Are you ready when the right buyer knocks?
Ignoring the recent lockdown in Brisbane, the end of 2020 was starting to show some signs of increased activity in the land of motels, with a much improved level of activity. This is continuing into 2021 and contracts are starting to hit our desks. Hopefully this is a sign of confidence in recovery which will only increase as the year gets going. There are many people reassessing their past careers and looking for something new or different, so you never know when the right buyer will happen to knock on your door and it never hurts to ensure that your business is in tip top condition and saleable.
We have prepared a checklist of things we often see arise in motel transactions. Turning your mind to these mattes know will assist in ensuring as smooth a possible transaction.
- Are your figure ready? Ask your account to prepare a set of sale figures (it is worth the costs as it will assist both your agent in the sales process and also your buyer). Be prepared to answer questions above Covid (What was the downturn? Did you reduce your rent? Are you paying full rent now? What do you owe the landlord?). You should also be prepared to offer historical figures to any buyer. If you want them to understand that last year’s figures are not reflective of what the motel can do, then you will need to show them historical figures.
- Do you have a copies of the lease (and all documents associated with that) available? This could mean past assignments, deeds of consent, variations. You need to ensure that you have a copy of everything (and they are fully signed and dated copies). If not, find them now. It is easier to locate documents without the pressure of a looming due diligence date. Often these documents will be held by past lawyers, past financiers or the landlord.
- Are there any franchise / licence agreements? If so make sure you have full copies and understand what your franchisor will need to consent to any assignment.
- Are all your licences in order? Have you checked recently that your local Council has not changed their requirements? Are all your licences current and any renewal fees paid?
- Do you have an up to date inventory and is everything working? If not prepare it.
- Do you have any supply agreements such as internet, phone, gas etc? Make sure you have full copies and understand what is needed to assign these.
- Does your asbestos register need updating? If so, attend to it and have the register available.
- Have your electrical items been tagged and tested lately? If not, consider attending to this.
- Has your landlord asked you to do anything that will come out when a buyer is seeking consent? An example of this would include undertaking improvements. If not consider dealing with it now or discussing with the landlord.
- Does the property hold a star rating (and what does the lease say about that)? Do you have a copy of the last report? Make sure you have copies of that report available and attend to anything that might have been raised in that report.
- Do you have any up to date list of employees including their leave entitlements (remembering that even casual employees will have an accruing long service lease entitlement)? If not prepare a list.
- Is the property compliant with fire safety requirements? If so have the records available or otherwise make the property compliant.
- Have the smoke alarms been checked and meet legislative requirements? If so have the records available. If not arrange for this.
- Is there a current pool safety certificate? If so have the certificate available. If not attend to this.
- Is there a council permit or approval of use of the property as a motel? If so have the records available. If not consider what is required to obtain this.
- Do you have a copy of the certificate of classification? If so have the certificate available. If not consider what is required to obtain this.
- Are all of the insurances adequate?
- Has your business name been renewed? Are all the domain names and social media details in your name?
- What will your landlord need to consent to the assignment of the lease? Treating your landlord more as a partner than an afterthought will help to ensure a smooth sale process. Whilst you certainly have no obligations to tell your landlord what you are thinking about, you may need to offer the business to the landlord first (check your lease). We suggest putting yourself in the position of the landlord – how and when would you want to be told that your tenant is moving on and what would you expect to see about from a new tenant?
Why not have a think about this list and make sure that you can answer all of the questions. If you cannot or this list identifies any deficiencies for your property or business, then the time to deal with it is now – without the added time pressure of a sale.
As each lease and business situation will be different, please take out comments as general guidance and contact Mahoneys to obtain timely and practical legal advice on the actual issues you are facing.