THE BUYING PROCESS

Making an offer

When you decide you would like to purchase a particular pub, you need to make an offer. This offer may be at the asking price or below it if there is room for negotiation. You should follow up any verbal offer in writing. Head your letter ‘subject to contract’ and include this phrase in any communication you have with the seller or agent. This ensures that you are not contractually bound by your offer or any other statements you make prior to signing the contract.

Acceptance

Once your offer is accepted, ask the seller to put it in writing and ascertain the name of the seller’s solicitor who will be dealing with the sale.

Appointing your professionals

Instruct your solicitor to deal with the transaction and provide them with details of the seller’s solicitor. Contact your property surveyor and arrange for them to prepare a full structural survey and valuation of the pub. Notify your accountant that your offer has been accepted and ask them for any further assistance you may need in preparing your detailed business plan or making your application for additional finance.

Arranging additional finance

Contact your lenders to arrange any additional finance that you may need and present them with your detailed business plan and a copy of the accounts for the pub. Because you have already obtained an agreement in principle for finance, this should make the process easier. Your lender will want to have the pub valued to ascertain that you are paying a realistic price and that there is sufficient security on which to secure the loan. They will generally appoint a surveyor to prepare the valuation report and charge the cost to you. The report will include several ways of valuing the pub, including its ‘bricks and mortar’, ‘forced sale’ and ‘going concern’ values. If you are using other property as collateral for a loan, this will need to be valued too.

Structural survey report

Your property surveyor will prepare a full structural survey for the pub for you. This is a ‘warts and all’ account of the state of the premises and can be a little daunting. Details of any major repairs should include an estimate of how much money it will take to remedy the problems. It should also include their assessment of the valuation of the pub.

Where the cost of repairs or the valuation is an issue, there is an opportunity to renegotiate the price you are willing to pay, and put in a revised offer taking these into account.

The initial legal steps

• The seller’s solicitor draws up the contract and sends a copy to your solicitor.
• Your solicitor conducts searches with local government departments in order to establish whether there are any legal restraints, planning applications or other legal issues that might affect ownership.
• Your solicitor will request documentation from the seller’s solicitor, including:
  • proof that the seller owns the property;
  • details of rights of way or restrictive covenants;
  • planning permissions or building consents;
  • electrical and gas safety tests;
  • damp and woodwork guarantees;
  • list of fixtures and fittings.
• Your solicitor also sends pre-contract enquiries to the seller’s solicitor. These are in the form of a standard questionnaire about the premises to be answered by the seller.

Exchanging contracts

Once the initial legal steps have been satisfactorily completed, you are in a position to exchange contracts. You and the seller sign your copies of the contract and your solicitors exchange them. You are required to pay a deposit at this stage, which is normally 10% of the purchase price. Exchanging contracts is a very important stage since at this point, the contracts become binding, and if you pull out after this you will lose your deposit. A date is set for completing the sale, which can be the same day, but is more typically a couple of weeks later.

Completion

Completion is the date on which you pay for the pub and the seller hands over the keys. It is vital that you have all your funds available for this date. If you are borrowing additional money, your lender will have to arrange for this to be electronically transferred into your solicitor’s ‘client account’. Waiting for the money to be transferred can be a nerve-wracking experience and there can sometimes be delays. Double check your solicitor’s bank account details and contact your lender two or three days before, to ensure that they have all the correct details. If you are using any of your own money to make the purchase, you will have to pay it to your solicitor in the form of ‘cleared funds’, such as a banker’s draft or bank transfer.

You will require sufficient funds to pay:

• the balance of the purchase price;
• Stamp Duty Land Tax on the transaction;
• solicitor’s fees and disbursements.

Additional funds will be required to cover the cost of stock and glassware that will be valued separately. This is normally paid directly to the seller via your stocktaker.

Your solicitor then arranges for the sale to be registered at the Land Registry and for the seller’s mortgage to be removed from the title (if applicable).