Monday 10 December 2018
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Buyer Beware

The buyer of a care home – as with other businesses regulated by the Care Quality Commission - must be registered with CQC to carry on the business legally. Giles Gillingham from rhw solicitors in Surrey, highlights pitfalls in the current CQC registration process and argues for a change.

When someone is buying a care home, the Sale Agreement will need to be conditional upon obtaining sufficient confirmation from CQC that an acceptable Notice of Decision (“NoD”) in respect of the buyer’s application and then a Registration Certificate will be issued to the buyer. CQC’s current procedure is that the NoD will not be given until the solicitors for both parties confirm that completion of the sale has taken place.

CQC understandably won’t issue a NoD (or agree to be legally bound to do so) before then as circumstances may change, for example, if the buyer is a limited company and goes into liquidation before legal completion takes place. That is a risk a buyer should and can accept.

The question for solicitors acting for sellers and buyers is what constitutes a sufficient written confirmation of CQC’s intention to issue a NoD (and, in turn, Registration Certificate to the buyer) as this is the point at which the Sale Agreement will become unconditional and a firm completion date is identified.

There is currently considerable uncertainty due to the lack of a coherent and consistent approach by CQC in issuing what CQC refer to as a “comfort letter”. Surprisingly CQC appears to have no set procedure in place regarding comfort letters and there is no standard template used across the regional offices of CQC in this respect. The content of comfort letters differs depending on which regional office of CQC is dealing with the buyer’s application for registration.

It is absolutely essential for buyers to know that CQC are satisfied with their application and that they will issue a NoD and, thereafter, a Registration Certificate on terms that are acceptable to the buyer. So if the buyer is, for example, seeking a like for like registration to that held by the seller, then before paying the purchase money to the seller the buyer needs to know from CQC that that will be what CQC issue.

Because the content of CQC’s current comfort letters is ambiguous we, as solicitors acting for buyers, have had to engage in further correspondence with the relevant CQC assessor in order to clarify precisely what provisions the NoD and Registration Certificate will contain. This confirmation usually comes through from CQC only at the second attempt.

This whole process creates uncertainty for both parties, is time consuming and costly. There seems to be no reason why CQC cannot streamline this part of their process into a single stage, and use a template “comfort letter”, which would save buyers (and sellers) cost and uncertainty. We have proposed this to CQC but the response from them has been that they do not have such a letter and, even if they did, it would not be used regularly! This is disappointing.

The process outlined above only serves to underline how important it is for buyers and sellers of care homes (and other businesses regulated by CQC) to employ solicitors with specialist knowledge of the registration process, who will ensure that the Sale Agreement is worded correctly in relation to the buyer obtaining a suitable comfort letter from CQC that will cause the contract to become unconditional.

We would urge other solicitors specialising in the sale and purchase of care homes to support us in asking CQC to revise its procedures in this respect so as to avoid unnecessary time and cost being spent trying to clarify the position for both buyer and seller.

Giles Gillingham, Senior Commercial Solicitor for rhw Solicitors LLP

Email: Direct Line: 01483 540534