Getting Comfy in Buying Parks
We have noticed an interesting phenomeon in the buyer and seller relationships this past year. Our clients are most often the buyers, and the sellers are most often couples or family groups.
While 90 percent of the processes are easy and all parties are on the same page, 10 percent of the time we see things become rocky. Typically, it has to do with one spouse being excited to sell and the other spouse wanting to hold the asset. The same with family groups. Some of the members wish to sell; others are not sure what life will look like outside of running a park.
When the latter occurs, it can make the due diligence period painful. One way to protect yourself during this phase is to have a "Comfort Clause," or "Letter of Comfort," as part of your agreement.
Will Kenton, Writer for Investopia writes:
"Two parties in a business deal can use a letter of comfort to put in writing the outline of the terms of their deal. Most major business transactions require a lot of time on management's part to perform due diligence before they can finalize a deal. A letter of comfort can summarize the steps each party agrees to take to ensure the successful completion of the transaction. A well-written letter of comfort can assure each party that the time spent on completing these tasks will be well worth the effort."
This clause calls for access and data to be shared in an open and accessible way. It prevents sellers from holding out on important information until the day of settlement. It calls for transparency regarding files, figures, permits, site access, and inspections.
Many times, the sellers are reluctant to allow buyers on site to take photos needed for a new website or to gain access to their PMS system in order to pull reports needed for budgeting and forecasting. This hinders our clients and puts them at least a month behind where one should be on opening day. An important corollary to this occurs in connection with paid reservations. The buyer wants to know what payments will be delivered to them at the time of settlement.
Adding a "Letter of Comfort," to your LOI's or Purchase Agreements can ensure you get the data and the access you need to make informed decisions well before the day of settlement.