Usually, the largest and most expensive asset (in terms of upfront cost) that will be acquired when purchasing a new care home, is the property out of which the home is operating. It is important therefore to go into the acquisition process with a good understanding of the steps required from a real estate perspective and the possible issues that might be identified. Here are some of our top tips, for a smooth care home acquisition process:
1. Get to know the Property: When acquiring a new care home property, it is essential that you undertake a survey at the outset of the transaction. Post purchase, you will be responsible for the upkeep of the property and that will include remedying any defects which could (and should) have been identified as part of the acquisition process. You will also assume responsibility for compliance with laws and regulations relating to the property (like those relating to asbestos and fire safety). Instructing a surveyor at an early stage, means that any potential structural (and potentially health & safety) issues can be identified from the outset, and enquiries raised of the Seller. The issues identified will feed into negotiations and allow price deductions, warranties, and indemnities to be discussed if a resolution cannot be achieved prior to completion. A surveyor can also work with your legal team, to advise on replies to enquiries and search results received.
In addition to instructing a surveyor, there is sometimes no substitute for a detailed site inspection or walk around – familiarity with the property and the area, will help you to visualise and put issues identified into context and also spot anything that might warrant further investigation, such as any third parties who appear to be using the property with or without permission.
2. Understand the process: One of the most time-consuming elements of any acquisition, is the detailed due diligence which is required to identify not just any ‘red flags’ which might put a halt to the transaction, but also the information which you as future operator will need to be aware of, to ensure that you are able to effectively plan for this new acquisition and any ongoing responsibilities.
From a real estate perspective, this involves a review of the title information available for the Property (including for any of the existing tenancies – this will be more involved where the home offers a mixture of supported living and residential care); replies to standard and bespoke enquiries; property search results; and any additional information disclosed by the Seller as part of the transaction.
As part of this process, recommendations for further investigations may be made. This due diligence process can be time consuming and clear communication from your legal team is essential, to manage expectations and timescales. Receipt of clear instructions from the outset and throughout the transaction, will allow your legal team to narrow the issues to those of critical importance to the you. If you are funding the acquisition with debt finance, then you will also need to consider and deal with any requirements that your lender might have.
3. Know your ‘non-negotiables’: Connected to the above, it is always important to know what will be a ‘deal breaker’ for you going into a transaction. Are you looking to redevelop, and therefore will a restriction prohibiting development mean that this Property isn’t the one for you? With an increased emphasis on sustainability and energy performance, will a property which cannot be updated to improve its energy efficiency (due, for example to its status as a listed building), mean that the acquisition is not in line with the values of the Company post-acquisition? If these things are known at the outset, they will be investigated as a priority allowing solutions to be swiftly identified and wasted time and costs to be avoided.
Ultimately, communication from both sides is key. Going into an acquisition with clear intentions and instructions, will ensure that the process is as smooth as possible and allow your real estate solicitors to work cohesively with the rest of the project team, to bring the acquisition to a swift conclusion.
For further information and support, please get in touch with our Health Real Estate team.
For further information, please contact:
James Atkins, Partner, Hill Dickinson
james.atkins@hilldickinson.com
