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What are the legal considerations for buying a gym in Queensland?

There are many important legal considerations for those contemplating buying a gym. Several points should be addressed by you and your small business solicitor and any financial advisor you have assisting you. These include:

  • Financial Accounts – The completion of any Sale of Business contract should be contingent on an examination of the financial history and viability of the business;
  • Contractor Agreements – A small business solicitor should closely review the contractors’ contracts to ensure that these agreements adequately protect the interests of the business;
  • Equipment and Site – Make sure you have satisfied yourself with the quality and condition of the gym equipment and the location of the business itself.

Before you enter into any Sale of Business Agreements, work out how many members the gym currently services, if the location is conducive to building up clientele, and whether there will be any issues around capacity of parking for the members of the gym. Finally, you should assess the financial viability of the gym.

Financial Viability

Most gyms get the majority of their income from their memberships. This generates a reliable annuity stream, which can sustain the business’ day-to-day operations. As such, it is crucial that the 10 business days provided for in the Real Estate Institute of Queensland (“REIQ”) Sale of Business Contract are used to ascertain the financial standing of the business and the accuracy of its accounts.

Have your small business solicitor insert into the Sale of Business Contract a special condition that allows you, as the potential purchaser, enough time to make all the necessary enquiries about the finances and day-to-day expenses of the business. This is best conducted with the assistance of an accountant.

Contractors’ Agreements

In almost all cases, personal trainers are contractors working in the gym, providing services while paying a regular rental fee. It is important that a small business solicitor or an employment lawyer review these agreements to make sure the terms and conditions are fair and reasonable for the business.

Under the REIQ Sale of Business Contract, the purchaser is entitled to choose whichever employees it would like to employ (or at least make offers of employment). It also allows the contracts of the various contracted trainers to be transferred into the contract. This, however, is insufficient for a purchaser wishing to review the terms of any agreement. As such, a small business solicitor needs to review or redraft the terms so that they are suitable to all concerned parties.

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Equipment and Site

It doesn’t matter if you intend on leasing the site or if you plan on buying the property, it is crucial that you look into the conditions of the premises and the quality of the equipment. This includes verifying the status of any local council approvals and the integrity of the building’s structure.

Although the standard Queensland contract includes a warranty that all equipment is fit for its purpose following settlement, it doesn’t include any procedure to assess the strength of this warranty.

The suitability of the site and the quality of the equipment is integral to running your business successfully. As such, it’s advisable to have a small business solicitor or a contract lawyer insert into the Sale of Business contracts a special condition that permits inspection of all equipment and the site itself to ensure their quality and structural integrity.

Conclusion

If you do not speak with a small business solicitor about incorporating these important terms into the contract, you might find it difficult to assess the site, equipment and supply contracts that you will inherit as the new business owner. As a result, you could end up in a worse financial position, which is why it is worth contacting a small business solicitor to avoid this situation altogether.

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Priscilla Ng

Priscilla Ng

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