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Is your dental practice lease fit for your requirements? Things to consider before a dental practice sale.
Friday 18th November 2016

When it comes to buying and selling dental practices, the lease can often be unexpectedly problematic

As a seller, if you are occupying your surgery under the terms of a lease (whether this is a written document or an informal arrangement with your landlord), it is sensible to ensure that your documentation is up to scratch. On countless occasions, we have seen practice sales stall due to problems with property documentation. Considering the issues before you sell could avoid problems later down the line.

First and foremost, you need to establish whether you have a written lease in place. Property is usually occupied by a tenant on the terms of either a lease or a licence and technically, neither has to be a written document. The difference between the two is that a licence will not give the tenant ‘exclusive possession’ of the property. A licence arrangement can also usually be terminated by notice. A lease, on the other hand, will allow the tenant, in most circumstances, to lock the door and keep the landlord and others out (although the landlord will often have limited rights of access for inspections etc). Commercial leases have a starting point of ‘security of tenure’, which means that at the end of the lease term, the tenant is usually entitled to a new lease on similar terms provided the landlord is not able to prove one of a limited number of grounds, such as if the tenant has failed to pay the rent or the landlord wants to redevelop the site. Unless you have signed a declaration giving up the security of tenure rights they will be available to you, whether your lease is in writing or is informal.

Although you may still have security of tenure, informal unwritten leases should be avoided wherever possible. If you have not set out the landlord’s and tenant’s obligations in writing, you have nothing to prove who has responsibility for repair or insurance of the property. You also have nothing to establish procedures for getting approvals for transferring the property on, or carrying out alterations. A formal lease sets out the landlord’s and tenant’s obligations and makes it clear what can and can’t be done in or with the property.

An informal lease is also unlikely to be acceptable to a practice buyer, particularly if they are raising bank finance for their acquisition. If you are considering selling your practice be aware that any buyer who needs bank finance is likely to need a term of at least 15 years on a formal lease.

Also bear in mind that for leases in excess of 7 years, it is compulsory to register the document at the Land Registry. Leases for 7 years or longer will involve a stamp duty land tax return being submitted to the HMRC (even if no tax is payable). If you fail to fulfil either of these two requirements the lease may be invalid and a buyer is likely to insist on this being done retrospectively before proceeding.

From a dental practice perspective, it is also worth considering that there are certain issues that will be peculiar to your industry that should be taken into account in your lease. For example, a dentist is unlikely to be registered for VAT. However, for most commercial properties, the landlord would have the option to elect the property for VAT at any time. This means that the landlord can charge VAT on top of the rent. For most dentists this would have the effect of a 20% increase in their rent. It is possible in a lease for the landlord and the tenant to agree that, during the term of the lease, the landlord will not make any VAT election, or alternatively if an election is made that the rent payment shall instead be deemed to be inclusive of VAT, rather than exclusive.

Leases also frequently contain provisions which prevent the tenant from sharing occupation with any third party or subletting. On the face of it you might not think this to be an issue. However, when you bear in mind that your associate is self-employed, if you allow them to use your building may be a breach of your lease. This can be easily avoided if, when you are negotiating your lease, you ensure the document doesn’t contain provisions which would prevent you from sharing possession with another self-employed healthcare professional.

It is also not uncommon to encounter within a commercial lease provisions which prevent you from storing any noxious or flammable substances on site. By its very nature, the running of a dental practice from a property is likely to involve the storage of drugs, oxygen cylinders, heavy metals and x-ray machines. Careful consideration of what can be stored on site and your permitted use of the property could avoid problems further down the line.

Finally, it is important that the permitted use within your lease is correct. The obvious starting point might be that you are permitted to use the property as a dental practice- however, should you wish to add to the business in the future offering cosmetic treatments or complimentary therapies then this could be a breach. As an alternative you could set your permitted use as anything within use class D1- this covers medical centres and dental practices- it would give you a wider ability to carry out healthcare related activities in the building. However, when it comes to reviewing the rent it may be that this increases the desirability of the building and increases rent at future rent review dates.

