10/2/2023 | Pubs

Navigating the Legal Maze of Pub Sales: Expert Insights

In this blog article, Tim Widdows, Associate Director – Pubs & Restaurants South, speaks to Simon Ralphs, Partner at Clarkslegal LLP, about navigating the legal maze of pub sales, including common pitfalls to watch out for, conducting the proper legal due diligence, essential documents, licensing and regulations, financing considerations, and much more.

The world of pub sales can be a labyrinth of legal intricacies, where success hinges on careful planning and a deep understanding of the legal landscape. To shed light on this complex process, Tim Widdows, Associate Director – Pubs & Restaurants South, sat down with Simon Ralphs, a seasoned property solicitor with extensive experience in facilitating pub and restaurant sales. In this article, Simon shares invaluable insights on common pitfalls to watch out for, conducting the proper legal due diligence, essential documents, licensing and regulations, financing considerations, and much more.

What are some of the common pitfalls and deal breakers that you see?

Deals can sometimes teeter on the edge of success or failure. Simon points out that securing funding and obtaining a superior landlord's consent for leasehold properties are frequent bottlenecks. However, he emphasises that deals falling through is a rarity and is typically due to a party's change of heart or critical title or planning issues.

We sometimes see the due diligence process causing delays to a sale – can you outline the legal due diligence that buyers and sellers need to conduct?

This is crucial. Before entering into a sale agreement and to avoid delays, buyers and sellers should conduct thorough legal due diligence. This should involve a comprehensive review of the title and various searches, such as Local Authority Search, utilities searches, and more. Additionally, replies to CPSES (Commercial Property Standard Enquiries) help gather essential details about the property, planning, insurance, and any leases. On the business side, meticulous scrutiny of accounts, contracts, employees, premises licenses, and other business matters is essential.

What essential legal documents should both parties prepare and exchange during the sales process?

Key documentation plays a pivotal role in a successful pub sale. Parties involved must prepare and exchange several crucial documents, including the sale contract, the Transfer (Form TR1) transferring legal title, and consent to transfer the premises license. After the sale's completion, SDLT (Stamp Duty Land Tax) forms and the Land Registration AP1 form come into play.

What are some of the key factors to consider around licensing and regulations?

The topic of licensing and regulations can be intricate. Simon suggests leaving this area to licensing lawyers if specialised advice is needed. It's essential to be aware of the licensing requirements, which can vary significantly depending on the type of pub and location.

For those deciding between a freehold or leasehold sale or purchase, can you outline the significant legal considerations?

The legal process can differ significantly between freehold and leasehold pub sales. Freehold transactions typically proceed more smoothly and swiftly, as they don't require consent from a superior landlord. Leasehold sales, on the other hand, necessitate a thorough review of the lease terms, including obligations and rights granted to the landlord.

From a legal standpoint, what should buyers look out for when viewing a property?

A professional property survey is recommended to identify any structural or maintenance issues early in the process. Buyers should also verify clear property access and address any visible concerns. Early detection can allow for negotiations with the seller to resolve these issues.

What legal considerations should buyers be aware of when securing finance for a pub purchase?

Securing financing for a pub purchase can be a daunting task. Simon acknowledges the challenges, with lender solicitors often posing numerous queries and causing delays. It's crucial to be prepared for a potentially lengthy and arduous financing process and certainly worth considering working with a specialist broker.

Our colleagues at Christie Finance can review your individual business needs and arrange tailored funding advice, to help you secure the necessary finance to complete your purchase.

Do you have any tips to help buyers and sellers navigate any tax implications that may result from a sale?

While not a legal domain, Simon highlights the importance of having an accountant review the tax implications of a pub purchase. This includes considerations of VAT, SDLT, and a thorough review of the business's accounts and tax payments.

What’s your advice for resolving any contract disputes that may arise?

When buyers and sellers reach a stalemate, Simon suggests open communication as the first course of action. Frequently sitting down to discuss the issues face-to-face can lead to a solution. Property agents also play a pivotal role in resolving disputes.

What should buyers and sellers expect in terms of legal costs and how can they manage these effectively?

Legal costs can vary, but Simon notes that budgeting a few thousand pounds for due diligence and document-related expenses is a common practice. Some firms, like Clarks legal, invoice monthly to ease both their and the client's cash flow.

Understanding the sales timeline is important – how long does the typical legal process take and what factors can influence this?

The timeline for a pub sale can be influenced by various factors, including funding delays, legal complications, and the responsiveness of solicitors on both sides. In an ideal scenario, most sales should be completed within 8-12 weeks.

In conclusion, navigating the legal process of a pub sale demands meticulous planning and expertise. Working with a team of professionals and considering Simon’s insights will help you embark on your journey with greater confidence, armed with the knowledge needed to navigate the legal maze successfully.

Our award-winning Pub & Restaurant team offers leading advice across brokerage, valuation and consultancy, working with a wide range of clients, from the smallest independent operators to the largest corporations.

Alongside a specialist agent, it is important to instruct a property solicitor who has experience transacting pubs as Trading Going Concerns (TOGC) and staff transfers (TUPE). We can help this process by recommending a professional that we have worked with previously.

The benefits of choosing Christie & Co as your agent also include access to other helpful businesses within the Christie Network, such as Christie Finance who can help you secure funding for your purchase. Get in touch to find out more about how we can help you achieve your goal of buying or selling a pub.