There are plenty of considerations before you put a property on the market
by Graham Wilson of MCM Solicitors
Selling a business can be a stressful and transformative moment for any owner, whether you are retiring, moving on to a new venture, or simply looking to realise the value built over years of hard work. However, preparing your business for sale takes careful planning – both commercially and legally.
The sale of a leisure and hospitality business involves navigating a blend of business, property, and regulatory considerations, so early preparation is essential to secure a smooth transaction.
We’ve set out below some practical advice based on our experience assisting and advising operators and business owners as they bring the business to market.
Before taking your business to the market, it’s vital to ensure the business is “sale ready”. This is not to be confused with Mr Johnson’s “oven ready” deal as we have all seen how that turned out!
From a business side, ensure that you have clear financial records, employment records and payroll are all up to date. Prospective buyers will want to see supplier contracts, stock lists and know that all VAT filings have been made.
From a property side make sure that all statutory obligations are fully up to date. Regulatory compliance is particularly important in the hospitality sector, so matters such as alcohol licensing documentation and transfer applications, gaming licences, health and safety records, fire safety procedures and risk assessments, food hygiene certificates, Legionella testing certification, and staff training logs must all be current.
In Scotland it is also a requirement to have a valid Energy Performance Certificate for the premises and if the premises are over 1000m2 of conditioned space then there can be obligations on the owner or occupier to improve the energy efficiency of premises.
Similarly, there are strict duties imposed on owners and occupiers when it comes to managing the risk of Asbestos Containing Material (ACM) within the premises as failure to comply can come with criminal liability. Make sure that you have a current Asbestos Management Survey and Plan in place if there are or you suspect that there are ACMs in the Premises. If in any doubt best practice is to obtain a survey.
Buyers will want to know all this information in order to make informed decisions and having these formalities in place helps avoid delays during the due diligence phase. Even if the buyer says they are happy to take the business “as seen” if they have a bank or private equity funding them you can bet me a pint that the funder will insist upon sight of statutory compliance paperwork.
A key decision for any seller is whether to dispose of the business and assets of the pub or to sell the shares in the company that owns and operates it. A business and asset sale typically involves the transfer of tangible assets such as stock, equipment, fixtures and fittings, along with intangible elements like the trading name and goodwill. Under this structure, the buyer does not inherit the seller’s historic liabilities, which generally remain with the original owner unless expressly transferred. For this reason, many buyers prefer asset purchases, as the risk profile is often more straightforward and contained.
By contrast, a share sale involves the transfer of the entire corporate entity. The company continues to own the pub, the business, and all associated rights and obligations, but the ownership of the company itself changes hands via share sale. This means the buyer inherits all existing and historic liabilities, whether known or unknown, ranging from tax obligations and employee matters to regulatory risks. Although share sales can offer tax advantages for sellers and may reduce the administrative steps associated with transferring individual assets, they are often more legally complex and require more extensive warranties, indemnities and due diligence to protect the buyer.
Property considerations also play a central role in any hospitality sale. Where the seller owns the property, the seller must provide evidence of title, property searches and satisfy the purchaser on any enquiries they raise with regards to the title and any common repairing liabilities.
However, many pubs, restaurants and leisure venues operate from leased premises, and in these cases, the assignation of the lease becomes a critical step. Most commercial leases in Scotland require the landlord’s formal (written) consent before the lease can be assigned to a new tenant. Landlords are entitled to assess the financial standing and experience of the proposed assignee, and they may raise concerns about the incoming party’s ability to meet the lease obligations.
Conditions may be imposed as part of the consent process, such as requiring a rent deposit, additional guarantees or other forms of security. Landlord approval can take time and has the potential to affect the viability of the deal; it is therefore advisable to involve the landlord at an early stage and to seek legal advice well before heads of terms are finalised.
Across every aspect of the transaction, early engagement with professional advisors is strongly recommended. Selling a pub touches on multiple areas of law – corporate, property, employment, licensing and tax – and coordinating these elements effectively can make the difference between a smooth, well‑managed sale and a process fraught with delays.
By “auditing” the business in advance, ensuring that statutory responsibilities are properly met, selecting the most appropriate sale structure and openly communicating with key stakeholders sellers can significantly increase the chances of a successful sale and a more streamlined negotiation process.
One final thought is to give serious consideration to the completion date.
Historically in conveyancing Friday has been completion day but when selling a going concern the buyer might not be best advised to take the keys on a peak trading day. You won’t want to do a stock take in the morning, finalise the deal and then hope that the tills, card machines and all other business critical matters all work smoothly before the buyer commencing trade. I’m sure every operator can attest to glitches and problems with IT and communication systems!
Lots of food for thought (no pun intended!) but whatever you decide to do with your business – as a full-service law firm with people who have decades of experience working alongside the leisure and hospitality sector – we are well placed to help.
