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What does, no punch and no PIP , mean ?

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The BAF Group LLC
MD

A "punch" list refers to the list of repairs that a hotel/motel flag (franchise) requires on an annual or semi-annual basis, when their representatives conduct their periodic inspections. The punch list makes certain that the facility is in keeping with the franchise company's specifications for maintaining minimal standards of repair, in order to retain the flag.

The PIP, I believe, describes projections for a Property Improvement Plan, usually in a property that has been in some semblance of disarray and needs to be improved over time. We just sold one that needs $2 million in such long term renovation because of previous negligence; however, it was not formally described in terms of PIP. There are some circumstances where a motel operator is changing flags and the new franchise company gives them the approval, pending acceptance of the PIP, which they will monitor to make certain adequate progress is being made. This is also what is occuring with the motel we just sold.

When you buy a hotel/motel property, this can be one of the biggest concerns. When there is a change in ownership, the flag will sometimes demand a quicker resolution to these items for repair than they might with the current or past ownership. Others give the new owners more time - there is no rhyme or reason and it all depends on the brand's own philosophy. Therefore, it is vital that your Contract of Sale be contingent upon speaking with the franchise representatives to determine whether there is any punch or PIP that is required once you take over. If there is a sizeable list, this should be calculated into your business plan and even into the loan you are taking out for acquiring the property. Sometimes, the list can be so high that either the price must be lowered to make it worth your while to buy, or you back away from the deal, altogether.

DO NOT TAKE THE SELLER'S OR THE BROKER'S WORD FOR THERE BEING NO PUNCH AND NO PIP!!! You want a written disclosure from the franchising company.

Dec 22, 2009
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The BAF Group LLC
MD

A "punch" list refers to the list of repairs that a hotel/motel flag (franchise) requires on an annual or semi-annual basis, when their representatives conduct their periodic inspections. The punch list makes certain that the facility is in keeping with the franchise company's specifications for maintaining minimal standards of repair, in order to retain the flag.

The PIP, I believe, describes projections for a Property Improvement Plan, usually in a property that has been in some semblance of disarray and needs to be improved over time. We just sold one that needs $2 million in such long term renovation because of previous negligence; however, it was not formally described in terms of PIP. There are some circumstances where a motel operator is changing flags and the new franchise company gives them the approval, pending acceptance of the PIP, which they will monitor to make certain adequate progress is being made. This is also what is occuring with the motel we just sold.

When you buy a hotel/motel property, this can be one of the biggest concerns. When there is a change in ownership, the flag will sometimes demand a quicker resolution to these items for repair than they might with the current or past ownership. Others give the new owners more time - there is no rhyme or reason and it all depends on the brand's own philosophy. Therefore, it is vital that your Contract of Sale be contingent upon speaking with the franchise representatives to determine whether there is any punch or PIP that is required once you take over. If there is a sizeable list, this should be calculated into your business plan and even into the loan you are taking out for acquiring the property. Sometimes, the list can be so high that either the price must be lowered to make it worth your while to buy, or you back away from the deal, altogether.

DO NOT TAKE THE SELLER'S OR THE BROKER'S WORD FOR THERE BEING NO PUNCH AND NO PIP!!! You want a written disclosure from the franchising company.

Dec 22, 2009

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