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Common Issues: Buying or Selling a Hotel in California

by | Dec 24, 2015 | Uncategorized


The business of buying a hotel is much like buying many businesses in one. Many hotels have restaurants, gift shops, spas and golf courses attached which also need to be considered during the purchasing or selling process for it to be a successful transaction. Therefore, there are a few things to keep in mind and consider during this process.

Traditional real estate issues and questions need to be considered, such as, are the buildings and land owned outright or are there leasing considerations to be taken into account? Are each of the amenities owned by the hotel owner, or are there separate entities to be dealt with during the purchase? Are there environmental issues such as safety renovations, bodies of water, or underground storage that need to be considered or taken care of before or after the purchase takes place?

Retail shops or restaurants within a hotel are often leased or owned by outside entities. Often these leases need to be updated or sold when ownership changes. Deciding whether the buyer or the seller is to acquire the necessary leasing or licensing paperwork needs to be part of the contract.

Liquid assets such as liquor is usually a sizable operation within larger hotels and licensing through the California Department of Alcohol Beverage Control must be involved to obtain a license to sell it. A coordinated effort between the buyer and seller must occur for a smooth transition to take place. This is a separate transaction from the original sale of the hotel, in which there needs to be a Liquor Purchase and Sale Agreement.

Management agreements need to be clear and in place prior to the sale since many hotels are owned by one entity and managed by a completely separate entity. Many buyers will want to lease a different management company to run the hotel than the one in which the seller already has in place. These contracts will need to be reviewed to make sure when the lease’s expiration dates occur or what the termination clauses include.

This also leads to employment issues of individual employees as well. Hotels are very labor intensive operations, which employ many people from housekeepers to hotel operation managers. The transfer of ownership of hotels brings up many employment laws and concerns which need to be dealt with the state of California.

Being prepared for these issues will save a lot of time and money and save both parties unnecessary headaches. To make sure you’re prepared for every eventuality, contact the southern California commercial real estate attorneys at The Law Office of the Law Office of Ernesto Aldover.