Don’t Cut Out the Legal Advice!
If you’re looking at buying a hair salon then pay attention. I’m going to reveal some crucial issues you will need to work through before you hand over any money for the business.
Keep in mind, though, that buying or selling any business is a complex process, and the following is a selection of some of the most important points to deal with.
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Investigate the Accounts of the Business You Are Buying
Firstly, take advice from a decent accountant who’s familiar with buying hair salons or similar businesses. I can’t count the number of times where I’ve told a client to do this and I’ve received a call a few days later to tell me that, having gone over the figures with their accountant, they’ve decided to pull out. Take advice early and you could save yourself the expense and stress of having to pull out at a much more advanced stage in the deal.
Check the Planning Permission
Check the planning position early on. Just because the current owner’s been trading as a hairdresser without a proper planning consent doesn’t mean you should be a fool and do the same thing (and who knows, maybe the seller’s selling because of the lack of consent). If you need planning consent, you’ll have to factor in at least a three month delay whilst your application for change of use is processed by the local council.
Many people don’t want to wait this long and will look for another business to buy where consent is not needed. Don’t forget that using a property as a hair salon could well fit within use class A1, which is a popular use class for high street shops. That said, if you’re planning on offering other services like beauty therapy, nails or massages, then these would probably not fall within A1 use and you might have to obtain planning permission for them.
Negotiating the Lease
Chances are, the seller will be a tenant in occupation under a lease. You will then have the choice of taking a transfer of that lease as it is, warts and all, or negotiating the terms of a new lease directly with the landlord. This is an issue that you should discuss with your solicitor, as there are always quite a few points to weigh up.
For example, on the one hand, the rent under the current lease might be low and fixed for another four years, but the lease is excluded from security of tenure. On the other hand, if you took a new lease you might want to make sure it has security of tenure and a longer term, whilst acknowledging that you’d probably have to pay a little more rent.
Employment Contracts
Be extremely careful about employees. You will need to make sure that the landlord gives you full details in writing of all the employees and workers (whether full or part time), and the terms of their respective contracts. If you don’t do this, you could find yourself having to pay the salaries of several employees you never knew existed, but whose contracts automatically transferred to you on completion.
Obtain a Warranty in the Contract for Sale
Remember to get answers in writing to any important questions you raise with the owner about the business. That way, you would have an infinitely better chance of taking action against the owner following the sale for any misstatements. Better still, you will want the owner to warrant in the contract for sale that the answers he has given are true and accurate. Check the owner’s answers to any questions carefully. Sometimes, they will simply ‘forget’ to answer some of them or give an ambiguous reply. Don’t be afraid to push them for a clear written answer.
Take a Full Inventory
Do take the time to draw up a proper and full inventory of all the contents you will be purchasing. You don’t want to find that those designer cutting chairs you wanted are missing on the day of completion because the seller never said they were included in the sale.
Buying any business is complicated, so be prepared to invest some time thoroughly researching the business you’re looking to buy. If you do, you should save yourself a lot of potential future headaches.
We also offer legal advice on Taking on a Hair Salon Lease.
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For further information or advice about any aspect of Commercial Conveyancing please, contact Bartletts Solicitors today on Freephone 0800 988 3674, or Chester 01244 313 301 email advice@bartletts.co.uk or complete the free enquiry below:
