Hotel Property Transactions — Disposing of a Going Concern
The disposal of an operating hotel differs from an ordinary sale of real estate in that the subject of the transaction is not merely a building but an income-generating operational business — with its room stock, running contracts and flow of guests. The legal regulation of such a transaction therefore rests on the norms of the Civil Code on sale, though with particular practical emphases: what passes to the buyer including the documents, how defects are recorded and how the limitation of liability operates.
Under a contract of sale the seller is obliged to transfer to the buyer the right of ownership in the property, the documents connected with it, and to hand over the goods. The buyer is obliged to pay the seller the agreed price and to accept the property purchased. In the hotel context the circle of documents is broad, and the law obliges the seller to transfer all documents connected with the property — a decisive detail in a going-concern deal. If the price is not directly indicated, the parties may agree on the means of determining it.
The Seller's Liability for a Defective Object
If the thing sold is defective, the seller must either cure the defect or — where the thing is of a generic kind — replace it within the necessary period. The seller bears reimbursement of the expenses necessary for the cure, including transportation, travel, work performed and materials. In the hotel context this means that defects of engineering systems, rooms or common spaces are eliminated at the seller's expense, unless otherwise agreed.
The seller may refuse both to cure and to replace if this requires disproportionately great expense; and where the seller hands over a defect-free thing for the purpose of the cure, it may demand the return of the defective thing. Limitation of liability is also possible: the seller's liability for the sale of a defective thing may be limited or excluded, but such an agreement is void if the seller deliberately concealed the defect. In a hotel transaction, where defects often throttle operational income, this norm turns into a demand for the seller's good faith: every known flaw must be disclosed before the deal.
What Must Be Examined Before a Hotel Deal
The norms of sale create the general framework, while the concrete safety of the transaction depends on the quality of the contract. The acquirer of a hotel must be sure that the documents transferred reflect the full picture of the object, and that the contract defines the notion of defect, the deadlines for the cure and the allocation of costs. The seller's silence, in turn, renders void any clause excluding liability — which also changes the negotiating position of the parties.
It is worth revisiting the details of the defect regime once more, since they create the practical prism of a hotel dispute. If the thing sold is defective, the seller must cure the defect or, in the case of a generic thing, replace it within the necessary period. The seller also bears reimbursement of the expenses necessary for the cure, including the costs of transportation, travel, performance of work and materials — an enumeration that extends on a hotel object to engineering systems, equipment and interiors.
Where the seller hands over a defect-free thing for the purpose of the cure, it may demand the return of the defective one; refusal to cure or replace is permissible only where disproportionately great expense is required. On price, too, the law gives flexibility: if the price is not directly indicated in the contract, the parties agree on the means of determining it — which on an income-producing object is often the practical choice.
Frequently Asked Questions
What obligations do the parties have in a hotel sale?
The seller transfers the right of ownership, the documents connected with the property and hands over the object; the buyer pays the agreed price and accepts the property. The parties may also agree on means of determining the price.
Who finances the elimination of defects?
The expenses necessary for the cure — transportation, travel, work and materials — fall on the seller. Refusal is possible only where disproportionately great expense is required.
Does a liability disclaimer protect the seller?
Limitation or exclusion is lawful, but the agreement is void if the seller deliberately concealed the defect. Recording known flaws is in the interest of both parties.
Can a defect-free object be received in exchange?
Yes — replacement of a generic thing occurs within the necessary period, and upon handing over a defect-free thing the seller may demand the return of the defective one.
How We Help on Legal.ge
The Legal.ge team accompanies a hotel property transaction with full legal support: we draft the contract in full compliance with the norms of sale, write in the definition of defect, the deadlines for cure and the allocation of costs, examine the transferable documents and defend you should a dispute arise. Contact us on Legal.ge — your hotel transaction will be legally balanced.