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Top tips for buying or selling a care home

View profile for Mark Williams
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Statistics show an increase in the number of injuries in care homes

If you are buying or selling a care home there are several things that you can do to help the process run smoothly and make sure that you get the most out of the transaction.

Register with the Care Quality Commission (CQC)

If you are buying a care home as either an individual, partnership or organisation you will need to register with the CQC. Registration is required if you will be providing one of 14 regulated activities which include personal care, nursing care and accommodation for persons who require nursing or personal care.

Registration takes at least ten weeks providing there are no queries with the application. Therefore if you require a quick acquisition and you are not already registered with the CQC it is advisable to make the application sooner rather than later.

Ensure you have all relevant documentation in order

Where an asset purchase/sale is planned the due diligence process can be lengthy due to the number of contracts, policies and assessments that need to be reviewed. The care home likely to have numerous contracts in place with suppliers of different services including everything from utilities providers to clinical waste disposal and perhaps lift maintenance providers. It is also likely to have records of kitchen, fire and resident risk assessments, data protection policies and food hygiene reports that will need to be reviewed to ensure they are up to date.

If you would like a quick asset purchase/sale it is important that the seller is provided with relevant due diligence documentation ready to disclose and that the seller’s solicitors provide such documentation as early as possible and in an organised manner so that the buyer’s solicitors can quickly ascertain how long it will take to review the documents so that expectations of both parties can be managed by their respective solicitors.

Additionally, where the care home has contracts in place with local councils in order to provide publicly funded care for a particular period of time those contracts can often continue beyond the initial term and are not always extended or varied in writing. Given the strained resources of public authorities it can take some time to obtain the latest signed amendments to those contracts so that the buyer’s solicitors are aware as to the latest terms of the agreement between the local council and the care home.

Make sure assets are maintained

Where an asset purchase/sale is planned it is important assets such as kitchen equipment, lifts and on-site washing/cleaning equipment are maintained and that there is proof that such maintenance work has been recently carried out. Otherwise, the buyer may face a bill to maintain the these, or worse still a possible claim soon after the acquisition should the assets concerned cause an injury to a resident or a visitor to the care home.

Regulatory breaches must be disclosed

If a share sale is planned it is important to ensure there have been no claims or regulatory breaches and if there has been any they must be disclosed to the buyer.

Regulatory breaches can be researched via the CQC, however, any previous, ongoing or potential litigation should be reviewed as part of the due diligence process with the seller's solicitors asked to disclose the detail of any claims so that the buyer is fully aware of any risk associated with the company being bought.

Will the care home be a good investment?

Find out the ratio of private to publicly funded residents at the care home. Care homes usually make a greater margin on private paying residents, therefore a care home with more private paying residents can be more commercially lucrative.

Get to know existing staff

If you are buying a care home it is recommended, where possible, that you meet with key staff before the purchase to get to know them as they will be fundamental to a successful transition in running the business.

Ensure you have full particulars of all staff. It is common that care home staff are engaged under a variety of different contracts, for example part time or zero hour contracts. It is therefore important that you are aware of your liability for all members of staff, regardless of what contract they are employed/engaged under. This will include full details of salary, pension contributions and any other contractual benefits.

Compliance is a key issue in care homes. Therefore be careful to check the experience and training staff have had to ensure they are fully capable of undertaking their roles and such training/qualifications are up to date.

In the event of an asset sale/purchase both the seller and buyer must comply with its duties under the Transfer of Undertakings (Protection of Employment) Regulations (TUPE). Employers must consult either with trade union representatives, if there is a trade union in the workplace, or inform and consult other employee representatives if there is no trade union within the appropriate time frames and prior to the transfer of ownership of the business.

Ensure the property has relevant permissions for the intended use

Make sure that the property has the relevant planning permissions for the use for which you are buying the property and that there are no restrictive covenants that restrict the use of the property. For example, there may be a restriction that the property may not be able to be used for trade purposes. If there is such a restriction then the purchase of a defective title indemnity policy may protect you.

If you require legal advice regarding the sale or acquisition of a care home please contact our corporate/commercial law team on 0175 321 6399.

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