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Things to Consider if You're Thinking of Selling Your Estate Agency Business

Property Technology Blog

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In this guest blog, we're delighted to welcome back Peter Nicholls, who previously authored the post Establishing Your Reputation as a Lettings Agency off the back of his contribution to our eBook, 10 Top Tips to Find Landlords in 2017. This time, he discusses a number of things to consider if you're considering selling your estate agency business in the near future. 

Things to Consider if You're Thinking of Selling Your Estate Agency Business

I have written this short information piece, because it has, on occasion, been our experience that clients can sometimes drift naively into selling their business (despite our best efforts, I might add!), and more latterly find themselves compromised either practically or financially at some later date. 

Are you eligible for Entrepreneurs’ Relief?

When you sell a business your proceeds of sale are likely to be subject to Capital Gains Tax. However, if you qualify for Entrepreneurs’ Relief you will only pay 10% on all gains on qualifying assets up to a lifetime limit of £10 million.

So, how do you qualify? Well, in broad terms you will qualify should you dispose of any of the following;

  • You sell all or part of your business as a sole trader or business partner
  • You sell shares you got through an Enterprise Management Incentive scheme after 5th April 2013
  • You sell assets that you lent to your business or personal company
  • Sell your shares in a company where you have a minimum stake of 5% in a company with voting rights (known as a “personal company”)

However, if you are in any doubt, your accountant should be able to advise you with regard to your situation.

What are your obligations to your employees?

When ownership of your business changes, your employees are usually protected under the Transfer of Undertakings (Protection of Employment Regulations) or TUPE as it is more commonly known. TUPE would usually apply when either a business transfers or the service provision changes, so under TUPE the following would apply:

  • All employees’ jobs usually transfer over to the new company unless they are made redundant (prior) or the business is insolvent
  • Employment terms & conditions are transferred as they exist
  • Continuity of employment is maintained also
  • Protection under TUPE does not apply if employees were recruited to oversee a particular event/short term task or their contract is connected with a supply of goods for the company’s use

Again, if you are in any doubt at all, take legal advice and make sure that you don’t inadvertently break the law.

Understand what you are selling

Are you selling your assets or your company? Most estate agents would prefer to sell their company and its shares, so that they qualify for entrepreneurs’ relief. However, buyers will naturally be more cautious when taking on potential liability from a third party.

So, it is important that you consider the following if you wish to curtail the transaction time and minimise your legal fees;

  • Your business will be subject to due diligence by the buyer and their solicitors, so look to tidy up any potential issues or difficulties prior to sale. If that is not possible, disclose your concerns early on in negotiations – that way the deal will not get derailed at a later stage
  • Please note, buyers do not usually take on the historical debt of the businesses that they wish to buy, so debts (if minor) should either be settled prior to sale, or disclosed during negotiations so that an amicable agreement can be reached as to their settlement at an early stage
  • In general terms, the tidier your records, the faster your transaction will proceed. So, it is important that you prepare your business in advance, as no buyer likes unwelcome surprises - however unintended
  • Think carefully about what you are looking to achieve, and don’t be afraid to take advice at an early stage from your chosen advisors (solicitor, accountant and broker). It is important that you assemble a team around you in which you have complete trust and confidence – as they will no doubt prove their worth in moments of potential stress and/or difficulty

The majority of people who sell their businesses do so only once in their lives, so it is vital that you give yourself the best possible chance of success by planning and preparing for your exit. So, my parting shot on this subject is that the old saying about making your own luck, “the harder I work and prepare, the luckier I get”, applies just as easily to selling your business as it does no doubt to a great many other things.

For more information about selling your estate agency, visit www.ideologyconsulting.co.uk.

Peter Nicholls

Written by Peter Nicholls

Peter Nicholls is CEO of Ideology Consulting, Business Consultants & Brokers to the UK Estate Agency Sector.

estate agency

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