The way in which we take holidays has changed in recent years, with many people embracing domestic travel, or “staycations”, and taking more frequent trips in place of an annual two-week holiday abroad. In fact, YouGov reported that the majority of people in the UK intending to travel in 2024 planned to take a domestic holiday, and more than half anticipated taking between two- and four-trips.
There is an abundance of reasons for these new habits: environmental consciousness, security concerns and a desire to avoid travel administration are just a few. There is also the convenience factor – staycations allow us to reach our chosen destination more spontaneously, and perhaps even with our pets in tow.
Therefore, it is not surprising that we are seeing continued interest from both existing and new operators looking to invest in the holiday home parks sector by acquiring and/or developing new holiday home parks. There are, however, a number of considerations for potential buyers to make before signing on the dotted line.
1. Transaction structure
Depending on what is agreed, the purchase will be structured by way of either an asset sale or a share sale.
An asset sale would encompass the acquisition of land, property and other assets associated with running the holiday park business. A share sale involves the seller selling shares in the company which owns the assets and/or operates the business. There are a number of reasons why either structure may be opted for, often tax-related. Whichever structure is opted for, it will be important to agree this with the seller at a very early stage to save time and cost.
2. Exclusivity
There may also be circumstances in which you can negotiate a period of exclusivity with a seller, whereby the seller agrees to not engage with any other interested parties during an “exclusivity period”. During this time, parties contractually agree to instruct solicitors and progress the transaction. Sometimes a fee or deposit amount is required to secure such an agreement, which will be formally documented by solicitors in an exclusivity agreement. As a purchaser, this may give you comfort to incur expenditure on matters such as searches, tax and planning advice and engaging your professional team.
3. Professional team
Appointing a professional team early in the purchase process is invaluable. This will certainly include a lawyer, accountant and tax adviser. You may also need a financial adviser if borrowing funds, a valuer and a planning adviser, depending on your plans for the park. Your team will be able to support you and will minimise potential difficulties further down the line. Clear and effective communication across your team is also useful to ensure you can quickly resolve any issues or queries that arise.
4. Financing the transaction
If you plan to acquire a holiday park with finance from a bank or other lender, they should be involved as early as possible and kept informed of anticipated timelines. This will help the lender or their solicitors to work towards those timelines, satisfy their due diligence in respect of the assets over which they are taking security, and prepare security documentation, enabling you to access funds in time for completion. It is useful for your solicitors to be able to establish a good relationship with your lender or their solicitors early on to discuss what your lender’s requirements are and work towards meeting them in a timely manner.
5. Due diligence
Another matter to address at the beginning of the transaction timeline is to start the due diligence process. This is the process of looking under the bonnet of the business and checking the park is operating properly. It typically takes several weeks to complete. The process will be thorough and usually involves obtaining as much information as possible on both the business and the property assets being acquired.
In relation to the property element of the purchase, your solicitors will be able to advise and assist you in obtaining relevant searches such as local authority searches, environmental searches, highways searches and utilities searches, as well as reviewing the results of these. You may also want to commission specialist surveys or assessments on matters applicable to holiday parks, such as drainage, boundaries, and the condition of any septic tanks on the park.
6. Employees
It is recommended that you gain an understanding of the business “on the ground” by visiting the park in person. Sharing any concerns or observations with your solicitors will allow them to raise relevant and pertinent enquiries with the seller as part of the due diligence process, and of course there may be matters you wish to discuss with the seller directly. You may well want to speak with some of the staff at the park, though you should only do so with the seller’s consent as it may unsettle employees if they are unaware of the sale. You will also want to ensure you are clear what contracts of employment are in place with staff and the extent of any benefits offered.
7. Planning
Establishing the planning status of an existing holiday park is often complex and can require reviewing lots of planning documentation. Your planning consultant will be able to help you identify and navigate any site-specific issues. Key considerations include ensuring that the relevant planning permissions are in place to authorise the activities being undertaken on the ground. They will also check the site licence and planning permissions are aligned, for example with regard to the specific nature of the holiday use and any occupancy restrictions they impose.
8. Services
In place of a conventional “mains” infrastructure, many holiday parks may rely on septic tanks and sewage treatment plants, and springs or wells for supplying water. Often, licences issued by bodies such as the Environment Agency will be required in respect of these. You will want to be assured that the seller has operated in accordance with any such licences, and that the licences will either continue in force or can be assigned to you after completion. Doing so will avoid the risk of not being able to operate, or operating in breach of such licences and applicable laws. You will also want to ensure the services operate efficiently and have the appropriate capacity for current and likely future use.
9. Business as usual
When purchasing an operational park, you will want to be satisfied that matters such as cleaning, maintenance, gardening and security will continue seamlessly after completion. An important part of the transaction will be establishing that the seller has fit-for-purpose contracts in place with their suppliers and customers, and documenting and making arrangements as to what will happen in respect of those supplier relationships and customer bookings. You will also want to consider any restrictions on using the seller’s operating name and intellectual property.
Your solicitors will be able to assist with reviewing the information and documentation supplied by the seller for this purpose, as well as drafting the transaction documentation accordingly. It will also be worth discussing with the seller directly the practicalities of any handover including things like taking stock checks or meter readings, or any matters which involve third parties. Depending on the circumstances, it may be appropriate to agree a handover period with the seller to support a smooth transition.
10. Operating sustainably
With environmental matters having an influence over many holidaymakers’ decisions, it is important to consider how you can accommodate guests and generally operate your park in a sustainable, or more sustainable manner. For example, electric car chargers will continue to become increasingly important to guests from a practicality perspective. Research conducted by Booking.com discovered that 43% of respondents were willing to pay more money for accommodation with a sustainability certification. Initiatives you might wish to consider in order to lean into this, such as water turbines or solar tiles on communal buildings, will of course require upfront investment but often lead to lower running costs over time.
Holiday planning
In summary, while the holiday parks sector presents many opportunities, it is important to appreciate the associated risks. It is therefore vital you have an experienced professional team in place with an understanding of the matters which are likely to arise, to support you through this.
Nick Dyson is a partner and head of real estate at Blacks Solicitors
