The pull of the euro

Fancy swapping pub life in Britain for a bar in the sun? TONY HALSTEAD reports

The lure of the good life has been responsible for thousands of Britons ploughing their savings into foreign bars and restaurants over the past 30 years. The prospect of dispensing beers in Barcelona or serving sangria in Seville has long held a fatal attraction for those seeking a working lifestyle in the sun.

The Canary Islands, the Balearics and the Spanish Costas have long been favourite areas for Brits seeking their dream bars and there seems little sign of this trend going out of fashion.

Yet, with every success story comes a tale of others who have failed miserably. Running a bar in any foreign tourist area inevitably means hard work, long hours and familiarisation with foreign customs, laws and working practices.

The property rules vary from country to country, but all are complex enough to make even the best-prepared purchaser beat a hasty path to the nearest solicitor or property agent. Buyers in France or Spain, for example, will be confronted by a set of rules and procedures, which can often seem far removed from a UK business property transaction.

Leading property agent Christie & Co has offices in Paris, Frankfurt and Barcelona and has put together a few pointers to help buyers pick their way through the international property maze.

French customs

Interestingly, buying a property in France is not far removed from the system in Scotland with a 10% deposit payable on an initial "promise-to-buy" contract. The contract binds both parties, rules out gazumping, and allows, on average, three-months to complete the searches and obtain legal documentation.

Leasing is also common in France. Leases can be from 60 to 90 years, in the case of large-scale property and land, or shorter nine-year periods where the landlord is bound for the full-term and obliged to renew, although the tenant is usually granted a break period at each three-year stage.

Spanish style

In Spain, which is the most popular country for UK buyers, the system can seem more complicated. Essentially, the system involves a preliminary contract where the purchaser pays a 10% deposit, which is forfeited if the purchaser fails to go ahead with the deal. Vendors who pull out of a deal face a 20% penalty.

Another pre-contract agreement is the "call option" in which both parties agree to buy/sell if certain conditions are met. Either side stands to lose money if the deal stalls.

A sale is finalised when the Escritura (deed) is signed as a public document in front of a solicitor or other legal representative.

The three main forms of taxation involved in property deals are stamp duty, VAT and trans-fer tax.

Leases on small bars and restaurants are usually five, 10 or 15 years with larger restaurants and hotels subject to a 15 to 25-year tenure agreement. Rent is reviewed annually, but the maximum increase cannot exceed the Spanish government's retail price index. A premium is payable on the lease of a property that is already trading and the landlord can increase the rent if the new lessee wants to negotiate a longer contract.

In the case of restaurants, the landlord is not permitted to increase the rent by more than 15%. Landlords can also ask for real-estate tax to be paid as a percentage of the value of the building, but this must be established in the initial contract. The holder of a lease must also pay business tax according to its activity and its insurance.

Landlords are responsible for maintenance and repairs, but can charge a proportional cost to the lessee.

Case study: La Filharmonica

Six years ago, English-born Jackie Musson and her Spanish husband, Luis, took the plunge and bought their own pub in the Eixample district of Barcelona.

La Filharmonica was originally devised as a jazz bar, but Jackie and Luis realised that jazz alone could never entice sufficient trade. It now attracts a cosmopolitan clientele through such diverse offerings as food, TV sport, line dancing, swing dancing and a good old, weekly, English pub quiz.

The fact that Luis was Spanish obviously helped during the initial negotiations to buy the bar and set up the various supply deals to launch the new business.

But Jackie saw enough of the complex transactions and legalities to get a good appreciation of what buying or leasing Spanish property can mean for foreigners. She explains: "In a city, homework is the vital precursor to buying any sort of bar, because you have to be certain you can get the kind of licence you need to suit the operation you have in mind. Nuisances such as boisterous late-night customers, music and even noisy extractor fans can be frowned on by the licensing authority and some councils do not dish out new licences readily.

"It's often better to buy a bar or restaurant that already has the type of permits you will need, rather than risk an expensive investment. Therefore, it is better to check with the local council to find out what restrictions exist."

In resorts that are popular with package-tour operators, the authorities often take a more relaxed attitude; even so, it pays to be cautious. Jackie advises: "If you are buying in a city location, it's vital to check on ease of access for customers to buses, taxis, tubes etc, because transient trade is very important."

She also recommends that people take advice on the companies they deal with, especially those that supply machinery and installations, and that they are meticulous with record keeping and paperwork in the event of a claim.