Licensees looking for a challenge are snapping up pubs from Spain to Australia. Michelle Perrett finds out more.
So you've had enough of the UK's miserable weather and antiquated opening hours and want to get away somewhere a little more adventurous.
Perhaps you want to move somewhere offering sunnier climes, such as Spain, or maybe you feel like somewhere more exotic.
More and more licensees are being tempted by the idea of buying a pub or bar abroad with the majority heading for the sun of ever-popular Spain and Portugal. Increasing numbers are looking further afield to countries such as South Africa.
It has been estimated that over 80 per cent of pubs and bars on the coast of Spain are leased or owned by British people abroad but this does not mean the market has reached saturation.
Virtualpubs.com, an internet property company which specialises in selling pubs abroad, has witnessed a dramatic increase in the number of properties sold over the last few years. When the company was set up in 1999 it sold just 30 pubs a year but that number has increased by over 200 per cent - last year alone it sold 700 pubs.
Unlike in the UK, where freehouse property prices have been skyrocketing, destinations such as Spain form a relatively stable market. Here you can buy a pub lease for as little as £20,000 - making it a cheap and easily accessible way into buying an ongoing business.
And English speaking countries with sunny climates are increasingly being seen as more attractive destinations for those looking for something new.
Michael Davis, director of Virtualpubs.com, said: "People see buying a business abroad as an opportunity to do something different. A lot of people are getting more adventurous at the moment but they are not so adventurous that they want to learn a new language."
The result is that the online property company is about to launch in Australia and has just set up a branch in South Africa. Both countries have good climates and are English speaking - making it ideal for potential purchasers looking to get away to the sun.
Mr Davis believes there is a strong potential for growth in both these countries and although it is early days, the company has been receiving positive feedback.
"It's a new venture and there has been a lot of interest in what we have done. But the process will take a while," he said.
Last year Birmingham-born Dennis Teale bought the Drummond Arms in Gordon's Bay, South Africa. He had worked in pubs before in the UK but never owned a business. "I'm working harder than I've ever done in my life but at least it's for myself," he said. "I'm convinced that if I had stayed in the UK I'd never have tried to run a pub. I think you are more of a risk-taker in a new country," he said.
Whatever country you decide to buy the pub of your dreams, it's not necessarily going to be all plain sailing. But although it may be a risk, it can be minimised. Licensees need to make sure that they are prepared and that they take the right advice.
Proper legal advice is essential for checking that the business does not have any undisclosed debts, an overvalued inventory, pending legal action or overstated earnings.
Potential purchasers must also make sure that they check for any additional costs that they could be charged both by the legal and government authorities. For example, some counties have various types of property tax, which can add additional costs on to the purchase of your property.
Also, it is advisable to open a bank account locally in order to pay bills and taxes. If you need funding it's better to use a local bank as it will check the details of a property and can act as a safeguard for you as the purchaser.
Plus, don't forget that other countries have their own bureaucracy. If you thought that the UK was bad for over-complication - try working out the licensing restrictions when they are written in Spanish legal jargon.
Some countries may require a survey report for the property detailing items such as the plumbing, soundproofing, air conditioning and fire procedures of each site. This can be another additional cost.
If you are going to employ staff, remember that you may have to meet different legal requirements. For instance, in Spain if you are self-employed you must join the Spanish Social Security scheme.
More importantly, it's still going to be hard work running a business. Licensees must check out the locality and competition in the area.
Running a pub in Spain or South Africa is not going to be the same as running a pub in the UK. Just because you are in another country it doesn't mean you won't face some problems. You may be getting away to sunnier climes but it doesn't mean you are guaranteed success.
As Mr Davis said: "You have to offer people a reason to visit your business. More importantly, you still need to be the right sort of person to make a pub work."
Top tips for buying abroad:
- seek advice from solicitors, architects and surveyors before considering a purchase
- try to arrange your mortgage in principle before agreeing to purchase the property
- open a bank account in the chosen country to meet all bills and taxes
- never sign a contract you don't understand
- ensure you do not inherit any debt on the property
- bank reference and employer's or accountancy references are required.
How to buy a pub in Spain
Guidelines for buying a property or business in Spain are outlined here by Inmaculada Ranera, director of Christie & Co's Barcelona Office:
- Once the purchase price and the main terms of the contract have been agreed, it is usual in Spain to sign a preliminary contract, the Promesa de Compraventa (promise of sale), by means of which both parties assume the obligation of a future contract.
- The purchaser deposits the arras (normally 10 per cent of the asking price). This sum is forfeited if the purchaser doesn't go ahead with the deal. If the vendor pulls out, the purchaser receives double the deposit amount.
- Another pre-contract agreement is the Opciun de compra (call option), in which both parties agrees to sell/buy if certain conditions are met. Both sides must make a deposit (between five and 10 per cent of the asking price) and either side will lose this if the terms of the contract and the agreed timing are not met. The sale is finalised when the escritura (deed) is signed as a public document in front of a solicitor or other legal representative.
- When a lease is agreed on a business which is already trading, a traspaso (premium) must be paid to take over the business. The business has to be traded in the same way for at least a year. The landlord has the right to increase the rent in case the new lessee would like to negotiate a longer contract than the existing one. In the case of restaurants, the landlord can not increase the rents more than 15 per cent.