In 2014 transactions in the licensed trade had its first major increase since the peak of the market in 2006. Given the recent upturn, we have listed out ten top tips for purchasers to consider when purchasing licensed premises.
- Is the licence up to date? A lapsed licence will need a court application to revive the licence attaching to the premises which will come at an additional cost. The licence should be reviewed to ensure it covers all aspects of trade that the purchaser wishes to pursue post completion.
- Does the licence extend to the whole of the premises or part? Licensing plans should be sought to verify this.
- Is there a valid Fire Certificate? Fire safety compliance is essential to the operation of a licensed premises.
- Is the property fully compliant with planning legislation and building regulations? While this point is always essential in any transaction, it is vital when purchasing a licensed premises as purchasers need to be aware that the permitted use of the property is a licensed premises, that all external signage on the premises is in compliance with planning and to make sure there are no enforcements against the premises which will hinder or delay operation of the premises.
- What contents are included in the purchase price? Is stock and trade included in the price? This is a useful point to enquire about if you are intending to operate the business from completion with minimal fit out costs.
- What intellectual property protections are there in place? Are they being assigned as part of the purchase? It is always prudent to enquire whether the brand you are purchasing is protected by trademark law. Goodwill of a premises is a factor in the price and certain well established premises will carry a lot of value trading under their existing name. If there are intellectual property protections in place, a purchaser should enquire whether their registration is up to date and also to request that they be assigned to the purchaser on completion. Normally assignment of intellectual property is done by deed and usually will form part of an asset purchase agreement.
- Are the employees of the premises transferring under the Transfer of Undertakings Regulations? Purchasers will need to ensure that if the existing staff are being transferred to them under the purchase that the appropriate notices have been served in a timely manner and due diligence is strongly recommended to ensure the purchaser is aware of any employment law issues/complaints which are ongoing as they will essentially be acquiring them on completion.
- If the premises serves food, is it fully compliant with all aspects of environmental health law and food hygiene regulations? Purchasers should enquire as to when the property was last inspected and the outcome of such inspections. Confirmation of any improvements made as a result of such inspection should be sought.
- Is the premises fully compliant with regulations in relation to any smoking areas on the premises? Certain court decisions have noted that enclosed smoking areas are not compliant and purchasers should be aware that purchasing a licensed premises with smoking areas that may not be compliant could lead to future expense to refurbish the area to bring it up to the requirements in the Regulations.
- What are your neighbours like? A purchaser should make enquiries as to the relationship the premises has with adjoining premises. If there are neighbours who have made complaints on noise, anti-social behavior or waste collection, it is prudent to be aware of these to assess whether this will impact on trade or have associated costs to rectify the matter.
Sharon Pennick advises a range of clients in the food and drink industry from suppliers to operators.
This publication is for guidance purposes only. It does not constitute legal or professional advice. No liability is accepted by Ogier Leman for any action taken or not taken in reliance on the information set out in this publication. Professional or legal advice should be obtained before taking or refraining from any action as a result of the contents of this publication. Any and all information is subject to change.