Planning on selling your Service Station?

By |2022-06-29T10:51:37+10:002-3-22|

The sale of a service station is quite different to the sale of a family home or commercial property. It’s not as simple as engaging a local agent and signing a contract subject to 30 or 60 days’ due diligence.

You could try that way, but I’d bet my 2021 AFL Dees premiership jersey (Melbourne Football Club for those not in-the-know) that you will encounter significant problems, your buyer will pull out or there will be variations to price and other key terms in order to keep the sale on track. It will probably result in a protracted sale process which will cost you more in the long run.

Before we go any further, I need to make one thing clear. You absolutely need a broker to manage the sale. Make sure you do your homework and appoint an agent who understands the various moving parts that make up a service station (servo) – as no two servos are the same.

Although you know your asset better than anyone, there may be a few issues that you simply aren’t aware of. These problems are not always easy to solve but there are always solutions. I’ve outlined a few common issues below.

Environmental Management Register (EMR)

Every service station by law must be on the EMR, due to the storage of fuel activity. However, sometimes they are not! So it’s worth checking. Also, the buyer must be notified about the EMR listing in writing before signing the contract. If they aren’t, you as the owner can be subject to statutory penalties and the buyer can rescind at any time up to settlement. Is your site subject to a management plan for historical leaks or spills?

Tanks and lines

This always comes up. What age are they and when were they last tested? Are the tanks steel or fibreglass and will there be problems with the purchaser’s finance? At the very least, the incoming bank will want to see a clear report.

Planning and building approvals

What are you doing on the site? Are all of those uses lawful and compliant? This seems like an obvious question but very often there are activities or ‘use’ aspects that are not approved or structures that have been placed or built without appropriate approvals or certification.

Health and food licences

This is the domain of the local council. Make sure that they are up to date and your kitchen is up to scratch. Beware the buyer’s searches will probably prompt an inspection.

Financials

These are critical to the sale price. Make sure that they’ll stand up to review.

Fuel supply agreement

You need to check what it states about the sale of the business. I’m aware of some fuel companies having provisions that require you first offer them the opportunity to buy.

Plant and equipment

What do you actually own and what is leased or owned by others? Changing fuel suppliers and de-branding can be an expensive and complicated exercise – but it does happen.

Tax

Are you comfortable that your current ownership and operating structure can be sold as a going concern and be exempt from GST? You’ll probably need some legal and accounting advice for this one.

Leases

Do you want to continue to run the workshop for a few years? Is there a mechanic that rents the space and do they have a binding lease?

Grey car at gas station being filled with fuel on thailand

There will be plenty of other things that will occupy your time in the lead up a sales campaign, but putting some effort into the issues above beforehand will reduce the extent of the buyer’s enquiries and make for a smoother transaction.

Did I mention that you should engage a business sales agent that specialises in service stations? They will have in-depth knowledge of these issues and much, much more.

For more information on the sale of a service station, contact Nick Prove and our team of experienced solicitors who are ready and able to assist.

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