The best laid plans

I have lost count of the number of times recently that solicitors or lenders acting on behalf of purchasers of pubs, clubs, hotels and restaurants decide at the eleventh hour to send the business valuer a raft of plans, building warrants, completion certificates and other documentation, requesting that their accuracy be verified as the deal completes “tomorrow”.

Such an unreasonable course of action reveals a common misconception about the role of the business valuer and, as such, holds the potential to break a seemingly sure fire deal at the last stage, to the bitter disappointment of both the buyer and seller.

With a view to putting the record straight, the remit of a business valuer, the provision of specialist valuation advice, emphatically does not require inspection of the property plans. It is this distinction between surveying and valuing that is not always appreciated by other professionals.

View on the ground

As stated clearly in the terms and conditions of engagement drawn up in accordance with the RICS guidelines, and heeding advice from professional indemnity insurers, business valuers inspect premises from ground or floor level only whilst exercising all due care and diligence to arrive at an accurate assessment of the worth of the subjects as a trading entity. For the avoidance of all doubt, they will not carry extendable ladders, nor will they use damp meters, for example, on site.

Since business valuers do not themselves take measurements of the actual ground or site upon which a pub, club or hotel is situated, they cannot possibly be expected to accept responsibility for warranting a deed plan, again a document often forwarded the day before the deal is due to conclude with a request that the valuer confirm the boundaries.

Warranting plans of either the property or the land pertaining to licensed premises is a complex and specialist process in itself, and no doubt most business valuers would be happy to recommend to their clients, their bankers or legal advisers an appropriate department of their own, or alternatively an appropriately qualified building surveyor for example, who could carry out such a detailed inspection accompanied by the plans and provide them with the comfort they seek. In practice, however, few clients opt to pursue this option because of what they perceive to be the prohibitive cost implications involved.

Costing the deal

The vast majority of buyers and sellers of licensed establishments want their valuations produced as quickly as possible and for the minimum possible expense. However, all too often, such a strategy can transpire to be a false economy in the long run.

Selecting a local, non-specialist valuer rather than an experienced and recognised, nationally-known business valuer can prove to be an expensive mistake. It is not unknown, for example, for banks to reject as substandard valuation reports submitted by non-specialist surveyors perhaps not appearing on their panel of permitted valuers for such properties or businesses. This then requires prospective purchasers to fork out the additional funds required to pay for the report which should have been commissioned in the first place.

Such non-specialist valuers would be likely to offer to undertake the work for a significantly lower fee than a specialist valuer, but I have said it before and I am sure I will say it again, “You get what you pay for”.

Similarly, it is not unknown for prospective purchasers of licensed businesses to have been so smitten with the subjects in question that they are prepared to ignore professional advice entirely. Should they be sufficiently flush financially that they can afford to ignore such advice, that is their prerogative, though should they subsequently encounter difficulties selling up a year or so later, they clearly cannot expect to complain to those advisers whose counsel they chose blithely to ignore.

In practice, however, most prospective purchasers, perhaps fortuitously, are not in a position where they would be able to seal a deal without the full support and co-operation of their bank, for the simple reason that they require close to the maximum available loan in order to fund the purchase.

Heartbreak hotel

Too often, potential deals fall through for the wrong reasons. This can be particularly galling in those circumstances where there is both a willing seller and willing buyer but where nevertheless something goes awry at the last minute that could have been resolved perfectly well earlier in the legal process.

It is therefore vitally important that all of the various professional advisers work together. Too often the valuer comes in at the beginning, supplies his report and is thereafter completely discounted and ignored and his advice is no longer sought or felt relevant until the last minute.

Trust me when I say that this has often caused heartache and has led to transactions falling through when otherwise they could have been easily completed within the set timescale. I urge all parties to the deal to get their houses in order early and ensure that the documentation which does require to be ratified is passed to the relevant professionals timeously and not the day before settlement is due.

Experience teaches us that buyers and sellers should refrain from assuming that a deal is concluded satisfactorily until all of the various hurdles, legal and otherwise, are fully wrapped up to the unequivocal satisfaction of all relevant parties. Perhaps if all of the professional advisers were more willing and able to work more closely together and were prepared to adopt a degree of understanding as to each other’s roles in the transaction, the incidence of last-minute snags and potential deal breakers could and should be minimised.

Roy Hudghton is a partner in DM Hall Chartered Surveyors and a specialist in the valuation of licensed premises and leisure-related properties