What to consider when purchasing a care home: the legal aspects
The process of buying a care home requires input from specialist legal advisors who are experts in both business law and health and social care law. When purchasing a care home, you should consider the following:
Care homes are often operated by their owners through limited companies. Therefore, you need to consider at the outset whether the transaction should be undertaken by way of a purchase of the shares in the company or by way of a purchase of the business and assets of the company.
Have you undertaken sufficient ‘due diligence’ on the care home? Have you looked at critical things such as whether the care home has a satisfactory CQC report or whether the care home has been the subject of any litigation or investigations?
You will need to be registered with the CQC before you can take over the care home. This process can take several weeks and will need to be factored into the timing of the transaction. However, if the purchase will be undertaken by way of a share purchase of the seller’s
company which operates the care home, the company should already be registered with the CQC.
Local authority funding
Are any of the residents of the care home funded by the local authority? If so, as a buyer, are you familiar with the local authority’s contract with the care home? If you are buying the shares in the company which operates the care home, is there a ‘change of control’ clause in the local authority contract which needs to be addressed?
Financing your purchase
If you are seeking bank funding for the purchase, you will need to ensure that you fully understand the terms of any loan and security documentation you will be required to enter into with your bank. If you are using a limited company for the purchase, your bank may require a personal guarantee from you.