A specialist dental solicitor will be able to assist in making the decisions and negotiating the document that is right for you and your business- whether you are taking the new lease upon purchasing a surgery or reviewing your arrangements in order to ensure that you are getting the best deal.

 

 

 


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Dental Practice Equipment Warranties - What is reasonable to expect
Friday 11th November 2016

If you are buying a dental practice a major part of the work that a specialist dental lawyer will undertake on your behalf will be to negotiate the ‘warranties’. These warranties are a series of promises made by a seller that give you some assurances that the business you are acquiring is what you think it is.

The warranties will cover a wide range of issues and will be tailored to the specific practice and your personal requirements. A breach of one of the warranties given in the sale contract could allow you to make a claim against the seller following completion.

One area which is often in dispute between a seller and a buyer is the area of equipment warranties. Buying an operational practice will usually include a purchase of all of the equipment within that practice.  However, don’t expect the type of warranty you get in Curry’s for your dishwasher!

The warranties given by the seller will apply on the date of exchange of contracts- which if you are buying an NHS practice is likely to be at least 28 days before the date you take over. It is wise to seek a provision in the contract to say that the warranties are repeated on the date of completion.

You are very unlikely to get a promise that something is going to continue to work for a year or two following the purchase. It is possible that you will get a promise that something will work on the date the warranty is given; although even this is not a given, as the seller may say that they are not sufficiently qualified to make such an assurance.

As a buyer you might seek warranties not only that the equipment is in working order on the date of completion, but further that the equipment that you are being sold is adequate for both the continuation of the practice in the same way that the seller operates it (i.e. that the seller isn’t going to remove a vital item of equipment prior to the sale and leave you unable to practice). It is also reasonable to seek a warranty that the equipment available is sufficient and adequate to ensure that the practice complies with current GDC and CQC guidelines. A dental lawyer will also seek to give you protection that the equipment has been properly maintained- partially by making enquiries relating to certain statutory inspection and maintenance regimes (such as for the pressure vessels and X-ray machines)- and partially by seeking warranties in relation to servicing and maintenance.

Finally, a sensible buyer would seek a warranty that the equipment within the practice is actually owned by the seller free from any finance or lease agreement.

A seller will look to limit the warranties in relation to equipment as much as possible. Firstly by ‘disclosing’ against the warranty. If information is disclosed to you prior to completion then you are usually prevented from making a warranty claim relating to that information.

A seller might also look to make a disclosure that you have had an opportunity to inspect the equipment and that any issues that would be reasonably apparent on such an inspection are deemed to be disclosed. This means that you would be prevented from making a claim for breach of warranty in relation to anything that would be apparent from an inspection of the equipment. The question is what sort of inspection would this cover- a qualified technician who inspects the equipment might find a fault in an item that a cursory glance around the practice would fail to bring to light. A sensible approach if a seller seeks to disclose anything that would be apparent on inspection is to ensure that this is limited to a brief visual inspection by a lay person.

Warranties will also be limited in terms of both value and time. You will have a limited amount of time to bring a claim for breach of warranty following a practice acquisition- it is important that you are aware of the timescales for bringing a claim. A seller will also seek to place a minimum value on any claim- for example the contract may stipulate that any claim under the warranties must be worth at least £500 as a single claim or if you have a large number of small claims at least £10,000 added together (although the exact figures would be negotiable and will depend on the practice and circumstances).

It is important that both the seller and the buyer understand the warranties that are being offered in any sale agreement. Equipment warranties should offer the buyer some assurance that what they are buying will be fit for their requirements even if they don’t purport to promise that things won’t break in the weeks, months or years following your acquisition.

 

 

 


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Demand and supply when it comes to dental practice sales
Friday 4th November 2016

All of the evidence suggests that the demand is far outstripping supply when it comes to dental practice sales. Anecdotal reports indicate that when thriving practices in good areas come to the market potentially hundreds of ‘would be buyers’ will register an interest. Practices on the market often receive multiple offers and the goodwill valuations appear to increase year on year.

