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Important Considerations When Buying or Leasing a Service Station

May 20, 2016

You must focus your attention on a number of important considerations when buying or leasing a service station to ensure that the site is appropriate to conduct your intended use. If you ignore these key items, the site may not be as successful as you commence trading at that location. In addition, it may even pose a danger to the environment. The following is a partial list, though not exhaustive, of the considerations that one should undertake as part of your due diligence.

1. Examine the overall condition of the building and site to ensure no repairs are necessary on the basic structural components of the fuel station. Never lease or purchase a station that is in less than favourable condition unless the owner repairs the issues first or the purchase price has been discounted accordingly.

2. The underground storage tanks (UST’s) and lines should be leak-free to prevent environmental damage. If prior contamination of the soil is present, you should insist that the current owner remediates these items before you agree to lease or purchase the service station since you potentially become liable financially as the new tenant or owner. We always recommend that a fresh environmental report is prepared by a suitably qualified consultant who as part of the report preparation will perform independent testing on the lines and tanks, groundwater, sub soil etc to determine the conditions below ground.

3. Line-of-site permission allows your business to be seen in the proper manner even in case of future construction. Without this, future projects may block the view of the station from the customer traffic, which would spell death for your business.

4. Learn all there is to know about the station's present financial condition. Inspect the books to discover profitability of the station along with the bills that are pending, payroll status, tax liabilities and other pertinent financial data.

5. You also need to know the present arrangements for fuel delivery and if there is still viable fuel in the in-ground tanks. Inquire if you can purchase fuel from any company or if there is one specific supplier or supply agreement in place.

6. Contract terms need to be fair and equitable as far as price, payment arrangements, special conditions and all other terms. Whether you are leasing or buying the fuel station, you deserve contract terms that help your business instead of hurt it.

7. Are there other tenants in place? Do they have leases? If so, what are the terms of the lease? What are the review periods? Is the tenant paying the current correct rental under the existing agreement and are the outgoings being recovered from them. If they are a public company like McDonalds, are they paying the land tax?

8. Access is probably one of the most poorly understood components when looking at both existing and greenfield sites. It can also be one of the most costly as we have seen plenty of cases where people buy a site for the use as a service station, only to find out that the road works alone will far exceed what they have paid for the site, thereby blowing the chances of making the site stack up financially. Similarly, are there any plans by Vic Rds or the relative authority to by-pass the site or restrict access via a median break, underpass, no right turn, etc.

When you hire Lease Link Property Consultants to assist you with buying an existing site, greenfield site, or leasing a service station, we will be certain to address all the above considerations and other ones to safeguard your interests. We also perform contract negotiations and other services for you. Consult with us soon about your plans to purchase or lease a petrol station.

  • Commercial Leasing and SalesM
  • Property Advisory
  • Site Acquisition
  • Fast Food and Fuel Specialist
  • Purchaser/Lessee Advocacy
  • Development Consultancy

You will be able to locate an ideal location faster with the assistance of a property consultant than without one. In addition, you will pay less for rent or purchase in most cases since this consultant is an expert at advocating the best deal for your company.

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