Selling a hotel and getting it right article banner image

You have made the decision to sell. A future of actually being on holiday at Christmas and Easter beckons. But that is only the beginning, what do you need to do now?

1. Help – where do I start?

If you involve your Solicitors early on, together you can review and prepare a package of information for the buyer and his advisors. Many questions and issues will be raised by the buyer. The more comprehensive the package the smoother the sale of the hotel will be.

2. But it’s only a building and a few other bits and pieces isn’t it?

The first thing is to make sure that your property title deeds are in order. Do they show everything that you own or use in connection with the hotel? E.g. an arrangement with a neighbour to buy part of their garden for extra parking, but which has never been documented. Is there any land which you use occasionally for special events? Do those arrangements need to be formalised so as to maximise the value and attractiveness of the business? It is also sensible to make sure you know the up-to-date planning position on the property. Your Solicitor can get details from the local planning authority and review this with you, so you do not have any last minute queries about lack of building regulations approval or other issues which cause delays. Particularly important if the property is old, listed or much altered. Your Solicitor can also go through the standard questions that are asked about commercial properties so that they can be sent out at the outset.

3. Do I have to tell my staff?

The law provides that your employees in the hotel will automatically transfer to the new owner and they will have the same employment rights as they have with you. It will be automatically unfair if you or the buyer dismiss any employees because of the sale. This law protects not just full time staff, but also those working part time or on a casual basis. The buyer will want to know many details about the employees E.g. age, length of service, disciplinary record, pension scheme. It is a legal requirement to have a stakeholder pension scheme if you have more than five employees. Your legal team can help in formalising arrangements so that you have a more attractive package to present to purchasers. The law also says that you must consult your staff about the transfer. Your legal team can advise upon the timing of that, so as to protect commercial sensitivity, whilst ensuring that you are complying with the law.

4. What else will the buyer want to know?

As they are paying for the goodwill of the business the buyer will want to know about everything else that is necessary to continue the business in the way you have done. You will need to provide information about existing contracts. Not just written contracts, but every significant arrangement with third parties e.g. maintenance of alarms, laundry service provision, suppliers of the business. If there is anything you do not own, e.g. drinks cooling equipment on loan, gas bottles or anything on a hire purchase arrangement, this will need to be disclosed and arrangements made for dealing with those on the handover. The premises licence is a key asset of the business which the buyer will want to know about. Again your legal team can provide you with special advice on that. You may want to vary your premises licence so as to make the hotel easier to market

5. So is that it once contracts are signed?

These days buyers want to protect themselves, and will require so called ‘warranties’, which are statements by you about the business. If they prove to be incorrect and the buyer suffers loss then they will be able to sue you. Your legal team can advise you about what the proposed warranties mean and which are acceptable. They will take you through the process of checking the warranties, and where they are only true in part, making disclosures against them. For example, you may be asked to confirm that the business is not engaged in any litigation, but if there is an outstanding personal injury claim against the hotel, that will need to be disclosed. Your legal advisers can also help you to put a cap on the amount and timescale of your liability under the warranties. Your best defence is to go through the exercise of discussing with your legal team the business and its assets and preparing a comprehensive package for the buyer, so that you can be confident in the warranties you are giving. It will not be an easy ride, it is always a stressful time running a business whilst selling it; but with the right legal team and a good initial package you should be able to ensure that things go relatively smoothly and quickly.

Scott Mitchell is a partner in our commercial property team with a focus on the tourism industry including hotels and holiday parks and the region’s coastline through work with owners and operators of ports, harbours and marinas. To contact Scott please call 01726 74433  or email