The prospect of buying a practice is extremely exciting, but it is important to remain clear-headed about your purchase. Making the wrong decision now could saddle you with unwanted debt and problems that could affect you and your family for years to come.
A Word of Caution if You Have Already Found Your Dream Dental Practice for Sale
As you have probably discovered, there are numerous dental practices for sale at any given time. You might even have already discovered your dream practice, with a great location, existing staff and patients and is ready for you to take charge. All that remains is to sort out the dental practice purchase agreement, and you are pretty confident that your family solicitor who handled your house purchase will easily be able to do this as well.
This could be your first and worst mistake, as buying a dental practice is a major financial investment that requires the kind of legal advice that you can only obtain from a specialist dental solicitor. If you pause for a moment and consider all the dental terminology associated with running a practice, then it becomes easy to see how a general solicitor will struggle to understand everything required to make sure your purchase moves forward in a legally correct and effective manner. There are several major pitfalls or red flags that could easily be missed by a non-specialist solicitor, while a specialist dental solicitor will be only too well aware of what could go wrong.
Four red flags to consider are:
How NHS (GDS and PDS) contract transfers will be effected
Registration with the Care Quality Commission (CQC)
Dealing with the transfer of shares in a limited company
Property, particularly when negotiating a new lease or transferring an existing one
These are just four potential problems that could arise, but there are many more possible pitfalls that a specialist dental solicitor will know to check for, protecting your investment and ensuring you buy a viable dental practice that will provide the predicted revenue
Taking a Closer Look at These Pitfalls
1. NHS (GDS and PDS) Contract Transfers
NHS contracts, both PDS and GDS are expressly stated to be non transferable.
In order to get around this absolute restriction on transferring a contract and experienced Specialist Dental Solicitor will create a process where the buyer is added to the contract as a partner and then post completion the Seller is retired from the contract leaving it in the name of the Buyer alone. This process is only generally possible with a GDS contract, however, a seller is able to convert a PDS contract (other than a wholly UDA ortho contract) to a GDS contract, so the practice becomes saleable. The way of accomplishing this is for the seller to enter into a partnership with the buyer once contracts are exchanged. As soon as the new partnership has been acknowledged by NHSE, the contract is completed. The seller is then able to retire from the partnership.
The documents and knowledge required to effect this process within the rules of the GDS regulations and the knowledge of the various CQC registrations and de registrations necessary to effect the change in ownership are complex and specialist. This is why it’s vital for buyers to seek legal advice from an experienced dental lawyer at the earliest opportunity before agreeing a sale.
2. CQC Registration
Both the seller and buyer have the responsibility of transferring the CQC registration for dentists, and both are required to provide a DBS check that is no more than 6 months old. This can take up to 2 months to obtain, so it’s vital that both parties begin this process early in the transaction. The registration becomes more complicated where partnerships have to be formed and dissolved to effect the transfer of the NHS if the dental practice is run as a partnership which might be the case if the NHS PDS contract has been changed to a GDS contract. If the partnership has to add or remove a partner from the practice and the practice was registered with the CQC before February 2014, the existing partnership will have to be de-registered first and must then reapply as a new provider with the new partnership. The registering and reregistering of an individual practice or partnership can take a further eight weeks. Again, it is a complex business that is best handled by a specialist dental solicitor who is experienced in providing CQC advice for dentists.
3. Dealing with Incorporated practices
Since it became possible to transfer practices into limited companies in 2006 an increasing number of practices have operated as limited companies. Many of these “incorporated” practices have been badly incorporated and there are significant risks in buying a practice that has had a “flawed incorporation”. It may be possible to remedy some or all of the issues but it is essential that you have an experienced specialist dental lawyer consider and identify the issues and then deal with them and include adequate safeguards so that there is no risk to you or your lender of claims arising or NHS contracts being forfeited after you have bought.
A dental practice for sale may be leasehold or freehold. If it is leasehold, then it’s important to check whether the lease needs an extension and the landlord’s consent will most likely be required for the seller to transfer the lease. If you need finance to purchase your dental practice then often the lender will require a charge on the lease, which again may need the landlord’s consent. This is something that is best handled by a specialist dental solicitor. Even if the property is freehold, its transfer can be complicated. Then there is the issue of an asbestos survey and a fire risk assessment that may not have been carried out by the seller. Additionally, the practice needs to be accessible to disabled patients, and this will be assessed during a PCT or CQC inspection. If any alterations are required, then a landlord will need to consent, even if the alterations are to meet legal obligations.
How to Find a Solicitor When Buying a Dental Practice
Making sure your dental practice acquisition is handled by a specialist dental solicitor will provide you with peace of mind and will ensure the transaction proceeds far more smoothly and quickly. Specialist dental solicitors often advertise at dental trade shows or in dental directories, or think about reading the legal columns in dental magazines. Often word-of-mouth recommendations are best, as for example, Goodman Grant Solicitors has a page of testimonials on their website. It’s worth taking a look to discover how we could help you.
Goodman Grant solicitors can offer dental legal advice that will help you avoid the potential pitfalls of buying a practice, so you can recognise the right dental clinic for sale and will know when to walk away from a potentially bad acquisition. We have more than 25 years of experience in providing dental legal advice, ensuring a dental practice purchase agreement is watertight, protecting the rights of the buyer. Please contact us to find out more. We look forward to hearing from you.