Hotel Searches

On this page

1. The Real Estate and the Business Are Sold Together
2. What the County Record Holds
3. What the Franchisor Holds Instead
4. Licensing and Why It Does Not Convey
5. Ordering the Search

The Real Estate and the Business Are Sold Together

A hotel trades as a going concern. The appraisal values the income, the price reflects the brand, and the thing conveyed by the deed is a building with a large number of small rooms in it.

Separating those is the first task in any hotel transaction, because they are governed by entirely different documents held in entirely different places. The real estate behaves like any other commercial parcel and searches accordingly. The business sits in a franchise agreement, a management agreement and a stack of licenses, none of which travel with a deed.

A buyer who treats the two as one thing has priced a brand they may not be able to keep.

What the County Record Holds

More than people expect, and the parts that matter most are the ones that survive a change of owner.

• The deed and the mortgages, with assignments of rents securing the lender against the room revenue.
• UCC fixture filings on furniture, fixtures and equipment, which on a mid-sized property is a substantial sum and is frequently financed separately.
• Recorded comfort letters between a franchisor and a lender, setting out what happens to the brand on a foreclosure.
• Memoranda of management agreement, where an operator insisted on recording notice of its position.
• Restrictive covenants barring a competing brand on nearby land, which are common around interstate exits and outlast everybody who negotiated them.
• Access, signage and parking easements, which on a pad site in a commercial development frequently cross land the hotel does not own.

The competing-brand covenant deserves specific attention. A buyer intending to reflag a property can find the site recorded against operating under the obvious replacement brand, and that restriction binds regardless of what the franchisor is willing to agree.

What the Franchisor Holds Instead

Everything that determines whether the hotel is worth what it sold for.

The franchise agreement and its remaining term. Transfer and approval requirements, which a change of ownership triggers and which the franchisor is not obliged to grant. Liquidated damages on an early termination. Quality inspection history, which determines whether renewal will be offered at all.

And the property improvement plan, which is the item most likely to break an underwriting. On renewal or transfer a franchisor can require a renovation schedule running well into seven figures on a mid-sized property, with a deadline attached. It is not recorded anywhere, it does not appear in any search, and a buyer who underwrote the real estate without it has underwritten half the obligation.

Licensing and Why It Does Not Convey

Liquor licenses are personal property in most states, can be pledged separately from the real estate and frequently have been, and may carry substantial independent value. Food service permits run to the operator. Occupancy and lodging registrations run to whoever is licensed.

None of it passes through a foreclosure of the real property, which means a lender taking back a hotel takes a building without a brand, without a liquor license and without the permits to operate. That is a materially different asset from the one the loan was underwritten against, and it is the reason comfort letters exist.

Ordering the Search

Send us the address, the county, every parcel number, the owning entity and the operating entity with any former names, and the brand and franchisee name. Tell us whether the property sits on a pad within a larger development, because the access and signage rights will then cross parcels you are not buying.

A full chain of title search with a judgment and lien search against every entity name is the usual scope. Ask for fixture filings specifically rather than assuming a standard search reaches them.

A title search reports what was recorded and found in the indexes reviewed, as of the day the work was done. It does not report franchise terms, improvement plan obligations, licensing status or occupancy history. See all search products, or tell us the brand and the county and we will scope it before anything is ordered.