Care home commercial property
The Commercial Property Side of Care Home Transactions
In most care home transactions, the property is the single most valuable asset and the place where the regulated service is delivered. That combination makes care home property work more involved than standard commercial conveyancing. This page explains the property issues that arise when care homes are bought, sold, leased, or refinanced, and how our commercial property team addresses them.
Property in a care home transaction
Whether a care home changes hands through a share sale or an asset sale, the property needs proper investigation. On an asset sale, the property transfers to the buyer and is conveyed alongside the business. In a share sale, the property usually stays within the company, but the buyer still needs to know exactly what the company owns, on what terms, and with what problems, because those come with the shares. Our commercial property team works alongside our corporate team on both structures, which is explained on our Buying and Selling a Care Home page.
Freehold or leasehold?
Many independent care homes are owned freehold by the operator or a connected party. Freehold ownership provides control, is generally preferred by lenders as security, and often accounts for the largest share of the overall price.
Other homes are held on a leasehold, with the operator paying rent to a landlord. Here, the lease terms shape the value of the business: the length of the remaining term, rent and rent review provisions, repair obligations, and any restrictions on assignment all require close review before a purchase. Buying a leasehold care home usually requires obtaining the landlord’s consent to the assignment of the lease, which must be built into the timetable.
Sale and leaseback
In a sale and leaseback, the operator sells the freehold to an investor and takes a lease of the home back, continuing to run it as a tenant. It is a way of releasing the capital tied up in the property, whether to fund expansion, reduce borrowing or realise value ahead of retirement, without giving up the business.
The lease terms decide whether the arrangement works in the long run. Rent levels and reviews, the length of the term, repairing obligations and what happens if the operator later wants to sell the business all need thorough negotiation before the freehold is sold, because the operator’s bargaining position is strongest at that point.
Property due diligence
Property due diligence on a care home covers:
- Title investigation: ownership, restrictions, covenants that could limit use as a care home, rights of way and access arrangements.
- Searches: local authority, drainage and water, environmental, and any others the location makes necessary.
- Planning: the planning history of the site and confirmation that the current use is lawful.
- Condition and compliance: survey findings and the building matters that carry particular weight in a care setting, such as fire safety and any works required by regulators or insurers.
What the investigation finds feeds into the contract, the price and, where appropriate, indemnity insurance. Problems found late cause delay; problems found early become negotiating points.
Planning and Use Class C2
In England, care homes fall within Use Class C2 (residential institutions) under the Town and Country Planning (Use Classes) Order 1987, as amended, alongside nursing homes, hospitals and boarding schools. There are no general permitted development rights allowing a change of use to or from Class C2, so converting a property into a care home, or converting a care home to another use, will normally need planning permission.
Planning also matters when extending or reconfiguring an existing home. Building work to increase capacity may need planning permission, and increasing resident numbers also normally means applying to the CQC to vary the condition on the registration that limits how many people the home may accommodate. The two processes run in parallel, and both need to be allowed for in the project timetable.
Leases, landlords and tenants
We act for operators taking, renewing or assigning care home leases, and for property owners granting them. Our commercial lease work covers the negotiation of terms, licences to assign, rent reviews, and disputes that can arise during the term. You can read more about this work on our commercial lease page.
Funding and security over the property
A lender funding a care home purchase will take security over the property, normally a first legal charge, and will often require a specialist valuation of the home as a trading business. We handle the property side of the funding: investigating and reporting on title to the lender, satisfying the lender’s conditions and completing the security documents. This runs alongside the corporate funding work described on our Buying and Selling a Care Home page.
How our property and corporate teams work together
Care home transactions stall when the business sale and the property work are run separately, with each side waiting on the other. At Tayntons, Shelley Bonney leads the corporate side of care home transactions and works with David Henson and Kate Gibbons in our commercial property team, so due diligence, contract terms, funding and completion are coordinated as one transaction rather than two.
Frequently asked questions
What use class is a care home?
In England, care homes fall within Use Class C2 (residential institutions) under the Town and Country Planning (Use Classes) Order 1987, as amended. The class also covers nursing homes, hospitals, boarding schools and residential colleges.
Do I need planning permission to convert a property into a care home?
Normally, yes. Changing a property’s use to a care home is a material change of use into Class C2, and there are no general permitted development rights into or out of that class, so planning permission is usually required. The position should always be confirmed with the local planning authority for the specific property.
What is a sale-and-leaseback of a care home?
The operator sells the freehold of the home to an investor and takes a lease back, continuing to run the business as a tenant. It releases the capital tied up in the property, and the leaseback terms determine how well the arrangement works over time.
What property searches are needed when buying a care home?
As a minimum, local authority, drainage and water, and environmental searches, together with a full title investigation and a survey. The property’s location and history may make further searches advisable.
Talk to us
For help with the property aspects of a care home purchase, sale, lease, or refinance, in Gloucester, Cheltenham, Stroud, the Forest of Dean or anywhere in Gloucestershire? call us on 01452 522 047, email info@tayntons.co.uk, or request a callback. We are proud to have our legal services rated as ‘Excellent’ on ReviewSolicitors.
