The Legal Side of Buying a Care Home

• Posted onJuly 9, 2021

As businesses go, care homes present a range of interesting challenges and opportunities to those willing to take them on.

Care is a heavily regulated sector, so it is important to go into the transaction with your eyes wide open and a full understanding of the legal implications.

Having the right advice is crucial. You need a lawyer who has a solid understanding of the complexities involved, including the commercial aspects of purchasing a care home, the regulatory and compliance issues and health & social care law. Having the assistance of other professionals is also essential, such as a broker to help you secure financing and an independent tax advisor.

Here, our commercial law specialists discuss the legal things you should consider when buying a care home in the UK.

Business structure

If you are starting a new business, you need to give careful thought to whether you want to operate as a sole trader, partnership, limited company or another type of business structure. There are various benefits and downsides to different types of business structure in terms of things like tax and personal liability.

It is common for care homes to be owned and operated by limited companies. This type of business structure allows the owners the benefits of limited liability while allowing access to lower tax rates (you should always seek independent tax advice).

If the care home is acquired by way of a purchase of shares in the company, as a buyer you may only have to pay 0.5% Stamp Duty. However, share purchases come with greater liability for the buyer and the transaction may be more complex (and therefore more expensive).

Alternatively, you could acquire the business and assets of the care home, allowing you more flexibility in which liabilities you wish to take on and therefore reducing risk. However, the tax liability may be greater.

Whichever option you choose, getting specialist legal advice and independent tax advice about all the options is essential.

Buyer’s due diligence

Undertaking careful and thorough investigations into the care home you are looking to purchase is vital. ‘Buyer beware’ is never more pertinent than when considering the acquisition of a highly regulated business.

The due diligence process can be complex. In terms of the care home property itself, due diligence involves things like undertaking relevant searches, reviewing title deeds & restrictive covenants, checking for planning issues and undertaking surveys.

Due diligence should also encompass a full review of any contracts, including care contracts, supply contracts and employment contracts as well as managing corresponding relationships with local authorities, private funders, suppliers, employees and other relevant parties.

You will also need to consider factors such as fire safety, risk assessments, health & safety, utilities, maintenance & clinical waste disposal, data protection and any other risk, compliance and regulatory matters.

Employment law

Buying a care home often comes with existing employees. Where you are purchasing the assets of the business, TUPE (the Transfer of Undertakings (Protection of Employment) Regulations 2006) will apply. This means that you and the care home seller will be obliged to protect the employees’ contracts of employment as they change from one employer to another.

Care Quality Commission (CQC)

If you are buying a care home and the business is planning to carry out regulated activities such as personal care, nursing care and accommodation for people who require care, you must be registered with the Care Quality Commission (CQC).

If you are not currently registered, the CQC registration process can take around three months to complete, assuming there are no delays or problems with your application.

So, applying as soon as possible is beneficial, particularly if you are hoping the care home acquisition will be quick. It is common for parties to exchange contracts with completion subject to registration being granted at a later date.

Where you are acquiring a business already registered, you must notify the CQS of the change of control over the care home. Part of the buyer’s due diligence should be to check the business’s record of compliance, including the results of previous CQC inspections.

Financing

If you require finance to acquire the care home, it is important to speak to an independent broker or financial advisor who can help you access the best possible deals and funding terms.

When preparing your loan application, there are a range of factors you will need to consider, including making sure you have a strong business plan, account documentation and proof of experience in the sector.

Set up your free initial consultation for advice about buying a care home

At WSP Solicitors, our Commercial Law team can provide all the advice you need about the legal side of buying a care home. We can work in partnership with you to help your business thrive, tailoring our legal knowledge and drawing on past experience across a wide range of areas, including commercial contracts, commercial property law, employment law and dispute resolution.

Contact our local offices in Gloucester and Stroud today to speak to one of our experts.

If you have a quick question or would like to request a call back, you can also use our quick online enquiry form.