Buying A Care Home – What You Need To Know

Part One: The Purchase

There is a lot more to owning a care home than simply being a good Nurse or Doctor or having successfully run another type of business. The skills you will be required to acquire overnight will include selling, management, and staff selection skills, not forgetting business planning, cash flow forecasting and client care.

For those not previously involved with the care sector, the more onerous regulatory requirements introduced by the Health and Social Care Act 2008 make entry less than straightforward and, unless the home is adequately managed through suitably qualified staff, may lead to an early exit.

There are various issues you will need to think about before buying a new care home. It will be important to put together a business plan and a marketing plan and to think about what your vision for your new care home will be.

Finding A Care Home

Once you have decided on the type of care home you plan to run, the next thing is to find a home that suits your needs and the needs of your potential residents. This is probably the most difficult part of the jigsaw but having found the right one, you will need to identify a bank, or broker with financial experience dealing with care home purchases, an accountant and a solicitor. All preferably people with experience of the care home sector and people with whom you feel you can deal.

Make enquiries of other care home owners, seek recommendations, ask for references and details of the experience they have had. Ask questions, and expect and get satisfactory answers.

Choosing A Lawyer

There are only a relatively small number of lawyers who have detailed experience of working for care home providers. Therefore it is well worth seeking one out with this expertise. Their specialist knowledge and experience may give you the edge in your negotiations and resolve issues before they become problems at a later stage.

Buying a care home is a major capital outlay. Throughout the transaction, the lawyer you choose should be approachable, respond quickly and be able to explain things clearly to you.

Legal Procedures or what happens when?

Heads Of Agreement Stage

It is preferable to involve your lawyer as early in the negotiations as possible, enabling him or her to offer advice on the terms you are seeking to agree.

Certain basic questions might well arise at this stage of the transaction, on which a lawyer’s advice will be essential, e.g. if the seller is a limited company should I buy its shares or just the assets; what information will I need from the Seller; how long should I allow to secure registration; what if I don’t want to take over all the employees; can I pay the purchase price in installments?

If the terms of the deal are fixed and concluded by the time your lawyer is instructed it will be very difficult to introduce changes, which could prove expensive for you in the long run.

A lawyer should also be consulted to help negotiate the heads of agreement and advise if an exclusivity agreement is appropriate and whether changes can be made to the staffing structure.

Pre-Contract Due Diligence Stage

Your lawyer will make local and other searches, raise general enquiries about the property, the residents, employees and equipment, report to you on the results, and negotiate the final terms of the contract.

A financial due diligence investigation will be carried out separately by your accountants. Together with your accountant, the lawyer can advise on and negotiate the split of the price, which can have significant Income/Corporation Tax and Capital Gains Tax implications, and any provisions needed relating to Capital Allowances.

Care Quality Commission (“CQC”) Application

There is currently no fee to apply for registration as a new provider or to add a location if you are an existing provider.

It is important that your application to CQC is made as soon as possible.

This will reduce the period you have to wait to complete the purchase after exchange of contracts, and thus limit the risk of significant changes in the business before completion.

Whilst CQC say they are “working towards” completing applications within 8 weeks in most cases we recommend you allow in the sale contract a period of four months from the date of exchange of contracts for CQC to notify you that they propose to issue a Notice of Decision to grant your application on terms acceptable to you, which will trigger the contract becoming unconditional. You should ensure that the loan offer from your lender will not lapse, and no new valuation be required by your lender, during the period from exchange until the contract becomes unconditional and is completed.