The acquisition of a dental practice can be a very complex process, whether you have your own existing portfolio or if it is your first venture in this area. Smith Partnership can make your decision as smooth as possible and of course ensure you are given the appropriate advice at the right stages in the transaction. Our focus will be to ensure that legal advice given is relevant, sound and concise.
It is fundamental for a dental practice acquisition to ensure the correct due diligence is executed before a commitment is made to purchase the target practice. When we say ‘due diligence’ we mean a detailed investigation into any legal aspects concerning the target practice.
The purpose of this article is to explore these aspects and to highlight a number of issues which may be encountered.
Where the target practice is based on a freehold title, an examination of restrictive covenants should be carried out to ensure that there is no third party who has the benefit of any covenant which could affect the occupation and use of the property as a dental practice. If this is the case, the buyer has two options, namely to seek to have the covenants released, but more commonly obtaining a defective title indemnity insurance for the protection not only of the buyer, but a lending institution.
More often than not a dental practice will be based on a leasehold title. A detailed perusal of the lease will be necessary to ensure that the content is enough to accommodate the requirements of any institutional lender and that the fundamental clauses of the lease are conducive towards the operation of the business at the property.
Where a purchase has been carried out with the aid of funding from an institution, invariably they will require searches to be carried out upon the property whether freehold or leasehold. There is a common misconception regarding searches; searches are not of the actual property but reveal various issues affecting the property. These searches will consist commonly of a local authority search, environmental search, drainage search, chancel liability search and coal authority search. By way of illustration, a local authority search may reveal the property is subject to an enforcement notice preventing its use as a dental practice or indeed an environmental search can reveal that the land upon which the practice is located is contaminated and therefore the occupier, i.e. buyer or tenant will have a liability to carry out some form of remediation at their cost.
Probably the most laborious part of the due diligence exercise is raising both property and business enquiries. Nevertheless, these enquiries are a crucial aspect of the due diligence process, the results of which may make or break any particular deal. The replies to enquiries will be reported back to the buyer together with any ancillary advice to ensure that they have a more in depth understanding of the operational side of the business.
In terms of compliance, we need to ensure that the business complies with a number of statutes, for example: fundamental to the acquisition will be an NHS Contract. We will ensure that the business purchase Contract contains a novation so that the NHS Contract is transferred to you simultaneously the seller resigns by way of a deed of retirement. The Contract will itself deal with a number of issues, for example:
- Business contracts,
- Protection of goodwill of the business and,
- Apportionment of liability.
As you will see, the contract itself can be quite complex, however, our role is to steer you through the issues using non-legal jargon to ensure that you fully understand and are put in an informed position to purchase the business.
We strongly advise you to ensure either yours or the sellers costs that an Asbestos Report is commissioned. Any costs consequences of the Report may be factored in to the purchase and any adjustments made.
In view of recent events Local Authorities are taking a more stringent approach to Fire Risk Assessments which should be in place where the business has more than five employees. There is no statutory format; however, these Reports must cover all fire risk issues prevalent in the Property.
It goes without saying “ caveat emptor “ buyer beware, please ensure you instruct a reputable surveyor to check the physical condition of the property – since your purchase will be subject to the present condition unless you negotiate otherwise.
As you will now appreciate the purchase of a Dental Practice is not without its concerns, however, the assistance of solicitors experienced in this field will make the purchase journey smooth and even enjoyable!
For further details of our expertise in this area please contact Dennis Thomas, Partner at Smith Partnership on 0116 247 2009.