Lawyer Monthly - October 2021 Edition

39 OCT 2021 | WWW.LAWYER-MONTHLY.COM BUYING A HOLIDAY PARK: THE LEGAL CONSIDERATIONS permission and those allowed under the site licence (which will usually prescribe a minimum distance between units for safety purposes). Ensure any third party funding the purchase of the park understands the valuation and operating model of how parks work and the process involved in making a profit. A lack of understanding can lead to confusion or conflict, which can damage relationships between a purchaser and any funder or significantly impact the profitability of the park. There are specialist valuers who can provide education in how a park operating model works. Litigation and Regulations It is also important for a buyer to ascertain that the necessary licences are in place with the occupiers on site. Informal arrangements may develop over time, particularly on holiday parks; however, this means that there may be no written record of the licence terms. In this instance, the rights and responsibilities of each party should be considered in terms of transfer of land and whether there is an opportunity for a buyer to utilise the lack of formality. This could involve seeking to introduce new licence terms and/or terminating licences to aid redevelopment opportunities. Holiday parks often have site rules in place which complement any Licence Agreement. A buyer will need to know what these rules are, and whether they have been implemented appropriately and enforced consistently. As part of the due diligence process, potential buyers should seek information on previous and existing disputes with occupiers on the site. In the case of a residential park, it may be worthwhile to search the record of decisions maintained by the First Tier Tribunal to ascertain if there are any previous relevant decisions. A residential park in particular may have a qualifying residents association in existence. A buyer will need to know of its existence to ensure that after purchase they discharge their statutory duty under the Mobile Homes Act 1983. This ensures that the buyer consults the association on all matters related to the operation and management of, or improvements to, the park which may affect the occupiers either directly or indirectly. Corporate Law It is imperative to discuss the potential purchase of a holiday or residential park with lawyers and accountants to confirm the most effective strategy when it comes to structuring any transaction. Whilst a share purchase will ordinarily be a more tax- efficient method, it will result in providing a larger suite of warranties and a tax indemnity in respect of the company’s tax affairs to the buyer. Therefore, serious consideration should be given to which structure is the most beneficial in all circumstances. Always ensure a proper and in-depth due diligence exercise is carried out. Despite the fact that holiday and residential park businesses may have a limited number of assets and contracts, there are almost always some issues or liabilities in respect of the business. In the absence of an effective due diligence process, the buyer would be unaware of these issues which would only then come to light after the sale has completed. Ensure that contractual protection is provided when it comes to the seller’s compliance with planning laws and consents in connection with the business. The most common issue with holiday and residential park businesses is a failure to adhere to the terms of the Site Licence or other applicable permits, consents, regulations or legislations. As such, having robust contractual protection in place to avoid these potential liabilities is crucial. In Conclusion As with many aspects of life over the last year or so, how we holiday has never looked so different. That trend of having more staycations is likely to remain given the ongoing uncertainty presented by COVID-19 as well as additional regulations caused by Brexit. The impact on the holiday park sector in particular is being felt. Whilst this will undoubtedly lead to opportunities to invest and develop further in this sector, as with many things there are associated risks, as highlighted above. For any buyers or individuals considering purchasing a park, it is crucial to secure the right advice from legal experts, accountants, and specialist valuers to ensure legislation is adhered to and avoid issues cropping up later down the line. Nick Dyson Head of Commercial Property, Blacks Solicitors City Point, 29 King Stree, Leeds, LS1 2HL Tel: +44 0113 227 9344 E: NDyson@LawBlacks.com www.LawBlacks.com