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Investing in a petrol station in the UK can be a lucrative venture, given the country’s continued reliance on motor vehicles and the demand for fuel. However, acquiring such a property involves a complex process with numerous legal and financial considerations. Beyond the standard documentation required for any property purchase, buying a petrol service station requires additional paperwork and due diligence. This article explores the essential documents and information you need when purchasing a UK petrol station.
What Legal Documents Are Needed When Purchasing a Petrol Station?
Purchasing a petrol station in the UK is not merely a real estate transaction. It involves buying a business that supplies a critical commodity. Despite the move towards sustainable energy, there remains a need for petroleum products in the United Kingdom for the intermediate future.
Therefore, buyers and sellers should adhere to the legal requirements below to ensure a smooth ownership transition.
1. Business Financial Statements
When purchasing a petrol station, you are not just buying the physical property but also acquiring an existing business.
You should request the seller’s financial statements to understand the business’ financial health better. These documents typically include:
- profit and loss statements;
- balance sheets; and
- cash flow statements.
You should carefully review these financials to assess the business’ profitability, debts, and overall financial stability.
Additionally, it is crucial to thoroughly understand the business’ revenue sources, including:
- fuel sales;
- convenience store sales; and
- additional income streams like car wash facilities or ATM fees.
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2. Fuel Supply Agreements
Fuel supply agreements are contracts between the new petrol station owner and a fuel supplier. These agreements outline the terms and conditions for the supply of fuel, including pricing, delivery schedules, and quality standards.
When purchasing a petrol station, you should review these contracts carefully. You should also confirm if the agreements are transferable to the new owner, which can significantly impact the station’s ongoing operations and profitability.
Ensure that the seller provides copies of all existing fuel supply agreements and that you understand the terms. If the agreements are not transferable, you should negotiate new contracts with suppliers, which can affect the fuel station’s financial outlook.
3. Environmental Reports
Environmental considerations are paramount when dealing with petrol stations due to the potential for soil and groundwater contamination from fuel leaks or spills.
As a buyer, you should request environmental reports to assist with any potential ecological risks associated with the property, from possible contamination or prior incidents.
Understanding the property’s environmental history is essential for legal and financial reasons. It can affect your ability to secure financing and influence the terms of the purchase agreement.
4. Licences and Permits
Operating a petrol station in the UK requires various licences and permits, which must be transferred to the new owner upon purchase.
Let us explore common licences and permits.
| Petroleum Storage Certificate | The local authority issues this certificate and ensures that the station’s fuel storage facilities comply with safety standards. |
| Environmental Permits | These permits are necessary for managing waste, handling hazardous substances, and adhering to environmental regulations. |
| Alcohol Licence | If the station has a convenience store selling alcohol, you will need to transfer the alcohol licence to your name. |
| Planning Permissions | Verify that the property has the necessary planning permissions for its current use. If any changes are planned, consult with the local planning authority. |
Failure to obtain or transfer these licences and permits can result in legal issues and business disruptions. To ensure compliance, working closely with legal experts specialising in petrol station transactions is crucial.
LegalVision’s Buying a Business: Guide to Negotiating Terms allows you to protect yourself by understanding which key terms to negotiate when buying a business.
5. Equipment and Asset Inventory
A petrol station is not just about fuel pumps. It includes various equipment and assets, such as:
- underground storage tanks;
- pumps;
- convenience store fixtures; and
- security systems.
When purchasing a petrol station, you should request a comprehensive inventory of all equipment and assets included in the sale. This inventory should include details such as each item’s age, condition, and maintenance history.
Key Takeaways
Purchasing a petrol station in the UK is a complex process requiring careful consideration of additional documents and information. Beyond the standard real estate transactions, buyers must examine financial statements, fuel supply agreements, environmental reports, and more. Expert lawyers can offer vital assistance during this process and help review relevant documents and conduct due diligence so you can make informed decisions and ensure a smooth transition when acquiring a UK petrol station.
If you need legal assistance purchasing a petrol station in the UK, our experienced business sale lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
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