tied pubs can be very stringent. If you are looking to purchase a tied pub you should contact us before signing any documentation. You will need full advice on the ramifications of entering into an agreement with a brewery, which as we say can involve significant expense.
If you are purchasing a pub or a bar as a going concern, it is probable that there will be existing employees. As a buyer you should be aware that these employees retain their existing employment rights on the transfer of the business, so will become the buyer’s employees on completion. The employees’ contracts will need to be carefully scrutinised before the business is bought so as to ensure that you can check that the employees’ rights and your obligations match the needs of your business.
Fire safety, asbestos and environmental health issues
There should be a current Fire Safety Assessment and Fire Safety Record. An asbestos report will also be necessary and checks made to ensure that any necessary remedial steps have been taken. If there are difficulties with these matters or environmental health issues are discovered, it is possible in perhaps the worst case scenario that the authorities could enforce the closure of the business. Therefore, everything must be in order.
Our solicitors specialise in the sale and purchase of public houses and restaurants stemming from their experience of working on both sides of the transaction. Our solicitors have acted for individuals taking on a new pub for the first time and also for the biggest names in the industry including Newcastle Brown, John Smith’s and Heineken.
Taking on a new pub or restaurant is stressful enough in the current economic climate, without having to worry about the terms of the lease and possibly even the brewery’s trade requirements. With Curzon Green you can rest assured that your deal is in safe hands.