5 Common Legal Steps Involved in Buying a Dental Practice
Key Contact: Jon Lawley
You’re buying a dental practice, your offer has been accepted in principle and your finance is in place. Next, it’s time to tackle the legalities, which honestly, sound complex and daunting. To prepare yourself for the process to come, here are five common legal steps involved in buying a dental practice, a specialist solicitor is experienced to deal with to help make sure the transition moves smoothly
1. Carrying out Due Diligence
Due Diligence involves gathering detailed information on the practice as a business before the buyer enters a contract with the seller. This is to make sure the business is commercially viable and to uncover any hidden issues. Due Diligence is usually instigated by a specialist solicitor who knows what questions to ask the seller to find out the information they need. They’ll investigate the practice accounts, insurance details, NHS contracts, litigation issues, regulatory information, equipment and compliance documents, supplier contracts, employee contracts and associate agreements, property-related documents such as evidence of planning permission and EPCs. If any issues are uncovered, your solicitor will offer advice on what to do next.
2. Transferring the practice property
When you buy a dental practice, you’re not only buying the business, but you’re also purchasing the property it’s housed within. These are two separate transactions your solicitor will aim to complete simultaneously. Investigations your solicitor will carry out will depend on whether the property is sold leasehold or freehold. For example, if it’s a leasehold property, your solicitor will check the length of the remaining lease and whether it needs to be extended before it can be transferred. This is usually because, if you’re taking out a mortgage on the property, your provider might require the lease to be a certain length before they release the funds. Buying a freehold property is generally more straightforward and involves looking into whether a seller has carried out relevant safety reports, like an asbestos survey, and a fire-risk assessment, for example.
3. Transferring NHS contracts
NHS practices are appealing to buyers for their strong goodwill, guaranteed income and lower patient turnover. However, transferring the NHS contract from one owner to another is a notoriously tricky and complex process. Although it’s possible to do it, it’s impossible to do so conventionally, which involves navigating a minefield of bureaucratic hoops. It’s important to prepare yourself for this part of the process, which can be time-consuming, require patience and most importantly, the support of a special dental solicitor for their intricate understanding.
4. Registering with the Care Quality Commission
To maintain high standards of dentistry, the Government requires all dental practice owners to register with the Care Quality Commission (CQC). Once an owner has registered their practice, the CQC will inspect it and issue a report recommending any improvements that need to be made. When you buy a practice, your solicitor will check the seller’s registration and inspection report to find out if recommendations made were made and complied with. They will also help you submit your registration application by liaising with the seller. They will also liaise with your mortgage provider who requires written confirmation the CQC agrees to register your practice. The situation is made more complex if you are buying an NHS practice.
5. Drafting the sale and purchase agreement
The sale and purchase agreement – or SPA – is the main contractual document drawn up in the practice purchase. It sets the terms of the sale and each party’s obligations and liabilities. A well-drafted SPA will include information about protections required as a result of matters arising after due diligence; warranties and indemnities to protect you from certain liabilities that may arise after completion; restrictive covenants to be imposed on the seller after completion to protect the goodwill of the practice; and funding documents, such as loan agreements, facility letters and debentures, and any other additional supporting documents to agree as part of the process including, for example, that transfer an interest in the premises, employment/associate contracts where the seller is staying on at the practice after completion, and company-related documents if any companies are involved.
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