In the second of three articles Michelle Noble from Charles Russell Speechlys examines the causes of delays in pharmacy sales…
There are some actions sellers can take before a transaction begins in relation to the pharmacy property in order to maximise their chances of avoiding potential delays.
Property title documents
It has been compulsory for some time for all freehold and leasehold (where the lease has seven years or more to run) land transfers to be registered at the land registry. If a pharmacy is not registered, and you plan to sell in the future, arranging for registration before the sale process begins will avoid delays and reduce the title deeds that a buyer requires.
If the pharmacy is leasehold, it is also worthwhile collating the lease and any ancillary documentation – deeds of variation, rent deposits, guarantees and any landlord’s consents (to alterations, assignments, underlettings, etc) before sale as these are all documents that a buyer will need to see before completion. If you have failed to obtain such consents (for example, for works), you should do so retrospectively.
Ownership of property
Where the pharmacy is owned by the incorrect entity/person it will need to be transferred, usually to a company. Normally this happens where a sole trader has purchased the pharmacy and then later incorporated a company. On incorporation the transfer of the property into the company name is overlooked.
There are two options where you own the freehold of the pharmacy – the property can be easily transferred to the company. Alternatively, you may wish to retain the freehold for investment purposes and grant the company a lease.
If you own the leasehold of the pharmacy, the situation is slightly more complicated and how you can transfer the property to the company will be determined by the lease terms.
The usual position is that the landlord’s consent to a transfer of the lease is required where there is a change in ownership. This consent can take weeks to obtain and an early approach should be made to the landlord for this to avoid delays.
On a sale of the company shares, provided that the property is in the name of the company, no landlord’s consent is required (as there is no change in the tenant). However, on an asset sale where only parts of the business are being sold and the tenant will be changing, the landlord’s consent to the tenant change will usually be required (as above).
In this situation once the buyer is known (and as early as possible therefore), the landlord’s consent should be sought.
A buyer will want to be satisfied that there has been no breach of legislation and therefore no potential liability. We usually see delays occurring where a selling pharmacist does not hold an asbestos survey, fire risk assessment or Energy Performance Certificate (EPC).
The asbestos survey and fire risk assessment are legal requirements punishable by an unlimited fine and/or up to two years imprisonment. The EPC must legally be provided to a buyer on an asset sale and the fine for non-provision is based on the rateable value of the pharmacy.
Where you do not have these documents in place, they should be produced before the sale transaction begins as most buyers will require that they are handed over on completion. They can take two to three weeks to produce.
Buyers will also want to be able to satisfy themselves that the property can lawfully be used as a pharmacy and that any works carried out at the pharmacy have been in accordance with planning legislation. As a result, buyers will want to see any planning permissions or building regulation documents that relate to the pharmacy that are up 10 years old.
The 10-year figure is a general rule of thumb. Buyers can obtain these documents from the local authority but this can take weeks and as a result if you are able to collect these before the transaction begins delays will be avoided.
If you have a lease of the pharmacy, you should check whether there have been any rent reviews. If there have, you should collate evidence that the rent review has taken place – usually a rent review memorandum.
This is very important even where the rent did not increase as any buyer will want to ensure that the rent review has been finalised. If the rent review has not yet been undertaken or finalised, you should take steps to agree the rent and for a rent review memorandum to be signed by both parties so as to avoid delays.
If you are concerned about any of the issues raised in this article or wish to speak to someone about a pharmacy transaction, call Michelle Noble (pharmacy transactions) on 01483 252 522 or by email to [email protected]