Negotiating Hotel Purchase and Sale Transactions: Key Legal Issues for Buyers and Sellers

Description

Purchasing a hotel or other resort/leisure property is fraught with legal issues beyond real estate matters to resolve in a shorter due diligence period. Working knowledge of the concerns, standards, and customs for addressing those matters is critical to a successful transaction.

The buyer and seller must ensure that the purchase and sale agreement provides a sufficient roadmap through the acquisition and disposition process that considers all stakeholders and meets the parties' reasonable expectations. A group of reps and warranties is not enough.

Key provisions may include the buyer's ability to obtain or assume financing; retain or terminate the franchise affiliation; retain or terminate the management agreement; the buyer's ability to secure required licenses and permits (including a liquor license); develop a property improvement plan; addressing employment concerns; evaluating potential organized labor agreements; withdrawal liability under ERISA; evaluation of existing leases and service contracts; approval by a loan special servicer; addressing hidden liens; and other due diligence items.

When the hotel property is subject to a hotel management agreement or a franchise affiliation, buyer's and seller's counsel must vet the buyer's ability to retain or terminate that relationship. The hotel management agreement can lock in much of the hotel's value. The buyer must carefully examine the management agreement and the abilities of the hotel management staff.

Listen as our authoritative panel discusses unique issues involved in the purchase or sale of a hotel. The discussion will include seller representations and warranties, critical closing contingencies in the purchase and sale agreement, and issues to consider in retention or termination of the hotel management/franchise affiliation.