Selling a Pub, Restaurant or Licensed Property lease or tenancy, Check List.
This Checklist covers a large area of Taking over a Business. As no two situations are the same, only the basic position is outlined. The answers do not provide a complete or authoritative statement of the law, nor do they constitute legal advice by the author. The information provided is only a snapshot: it does not create a contractual relationship nor does it form part of any other advice, whether paid or free.
An Essential Guide before you leave a Business.
This Check List is to provide information for anyone that is looking to assign a lease, tenancy or not renew a lease, we have tried to include most eventualities for normal leases etc., it is vital to consult with a professional specialist if you should be in doubt about any issue whatsoever, leases may appear to be the same, but they may not be. This Checklist information is for your guidance and aimed at making you forewarned on a number of issues.
1.In addition it is always advisable to use a Lawyer specialising in Commercial Property, if you want to get your retained monies released quickly.
It is essential that there is a â€˜Certificate of Complianceâ€™ at hand over. This is the validation that ALL statutory and civic regulations are complied with. This is the job of the solicitor acting for the ingoer. If there is inadequate compliance, then the solicitor takes the rap for not ensuring everything was in order from the start.
2.You should have had a Survey or Schedule of Condition, agreed with the Landlord or their Agent, when you took over the lease or at whatever juncture you acquired the lease. If you did not, the landlord can make as many spurious claims as he can get away with, your only option is to instruct a surveyor to act for you to dispute claims that are historical and were in existence before you took on the lease. (See Dilapidations)
3.You may need the services of a Valuer to assess the value of the Fixtures and Fittings (See Fixtures and Fittings)
4.You may also need a Stocktaker (See Stock at Valuation)
5.Guarantee Agreement, if you have this in your lease and you are assigning the lease, you need to know what this entails. You can buy yourself out of this, but it is not cheap. You are responsible to the Landlord for the assignee during the period that he holds the lease, as though you were trading and responsible for the whole building under the conditions of the lease.
1) The Dilapidations minefield. An FRI (Full Repairing and Insuring) lease requires to put and keep in good and substantial repair. The key word is put. Even if the predecessor thought things were about OK, another surveyor might find something that requires putting into good repair. An example is The Gunners pub in London. Punch did a dilapidations survey in 2011 and did not raise the issue of the extensive bar floor needing treatment. The Freehold was sold to a developer and the new dilapidations survey in December 2014 required the bar floor to be sanded down and varnished at a cost of £2500. The same thing with the structural condition. Cracks can and are covered over. What happens if a new structural crack appears ? Under an FRI lease, it is the tenant who is responsible for everything, which includes the structure.
2) Biggest minefield of the lot is what is known as, â€™inherent structural defectsâ€™. Small but vital example was a survey carried out for the ingoer. It was declared in the report that a defective stone shingle roof over an outhouse and massive ivy growth (must have been well over 100 years old) were inherent defects and were not the tenants responsibility. Both will be massively expensive to remedy. Greyhound at Broughton was another case in point. New Enterprise lease. Defective roof timbers in an extensive and historic store barn probably over 200 years old. Roof still holds up and may well survive for another 50 years. However the responsibility for its eventual costly repair now excluded from the tenantâ€™s obligations.
3) Always get hold of the dilapidations schedule that was served on the predecessor in title to see what was required and to check if everything has actually been done. Manyâ€™s the time there are still things outstanding.
In theory the building should be returned to the same state that you took it over in at the start of the lease.
Obvious improvements are often accepted, though some surveyors insist that all improvements are removed, this usually applies to vacant commercial properties e.g. factories, shops etc.
With pubs/restaurants any improvements enhance its value, assuming that the landlord agreeable.
Things like small holes in walls where fittings have been, need filling, a sneaky trick if it all looks fine is to leave a small obvious defect and then claim you missed it, if a surveyor doesn’t find anything they go looking.
You will be expected to Paint and Decorate according to the conditions of the lease.
If you have double glazing, if you know which company supplied it, get them to give you a quote for servicing and make good, most of it is like Meccano, it can all be replaced, the hinges, locks, new seals and the double glazed glass, otherwise find a local firm to give you a quote.
This is always a certain dilapidations issue, a word with a local good roofer could save you a lot of problems.
Guttering and Drainage
Another certain dilapidations issue, again ensure that nothing is obviously broken and all the sewers are clear and working.
Boiler and other Gas appliances
Ensure that they have all been checked and a current certificate available.
Hopefully you will have had the services of a local electrician, who will give you an up to date certificate or warranty of the state of the electrical wiring etc.
Another nasty sting is, if you took over a lease from another leaseholder, provided his dilapidations were settled before you took the lease, then dilapidations only apply to your time with the lease, if they were not agreed and carried out you could be liable for them.
In some case the previous lessee has paid for the dilapidations and they have not been carried out, this is illegal, but it needs proving.
The key things that you need are your original survey and the original surveyor if possible or a surveyor in any dispute.
Fixtures & Fittings
You need a copy of the F & F list that you paid for with prices if possible, a lot of valuers don’t give individual prices, just a ball park figure.
If you do find the Pub Co valuer gives a sensible figure, it could save you money, but you need to ensure that full payment is within seven days or on completion.
On F & F you very seldom get back what you paid originally, if you have invested heavily on F & F during your time, you will be lucky to recoup the investment. It is a rip off if the lease has expired and the property goes back to the Pub Co, they will sell your F & F at considerably more than they have paid you.
Stocktaker and Stock at Valuation (SAV)
You should also use a stocktaker, unless the stock is minimal, in which case it may pay you to split the fees with the Pub Co stocktaker.
