INVESTMENTS FOR SALE


Paramount Pub Sales

150 West End Lane
West Hampstead
London NW6 1SD

Tel: 020 7644 2333
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Pub Buyers Guide: Tips For Buying A Pub, Hotel or Wine Bar

Paramount Investments offer freehold pubs & leasehold pubs, public houses, bars, clubs, restaurants, hotels and other licensed properties for sale as investments or for redevelopment. We cover all areas of licensed property sales, investments and developments in England, Scotland and Wales.

UK Pub or Hotel Acquisition & Purchase Costs


When buying a pub or hotel, a prospective purchaser will normally incur "acquisition" or "purchase costs" in addition to the actual purchase price. These costs are essentially legal and surveyor's fees, VAT and stamp duty. The level of these costs will vary depending on each particular property, the nature of the client/surveyor relationship and any changes in the rate of Stamp Duty imposed by the Exchequer.

At present the purchaser of a property sold with a purchase price in excess of £500,000 could expect to have a combined acquisition cost equivalent to about 5.75% of the purchase price. A prospective purchaser may have additional costs of acquisition arising from a building survey or environmental survey.

UK Pub Sales Agents Fees

This is the remuneration which is payable to a commercial property or pub sales agent for services performed, usually arising from a disposal or acquisition transaction.

An agent appointed to identify suitable premises or dispose of an interest, will normally expect to charge about 10% of the first years rent, or in the event of a purchase/sale, between 2% to 2.5% + vat of the finally agreed sale price. Both fee levels would usually be exclusive of VAT and disbursements.

VAT

Value Added Tax is a tax that is charged on the supply, actual or notional, of certain goods and services in the United Kingdom.

You can register for VAT voluntarily if you are upgrading a listed property for sale. Subject to certain conditions, VAT-registered developers can reclaim much of the VAT where there are major approved works changing a listed building. As you might expect, it is often difficult to get approval for large scale alterations to listed buildings, and any work classified as "incidental repair" will not qualify. Alternatively, for smaller (non-incidental) repair work, the builder may not need to add VAT to the bill.

Full recovery of VAT on costs is possible for a VAT-registered developer that refurbishes a dwelling vacant for over ten years, where a long lease is subsequently granted or the property is sold.

Property developers can benefit from a reduced rate of VAT (5% compared wth 17.5%) on the costs of converting residential property, such as flats, and converting business property to residential use. For the conversion to qualify the number of dwellings must be changed - this is examined on a floor by floor basis.

While VAT recovery is possible on the costs of many conversions or new-builds to create residential property for sale, there can be a catch with multiple dwelling developments. VAT cannot be reclaimed if it not possible for each dwelling to be sold independently - that is, without a covenant relating to the other dwellings in the development.

A change of the original plans can prove expensive. Where a developer builds a new residential property for sale to a third party, VAT on building costs can be recovered. However, if before the first sale, the developers lets out the property on a short lease (under 21 years and a day) VAT cannot be recovered.

When an investor builds a block of residential apartments with shared facilities for the residents (for example, a gym or swimming pool), the facilities should be developed and managed by a separate business. If they are developed and operated by the investor, it may result in the investor only recovering part of the VAT on the construction costs of the apartments.

The interpretations by HM Customs & Excise of the VAT regulations for property development are regularly challenged and can often be subtly changed by an individual court ruling. Choosing to register for VAT may allow you to reclaim VAT, but investors need to consider the ongoing paperwork requirement.

Legal Costs

These are the costs incurred by both a purchaser and vendor of a property, or in connection with the sale or grant of a new lease by a landlord and a tenant. Such costs can include conveyancing fees, litigation advice, counsel's opinion, stamp duty (controlled by the Exchequer), local authority search fees, bank transfer fees and court expenses, plus other disbursements and VAT.

Since Legislation is constantly being updated, it is advisable to instruct a solicitor to assist in the preparation of all sale contracts or lease documentation. Fees will vary considerably but they are usually based on between 3% to 7.5% of the first year's rental, depending on the size, nature and complexity of the matter in hand. Alternatively sale costs are usually based upon a percentage of the sale / purchase price.Specific legal advice or consultancy fees are usually based upon an hourly rate of charge

Surveyor's Fees

A building survey is an examination of a building by a surveyor (which may include specific tests by the surveyor or other experts) in order to produce a report on the structural integrity of a building and the state of repair. Such a report would usually cover the condition of the structure, incidence of any defects to the fabric of the building and the state of repair of fixtures and fittings, services and plant installations.

Depending upon the instructions given to the surveyor; these physical features would also be described in relation to safety, stability, strength, efficiency and economy in use, ease of maintenance and other factors as required. A building survey is often required as a condition to the grant of a mortgage or loan secured against the value of a pub or licensed property.

Stamp Duty

This is a Government fixed tax, chargeable on the execution of documents, pertaining to transactions such as Leases, Agreements for Leases and Conveyances. The duty is payable by the purchaser or lessee, and the disposal document can not be adduced as evidence of the transaction unless adequately stamped.

The rate applicable is set by Central Government and varies depending upon the value of the transaction.Current rates are as follows:· Up to £60 000 - nil· Over £60 000, up to £250 000 - 1%· Over £250 000, up to £500 000 - 3%· Over £500 000 - 4%