Over the past 12 months FSP has seen a notable increase in instructions for both the acquisition and disposal of golf courses.
Transactions involving golf courses often include a number of bespoke elements, with complexities ranging from property ownership and occupational rights to considerations around access, overage agreements, and the contractual relationships between the landowner, club members and suppliers. This article aims to give prospective sellers and buyers a high level overview of the key considerations.
Whether acquiring or disposing of a golf club, early preparation and a clear understanding of the operational and legal landscape are critical to a smooth and efficient transition.
On all golf course transactions, there are certain core matters which require careful consideration:
Property
Typically, the most valuable asset in a golf course transaction is the property and so the prospective buyer will undertake comprehensive due diligence on it.
Sellers should go through course records to ensure property related documentation is up-to-date. This will typically include:
- title deeds;
- current and historic charges or mortgages (including those registered at Companies House or HM Land Registry);
- copies of any leases, licences or other occupational interests;
- details of easements or covenants on the property, particularly in relation to any rights of access;
- any planning permissions and building regulation approvals for the development of facilities at the site;
- any environmental, health and safety or condition reports relating to the property; and
- information relating to utilities.
Proper organisation of property information at an early stage will streamline the due diligence process and instil buyer confidence which protects against the risk of price chips and indemnities later in the process.
Overage Agreements: Plans for the Future
Many golf courses are situated on land with significant development potential. In such case sellers may seek to include an overage agreement, entitling them to a share of any future uplift in land value if development is realised.
Where future development forms part of the investment strategy, overage terms may significantly affect the returns. Buyers should consider if an overage agreement is appropriate and what the triggers, calculation methods and duration would be.
Greenskeeper Equipment
Course maintenance is typically one of the most significant ongoing costs. Buyers will therefore be keen to understand what greenskeeper equipment the course has including how it is owned (i.e. outright or leased) and what condition it is in. Sellers should therefore make sure they have a detailed and up to date asset register together with accompanying contracts where applicable.
Membership agreements
Minimising the disruption for the members of a golf course is an important consideration for both buyers and sellers. Sellers should ensure they are able to provide:
- a schedule of all current members including amounts paid and membership expiry dates; and
- a copy of the standard form membership agreement and any variations in use.
Typically, there will be an apportionment of the membership fees on completion, so the sellers receive the benefit of the fees attributable to the pre-completion period and the buyer receives the benefit of the fees attributable to the post-completion period.
Employees
Employees are fundamental to the operation of a golf course and will therefore be another area where the prospective buyer undertakes comprehensive due diligence.
Sellers should ensure they can provide full and up to date employment information including:
- job titles;
- start dates;
- hours;
- remuneration;
- benefits;
- notice periods; and
- pension entitlements.
Many golf courses engage self-employed consultants, for example golf professionals. Sellers should ensure that they have all relevant consultancy agreements available.
Transaction structure and confidentiality
A key consideration is how to structure the transaction itself, most commonly a share sale or an asset sale. The best structure will typically be driven by tax and risk factors, and we recommend you take appropriate advice at an early stage.
Throughout the transaction process a significant amount of sensitive business information will be shared, it is therefore vital that a non-disclosure agreement is signed by all parties. This ensures confidential information which is provided during the transaction process is safeguarded.
How we can help
At Field Seymour Parkes, we have extensive experience acting on golf course transactions. We also have a large network of professional contacts with experience in the golf course sector. These include brokers, developers, consultants, accountants and owners. We readily utilise our network for the benefit of our clients and are always happy to help make an introduction.
If you are considering the acquisition or sale of a golf course and need specialist legal support, please contact Ross Brymer.
