Buying a dental practice will almost always involve the acquisition of its premises, either freehold or leasehold.
Transferring the freehold is normally a relatively uncomplicated procedure once the seller’s title has been confirmed.
When taking over leasehold premises, there are two prime considerations; the present incumbent must have the property owner’s consent to the transfer, and the period remaining on the current lease. If a new lease is to be granted, with the incoming tenant responsible for maintenance and repairs, a photographic schedule of condition showing the current state of the building should ideally be attached to the lease documentation as a safeguard against future disputes.
A part of property due diligence is the completion of CPSE forms (Commercial Property Standard Enquiries) which require the seller to provide comprehensive information on matters as diverse as fire safety and service charges – but the ‘buyer beware’ principle still applies and buyers should still obtain their own professional survey.
The transfer of NHS, as well as other types of contract, can be a complex process, it’s a critical element in the valuation of the business and its future success. The buyer is always recommended to follow professional legal advice in the pursuit of due diligence in this area.
In the case of NHS contracts, both buyer and seller must be sure that the contract is transferable, either with the PCT’s consent or by utilising the partnership provisions in the GDS contract, and will not be terminated or adversely altered in the event of the sale of the practice. Buyers should also ascertain that a fixed term contract will be renewed after its expiry. The seller’s year on year performance in meeting the contractual obligations should also be checked, as an indication of how the practice is performing and whether clawback has ever been instigated.
The buyer also needs to be wary of inheriting any earlier, unresolved disputes or liabilities arising from the performance of the contract by the seller, which may have negative financial consequences or influence relationships with the other contracted party(s), and take these into account during the negotiations. If potential liabilities are discovered, the buyer should require indemnities to be included in the purchase agreement supported where appropriate by suitable retentions of the purchase price.
Even practices delivering similar services will have widely varying contractual arrangements with their staff, hygienists, associates and/or partners, service providers and sometimes suppliers. While lack of space precludes a detailed appreciation or assessment of these individual arrangements, two general observations can be made; buyers should pay particular attention to NHS and staff contracts in practices where both NHS and private work is undertaken, and to contracts which name specific practitioners to deliver particular treatments.
The seller should be prepared to supply the buyer’s representative with copies of all the relevant documentation, including copies of all contracts, recent NHS income and UDA statements, any relevant correspondence with the PCT, annual reconciliation and PCT inspection reports relating to HTM01/05, and any material which refers to PCT or patient complaints.
The buyer should pull no punches during the investigation; equally, the seller must be upfront about his business, and be prepared to answer searching questions.