The Contracts, responsibilities, and cooling-off periods.
One of the most important parts of the sale is the premises lease. It is the broker’s responsibility to work closely with the buyer and landlord in negotiating either an assignment of the existing lease, an assignment and modification of the existing lease, or a new lease. Always consider a renewal period included in your lease. Do your homework regarding the area that you are going to be renting and what development is taking place or might be happening in the near future. These might impact your business plan going forward and the term that you negotiate with your future landlord.
The Assignment of the Premises Lease.
If the lease is going to be assigned to the buyer, it must be executed by the buyer (also known as the assignee), the seller (also known as the assignor), and the landlord. Execution of a New Lease. If the buyer is negotiating a new lease, the lease must be signed by the buyer and landlord.
Equipment Lease.
If the buyer is assuming the equipment lease, this lease must be executed between the buyer, seller, and the equipment lessor.
Review Contracts.
The broker will provide and review all the various contracts in the transaction with the buyer namely:
- The purchase contract.
- Premises lease.
- Equipment leases.
- Equipment rental agreements.
- Franchise agreements.
- Signage rental agreement.
- LP Gas supply agreement.
- Maintenance agreements.
- Chemical supply agreements.
- Any other contracts.
Franchise Agreement.
If the business is a franchise, all the various franchise agreements must be signed by the buyer, seller, and franchisor.
Liquor Licence.
If the buyer is having an alcohol license transferred to him from the seller, the Liquor License needs to be transferred before the close of escrow. It is the author’s opinion that a specialist in the liquor license field should attend to this matter.
Entertainment Licenses.
If the buyer is taking over an entertainment license, the buyer must get approval from the proper authorities before the close of escrow.
Conditional-Use Permit.
The right to use the premises for a certain use not typically allowed for the property, per the zoning laws of the local government. If the buyer is assuming a conditional use permit, he should review the conditional-use agreement, and be aware of the proper procedures for renewing the conditional use permit when it expires. Municipal bylaws differ from area to area so ensure to get your facts before signing binding agreements.
Various Licenses to be acquired before trading.
- Business License.
- Fire, Health, and Safety Inspection.
- Occupancy Certificate.
- Tax Clearance.
- Registration of all Payroll required facets.
- Statutory Registrations.
Paperwork, paperwork, paperwork! The success of your hospitality business is reliant on the accuracy of the paperwork. Embrace it!
Author: Marius Joubert
Founder of Restauranthub.co the first true community for the restaurant and hospitality industry.