It is always worth taking as much stock as possible away with you, all opened food and cleaning materials, they are valueless in a stock take, all opened bottles of spirits and wine etc., that you don’t sell on your last night and anything else that you can use, run all the tapped barrels out by selling the beer off at cost price+.
Essential Information that needs attending to at some stage.
Bank business accounts, notify date of ceasing trading if necessary.
Cash and Carry Account, notify date of ceasing trading if necessary.
Cash and Change for Tills and Machines to be removed and banked.
Cleaning Contracts and supplies for Toilets, Kitchens, Bars etc. notify date of ceasing trading if necessary (Terminate)
Close Business for at least mid-day for stocktaking etc.
Contract to assign Business, Signed and completion time, ensure that solicitor has received the money, unless another arrangement has been made.
Contracts of Employment for Staff, Copies for the assignee.
Diary for all Bookings and Incidents, retain and ensure all future bookings are passed on to assignee, or cancelled formally if assignee does not want them.
EHO Registration and Food & Hygiene Certs, scores on the doors etc.
Energy Suppliers, Annual Contract notify date of ceasing trading if necessary
Equipment details of any outstanding rented or financed
Epos Tills make sure you have all the instructions to pass on
External Notices for Car Parks and Gardens, advise assignee
Fire safety equipment contract, Risk Assessment notify date of ceasing trading if necessary
First Aid Boxes with Accident Books, retain copies of books for possible future or spurious claims
Fixtures and Fittings, ensure that they are exactly as agreed with assignee, any that are personal must be declared and excluded from the F & F list.
Gaming and music machines rental agreements, notify date of ceasing trading if necessary
Heating Service Record for Boilers and any others
Inland Revenue if you have staff, ensure that you are up to date with all payments and records
Insurance, Business and property, public Liability notify date of ceasing trading if necessary
Notify Staff of your leaving and ensure that any staff leaving are passed on to the assignee
Inventory of everything included in the Purchase of the Business and the condition
Licences Pub and Machines, your Solicitor should have all the details, notify date of ceasing trading if necessary and claim any refund
Local suppliers Accounts:- Butcher, Baker, Builders Merchant, Catering equipment, Computer Service, Dry Goods, Frozen and Fresh Food, Gaming Machines, Garage local, Greengrocer, Ironmonger, Local Brewers, Office Equipment, Plumber, Electrician, Refrigeration Engineer, Wine Supplier, notify date of ceasing trading if necessary and settle accounts.
Notify Staff of your leaving and ensure that any staff leaving details are passed on to the assignee
PDQ Machines for Credit Card notify date of ceasing trading if necessary
Performing Rights and PPL Phonographic Performance, notify date of ceasing trading if necessary and claim refund
Personal Licence and designated Premises Supervisor, Check with your Solicitor and notify date of ceasing holding the licence and forwarding address
Phone Numbers of Essential Contacts for assignee
Rates payable and dates, notify date of ceasing trading if necessary
Refuse Collection and Waste Disposal, notify date of ceasing trading if necessary
Regulations for Disabled Compliance
Service Contracts, Rodents, Equipment, Cleaning, notify date of ceasing trading if necessary
Sky or other TV Contract and TV licences, notify date of ceasing trading if necessary, claim refund
Staff Job Description (Jobs Manual is worth passing on)
Staff paperwork Inland Revenue, hours etc., your Accountant will advise, retain copies and details of all staff passed on to the assignee.
Staff References, retain copies for yourself
Staff Redundancy, Details of possible redundancy commitment for existing staff in cost, to you. Seek your accountants advice as to whether you have an obligation for redundancy.
Stocktaker for wet and dry goods. (See above)
Trading accounts for suppliers:-National Brewers, Gas supplies for Beer Cellar, Wines and Spirits, Services, Gas, Electricity, Oil etc., Cellar Equipment where applicable, notify date of ceasing trading if necessary, check for over payments
VAT Registration, seek your accountants advice on deregistering
Website and email addresses
Optional Information that can be passed to the assignee
Asbestos Report including old Artex Ceilings and Walls
Auto Enrolment, Staff Pensions
Beer Cellar confirm ownership of equipment
Brewery Delivery time and other Delivery Days for new licensee
Brulines if applicable, advise of any outstanding issues
Certification for all electrical appliances where applicable (See above)
Cellar Management, provide information for the new licensee
Cold Storage Check
Deliveries on the Day
Delivery Days for all suppliers and order Days
Employment Law Hotline for Members of USE
Environmental Performance Certificate (EPC), Energy Efficiency Certificate as from April 2018, click on link below for information, Check for More
First Aid training for Staff
Health and Safety Hotline for USE Members
Licensing and Gambling legislation, 24 hour Hot Line 0114 2600 344
Operating schedule if relevant
Recipes for all dishes where the assignee is likely to use them
Staff Dress Code, if appropriate
Weights and measures signs and compliance
Allergens came in last year Read More
Scores on the Doors an essential for all businesses involving Food Hygiene, Read More
Credit and cash Flow More
FAQ’s on running a Business More
Note:- Everyone buying a commercial property, especially a lease should have had a Schedule of Condition or Survey, to validate the state of condition PRIOR to the original takeover date. If there were any outstanding wants of repair or decoration, then either the Landlord or the previous Lessee is responsible, if it is left until a later date, no action can be taken without documentary proof agreed with the Landlord or his Agent.
If you find anything that you consider should also be in the Check List, please email us at firstname.lastname@example.org, we appreciate your input, if it will help others, we have tried to cover the normal aspects of an assignment, but there are anomalies which we may have no knowledge at this time.
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