A Good Reason for Buying your Business through a Broker
I had to be the bearer of some rather bad news last night. I’m a business broker and I know a guy who recently bought a bar – about a week ago. I have known this guy for about 2 years, but he bought his bar privately. To be honest, I didn’t even know he was looking for a bar to buy, and I didn’t even know the bar he bought was for sale. But it was, and he bought it.
We saw each other in the 7/11 near his new bar and, knowing that I am a business broker he said to me “Do you know how I change the name on the bar contract into my name?” I said, “When you paid your key money to the landlord, you would have signed the new lease contract – it should be in your name now”. He said “what is key money?” and then proceeded to show me the lease contract that the previous owner has with the landlord. We adjourned to his bar so I could gather more information and advise.
Turns out that the previous owner sold the bar to him and received payment in full, but failed to tell him that he had to sign a new contract to lease the bar and that when he did so, he would have to pay key money to the landlord. Instead, he just told him “use my contract and when you want to change it over into your name, just see the landlord.” No mention of key money. The contract is five pages long and in Thai of course, and the new owner does not read Thai. He just took it on the say-so of the previous owner. I don’t know how the previous owner managed to get away with that, but apparently he did. The new owner paid a reasonable price for the bar – it wasn’t over-priced, but the key money that is now due to the landlord will add about 30% more to the cost. The new owner had no idea that there was any more money to pay. Although being appreciative of me being able to solve his problem, he wasn’t happy, and now has a bill for a few hundred thousand baht and, according to the existing contract, it is now over-due!
Sometimes you do not have to pay key money when leasing a property for business, but if you don’t, then nearly always there will be a security deposit due. And either way – key money or security deposit, you WILL have to sign a lease contract (or consortium contract if buying shares) and this is usually done the same day as you make final payment to the business owner.
Written by Parinee Insoongnoen (Palm)
Managing Director Asian Business Brokers (Thailand) Co., Ltd
for Asian Business Brokers © 2015
28 December 2015