Failing to undertake good due diligence in a rush to obtain a new restaurant or bar site can hit prospective hospitality operators in the pocket and more seriously perhaps, potentially open to a criminal offence.
Once a site acquisition is signed and sealed there is no going back and certainly no grounds for complaining that you are not getting what you thought you were getting. Money back is not usually an option!
What’s the problem?
- As soon as a transaction completes you will become liable as owner/controller of the premises. It will be no excuse to any regulator that the premises were sold to you in that state.
- If significant issues are uncovered only after completion, how will this affect your plans for refurbishment?
- Are you able to carry on trading with the premises in the state that it is?
- What costs are going to be involved in rectifying the situation? If this wasn’t previously factored in how is this going to affect your bottom line?
- Are the potential issues significant enough to maybe back out altogether? Or revisit the commercial deal?
It goes without saying a full structural survey should be carried out particularly when taking on any older premises, however you should also ensure that you check the position on the following core compliance issues (those most likely to incur cost), together with any other compliance issues particular to that premises and the trading operation at it.
Asbestos
- Asbestos Regulations contain a duty to carry out a suitable assessment proportionate to the premises.
- Ask to see a recent Asbestos Survey and/or Management Plan although these may have been presumptive only (based on the presumption that a pre-1999 building contains asbestos and not a full survey).
- Ideally carry out your own survey, alternatively you will need to carry out your own assessment as soon as you are in control of the premises in any event.
- The costs of dealing with an asbestos issue could substantially increase the cost of a refurbishment you may be considering.
- Breach of asbestos regulations is a potential criminal offence liable to fine or imprisonment.
- Britannia Hotels paid £200,000 in fines and costs for putting workers and guests at risk when it failed to carry out a full asbestos survey prior to commencing a refurbishment to The Grand Burstin Hotel in Folkestone.
Further INFORMATION about managing asbestos
Fire Safety
- You should ask for all current fire risk assessments, and should think about whether the premises have adequate fire escapes for the venue capacity.
- If fire escape routes are being used over adjoining premises, a proper review of these rights needs to be undertaken by your lawyer. Unfortunately these rights can often be inadequately documented and/or temporary in nature. This is a red flag!Fire escape rights are likely to be critical to the trading operation so the loss of them could be a real issue. You may need to require the landlord or tenant to rectify the situation.
More commentary on fire safety can be found HERE
For a reminder of your obligations read our GUIDANCE
Gas Safety Certificates, Electrical Condition Report, PAT Tests
- You should demand copies of recent and in date gas safety certificates, electrical condition reports and portable appliance test certificates.
- Be very cautious where the Seller claims to have none. You should demand that they carry out the relevant certification before you enter into any contract.
- Once inspections have been undertaken these could indicate a significant cost coming your way, particularly if for example the whole property needs rewiring, and sometimes this can be material enough to back out of a transaction if the price agreed does not bear the cost of carrying out remedial works.
In summary, acquiring a new trading site is an exciting time, but it pays dividends to scrutinise the less glamorous compliance issues before finally committing.
