What’s property got to do with a dental purchase?
Author: Summer Pearce
Key contact: Humaira Ashraf
Purchasing a dental practice involves various complex corporate considerations. However, it is just as important to understand the property aspects of the transaction from the start to avoid unnecessary delays and expenses. Below is an overview of the key property considerations when buying a dental practice.
Please note that this article does not cover all steps involved in purchasing a dental practice but provides a brief summary of the common steps of a property transaction.
Funding and early discussions
Once instructed, your solicitor should discuss with you how you plan on funding the purchase. If a loan is to be taken, they may get in touch with your bank relationship manager to ascertain their requirements. It is important to establish these from the beginning of the transaction, as certain banks have specific requirements with regards to which property searches are to be undertaken. It is also important to discuss any tax implications of your purchase with an accountant.
At this stage, heads of terms may be negotiated with the seller’s solicitor before the main terms of the transaction are agreed. This ensures both parties are on the same page from the initial stages of the transaction.
Title review
The initial stages of the transaction will involve understanding whether the property ownership is freehold or leasehold:
- Freehold ownership means that it is owned outright (including the land it is built on) with no time limit
- Leasehold ownership means that you only own the property (but not the land) for a specific term. Your solicitor will check whether the lease satisfies the lender’s criteria (if you are obtaining bank funding) and they will also check whether the lease terms are appropriate for a dental practice.
Particular attention is paid to whether there are any defects in the title which could adversely affect your interests as a buyer. Title review includes checking whether the property benefits from certain rights or whether there are any restrictions or covenants which could affect your intended use of the property. If there are any issues identified, your solicitor should report these to you and, if necessary, raise any enquiries with the seller. If there are any financial charges on the title, your solicitor may request an undertaking (a binding promise) from the seller’s solicitor to ensure that the charge is redeemed on completion, so the charge is removed from the title.
Due diligence documents
The principle “caveat emptor” or “buyer beware” means that it is the buyer’s responsibility to ensure that the property they are purchasing is suitable for their needs and is in good condition.
Your solicitor will conduct a review of the due diligence provided by the seller to ensure that it meets their requirements. Common due diligence includes the following (please note that this list is not exhaustive):
- Asbestos survey
- Legionella risk assessment
- Fire risk assessment
- Health and safety policy
- Gas safety records
- Planning permission for use as a dental practice.
Your solicitor will check for any issues within the documents and will raise enquiries with the seller’s solicitor. Issues that may arise include the presence of asbestos in the property or a high risk of legionella. In these circumstances, it is common for the solicitor to query whether any action has been taken to either resolve the issue, or at least, to manage it.
In addition to regulatory documents, your solicitor may review Commercial Property Standard Enquiries (CPSE) responses provided by the seller. The purpose of these is to provide you with further information regarding the property. CPSE responses can be useful, as the seller must provide correct information (to their knowledge) otherwise they may become susceptible to misrepresentation claims from the buyer.
Searches
While property searches are not a legal requirement for cash buyers, obtaining searches is a crucial step in ensuring that you are aware of any potential risks and are able to make informed decisions about the property. Typical searches usually include environmental, local, chancel, drainage and water. Searches can take anywhere from 24 hours to 3 months to return, so the earlier they are submitted, the better.
If any risks have been flagged in the results, your solicitor may raise these as part of their enquiries to the seller. For instance, if flooding has been raised as a potential risk, your solicitor may ask the seller whether they have experienced any flooding during their ownership.
Exchange, completion and post-completion
Once all enquiries are resolved and documents agreed, we work closely with our corporate team looking after the business side of the transaction to coordinate exchange and completion. Exchange and completion often happen simultaneously, but this is not always the case. You will have to sign the contract, transfer or lease and any mortgage deed, if applicable. Your solicitor will arrange for the transfer of any monies.
Post-completion steps can involve filing SDLT (for properties in England) or LTT returns (for properties in Wales) and registration at HM Land Registry. The seller should provide evidence of the removal of the charge from the title, if applicable. Other steps depend on the specifics of your transaction. For instance, if leasehold, a notice of assignment may need to be served on the Landlord of the property.
If you are thinking of buying or selling your dental practice, please do get in touch with our award-winning Dental team.
