Guidance for both seller and buyer….

The Valuation

The value of the inventory is assessed on the basis of its current trade value which is often higher than its "sale room" value, reflecting its value to the business "in situ". In order to maximise the valuation, the outgoer must ensure that the inventory is maintained in good clean condition and in working order.

The incoming tenants' valuers will probably make an appointment to carry out their valuation 7 to 14 days before the proposed change date. After their attendance, the valuers will negotiate and settle the valuation of the inventory on behalf of their respective clients. The aim of each is to agree a price which represents the reasonable going concern value of the inventory.

Although the respective valuers value the inventory items individually, the inventory has to be sold and bought in its entirety and the final valuation is agreed as a package, on a global basis. Individually priced inventories are not supplied, but valuers are generally happy to supply individual guide figures for items or sections of major consequence.

Electrical and Gas Appliance Safety

Proprietors (which include outgoing Public House tenants) are obliged to demonstrate compliance with Health and Safety At Work Regulations. It is necessary for all electrical items which have a plug attached and all gas appliances to have been tested and certified as safe by a qualified electrician or Corgi registered contractor respectively.

Failure to have items certified could result in tems being excluded from the valuation or -  included but at a significantly reduced value. Alternatively, the full value of the items subject to test could be retained pending production of Safety Certificates, and not released until the documentation is produced.

The cost of obtaining the appropriate certificates must be met by the vendor/outgoer. It is best to have very recent test Certificates, but the ingoers valuers may accept Certificates up to six months old if the business has a "well maintained" appearance, and there has been no change of operator during the period.

Apportionments, Services etc.

All meters should be read. All service providers should be informed of change of ownership and date of change.  The outgoer should NOT sign an authority on behalf of the Incomer without his express permission. The outgoer should advise the Rating and Water Authorities and ask that they apportion their charges up to, but not including, the day of change.

The outgoer should give notice of any Maintenance Agreements on change day that require apportioning, forward bookings and receipts for deposits and the like. There may be unexpired portions of Gaming Machine Tax or Licence Extension fees, but Performing Rights fees are not transferable. The valuers can deal with these adjustments. Do NOT make private deals on any matter without notifying the valuers.

Insurance

The outgoer is reminded to cancel his trade package insurance with effect from change day. The ingoer must arrange insurance cover as a condition of the tenancy agreement. The Brewer/Pub Co may arrange insurance on the building (and re-claim the premium as extra rent) but the tenant is obliged to arrange insurance cover for trade contents, public liability, employers liability, theft, etc.

Premises Licence

The outgoer must inform the ingoer of the status of the Premises Licence for the property, in case a transfer is necessary. No action should be necessary if the Premises Licence is held by the Pub Co/Brewer or other third party.

Designated Premises Supervisor

It is very important that the the outgoing and incoming should arrange for the variation of Premises License to specift the new incomer and his or her nominee as the new designated premises supervisor.  If this is not done before transfer day the business will not be able to continue trading.

Change Day

It is best if the outgoer has moved out before actual change day.  Change day is chaotic enough without both sets of people trying to move their own personal belongings in or out.  Preferably the ingoer should move in the following day or at earliest arrange for the removal men to arrive with their furniture in the afternoon.

Generally valuers for ingoer and outgoer will arrive at 9 am. The incomers valuer will be completing a thorough check of the Inventory for content and working condition. If items are found to be missing or not working, a deduction will be made from the original settlement. Conversely, minor additions can be dealt with on the day, and it is customary also for the listing and valuation of cutlery, crockery and small loose catering effects to be completed on change day.

Stock In Trade & Bar Glassware

This is listed and valued on change morning. Generally there s one stocktaker acting between parties. It is helpful if the outgoer can have available the purchase invoices for the last two months ensuring that the cost price information is complete for the stocktaker.

Out of date stock will not be valued, but any bottle deposits on out of date stock will be taken into account. It is best to remove any out of date stock or stock which is not in saleable condition (rusty caps, soiled labels etc.) before change day.

It is normal for stock to be run down before change over and dependant on when the ingoer wants to start trading he/she should discuss with his Area Manager, in advance placing an order for new stock to be delivered on change day or as soon as possible thereafter.

The Property - Dilapidations

With most Brewers/Pub Co the District manager and/or the Estates Department Surveyor will wish to inspect the property with both outgoer and ingoer to record its condition and discuss any points which might concern him or you. This could take some time.

Completion of Transfer

It is normal to complete most changes by lunch time. The valuers will total up all the figures, make any adjustments and produce final statements providing details of the transaction and cash flow. Payment will be made to the Pub Co/Brewer regarding adjustments and trade accounts, with the balance of the ingoing paid to the outgoer. Any money due back to the ingoer will be returned together with a final statement and account.

A final copy of the Inventory will be sent to the ingoer within a few working days and should be retained as an important record of the transaction.

VAT

Under normal circumstances (there are exceptions) VAT will not be charged on the Inventory, Stock and Glassware which are being sold, and no allowance will have been made for VAT in the estimated Ingoing. This relaxation of the normal rules applies to the transfer of a Going Concern provided the purchaser is registered for VAT or becomes registered from the date of transfer (see VAT publication "Transfer of a Going Concern") and certain conditions are met. See www.hmce.gov.uk/notices/700-09.htm.

Existing Employees

The transfer of undertakings (Protection of Employment) Regulations 1981.

The outgoer must provide full details of any employees to the incoming tenant.

Knipes is able to advise on many staff matters, please contact if you require any assistance.

When a new tenant or new owner takes over a hotel or pub, he takes over the previous licensees employees on the same terms and conditions as those on which they were employed by the previous licensee. It is not possible to contract out of this obligation. As a result, you should be aware of the following points:-

• Generally the new tenant or owner is responsible for claims for unfair dismissal and redundancy even if the dismissal was by the old licensee in anticipation of and before the transfer.
• There are certain special circumstances which do permit employees to be fairly dismissed before or in consequence of the transfer. For example employees may be dismissed for an economic, technical or organisational reason if it can be shown that in the circumstances (including the size and resources of the undertaking) the employer acted reasonably in treating it as a sufficient reason for the dismissal.
• In cases where the new tenant or owner does not wish to take over employees, it would be advisable for him to take legal advice as to his position before he commits himself to taking over the business.
• The period of employment of an employee with the previous licensee is added to his employment with the new tenant or owner. This will affect the employee's right against the new tenant or owner under employment legislation.
• If an employee has been employed for more than one year then, (and also in a limited number of other circumstances), in the event of dismissal, he can complain to an Industrial tribunal if he considers he has been dismissed unfairly.
• There is no simple guide to the level of compensation if the claim is successful but it could amount to several thousands of pounds for each employee unfairly dismissed.
• An employee could have a case for "constructive dismissal;" if a substantial detrimental change is made in the employee's working conditions.
• If an employee has been employed for two years and is made redundant he will normally be entitled to a redundancy payment.
• If any unions are involved there is a duty to inform them before the transfer occurs or compensation could be payable by the old and/or the new licensee.