INSIGHT

Key steps to buying or selling a leasehold pub

20-Nov-2014 - Last updated on 26-Jun-2024 at 13:55 GMT

'Buyers need to be aware of the raft of information they will be required to provide'

Paul Davey, managing director of Davey Co gives advice to each party — the buyer, seller and landlord

If you are considering buying or selling a leasehold pub, you would be very well advised to consider the steps outlined in this article prior to entering into the process, which can be time consuming, costly and fraught with pitfalls for the unaware. Close management of the entire process by a competent, specialist agent is very strongly advised.

There are three parties involved with lease assignments: the existing lessee (seller, assignor), prospective lessee (buyer, assignee) and the landlord. Each party has its own solicitor and there is usually a surveyor involved also. Co-ordination is therefore key to a successful and timely outcome.

Step 1: agree the terms of the deal
When entering into negotiations to buy a lease, be aware of what is included in the sale. Usually a leasehold premium will include the goodwill of the trading business, the inventory of trade fixtures and fittings and an amount allocated for the benefit of the lease and licences. The seller is usually responsible for picking up the landlord’s legal costs as well as his own. The buyer is responsible for his own costs. Stock is purchased separately as valued by a stock taker on the day of completion. When agreeing the sale terms, be realistic on the timeframe required to complete the deal. Usually 10 to 12 weeks is about right.

Step 2: get yourself organised
Sellers need to notify their landlord as soon as terms are agreed with the buyer. If it is a pub company or brewer landlord, an assignment pack is usually issued to the seller. A survey is usually carried out by the landlord in order for a schedule of dilapidations to be compiled and agreed with the seller. All certificates, including electrical, gas safety, hygiene and so forth, must be up to date.

Buyers need to be aware of the raft of information they will be required to provide. A bank reference, two trade references, evidence of cash funds, a business plan, cash flow projection plus evidence of their personal licence, trade qualifications and a CV.
A competent agent should assist in collating these.

An interview with the landlord is usually required, at which the business plan and cash flow projections will be considered. It is imperative that buyers are able to demonstrate they have the cash, experience and qualifications to be a successful lessee.

A credit check will also be carried out and the assignee may be required to attend a training course.

Step 3: landlord’s consent — licence to assign
Upon successful completion of Step 2 by the buyer, and agreement reached over any dilapidations or reserved matters with the seller, the landlord’s solicitors will issue the licence to assign. Landlords cannot unreasonably withhold their consent, but if they do have a legitimate commercial reason to do so, they can.

The advice and assistance of a competent agent managing the process will iron out any wrinkles and ensure a successful completion.