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BER could pose serious threat to dealer sales

Dealer business and property values are at risk as changes to general Block Exemption Regulations (BER) in June 2013 could see dealership sales blocked by manufacturers.

BER will give manufacturers veto rights over dealership transfers.

According to Tom Poynton, chartered surveyor within the automotive and roadside team at property consultants GVA, this potentially means a manufacturer will be able to restrict the market to specific purchasers when a dealer sells properties and businesses.

Poynton said: “This could have a major influence on the definition of a property’s market value, or the level of goodwill in a business, and seriously bring into question the notion of a fair ‘arm’s length’ sale.”

At present, a franchisee has a degree of freedom – so long as the brand’s corporate identity criteria are met, including the size, location and specification of the property, and the dealer hits the agreed sales targets, the franchise can be transferred across the network to any other dealer that satisfies the same criteria.

Poynton said: “If a dealer builds up a business, and commits not only time and effort, but extensive capital to a brand, it is only right that a fair value is realised for the business goodwill and assets. In light of this, it is not surprising that some dealers, especially small to medium sized groups, are hearing alarm bells, and may now see the next 24 months as a window of opportunity to dispose of a business in order to ensure best value.”

Poynton believes healthy competition in the market place cannot be assured if manufacturers can block a transaction or restrict sales.
He said: “These changes could pose genuine risks to automotive business and property values, and in the coming months dealers are going to need some assurances that a fair and reasonable approach will be taken by the manufacturers.”

In anticipation of the BER changes, a new code of practice is being devised for the motor industry (through the Retail Motor Industry and the National Franchised Dealers Association), but Poynton said this can only go so far in protecting the franchisee.

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