It hardly seems surprising given concurrent reports of stagnant associate salaries and downward pressure on associate UDA rates. Associates nationwide are looking to get their foot onto the ladder and become practice owners. However, goodwill values often seem to be driven by demand rather than their prospects as a good and profitable business. A practice in a handily commutable location, near to good schools and public amenities, is often sold at a higher price than for more profitable practices in less desirable areas.

The trick for a buyer is to know what you are looking for in a business. Do they want to work on a nice leafy suburban road, near a high street or nice restaurants? Or are they willing to work somewhere less appealing in order to fund living in that nicer location? A smart buyer will consider the problems and opportunities available to a practice on the market and do their homework before formally committing.

A specialist dental lawyer will help a buyer make enquiries, guiding them through the paperwork that a well-run practice should have to hand. A solicitor will ask the right questions and report back to a buyer in relation to any problems. A problem arising doesn’t necessarily mean a buyer will chose not to proceed with a purchase, but if they use the right lawyer they will at least go into the deal with their eyes open.

Dental lawyers will also represent the parties in ensuring that the contract that is prepared is a fair and reasonable balance between the interests of the seller and the buyer. The knowledge that there are other people interested shouldn’t prevent the parties from reaching a fair and reasonable compromise in terms of a sale contract.

It is important for both a seller and a buyer to understand that despite a buoyant market, a practice coming onto the market is a business. Sellers and buyers would be wise to establish a good understanding of the transaction process, particularly where the practice in question has an NHS contract. Delays in the transaction timescales are often a result of one party or another not being aware that everyone is waiting on them. The most common reason we see for a seller looking to remarket a practice is delays on the part of a proposed buyer. Significant delays are also often costly; in a simplified example, if a practice has a profit of £120,000 per annum, delays of just a month mean a potential loss of earnings to a buyer of £10,000. Scale it up for a larger, more profitable, practice.

Ensuring a firm understanding of the buying process, doing the due diligence homework via a specialist lawyer and having that lawyer ensure that a sale contract reaches a fair compromise between the needs and desires of a seller and a buyer, makes for an excellent start for a young dentist acquiring their first practice. 


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CQC letters of intent- a possible catch 22 situation
Thursday 27th October 2016

Before the introduction of compulsory CQC registration for dental practices in England things were relatively simple when it came to buying and selling (and running!) a practice. An NHS practice would transfer by way of adding and removing partners and notices would be served on what would then be called the Primary Care Trust, now NHS England Local Area Teams (LATs).

The introduction of mandatory CQC registration complicated matters somewhat and there was a degree of panic amongst specialist dental lawyers at the time concerned about a possible catch 22 situation that would arise. The CQC would not formalise registration until the practice was actually owned by the new owner and the PCT would not accept the new owner onto the GDS contract (which would allow the new owner to complete its purchase of the practice) until the new owner was CQC registered.

A solution was found by the use among dental law practitioners of the ‘CQC Letter of Intent’. This is a letter produced by the CQC once it has processed a new application, which states that the application has been accepted and that the seller and buyer shall be duly registered from the date of completion, which is usually subject to;

a)     Being given 5 days’ notice of completion

b)    The parties confirming to the CQC once completion has occurred

c)     The seller confirming that the previous registration should be terminated

d)    The recommendation to approve the partnership application being approved

It has become established that LATs will accept this letter of intent as confirmation that the parties comply with the CQC and will proceed to accept the partnership.

However, recently there has been a spate of LATs taking a different and more problematic approach. The problem (as with so many things affecting the NHS) is a bit of a postcode lottery. The majority of LATs continue to take the logical approach and appreciate that insisting on a full CQC registration before allowing the transaction to complete, leads to an impossible situation. Unfortunately, others refuse to take this sensible path.

We have recently encountered a number of transactions where the LAT have refused to accept a partnership has started until the full CQC registration has been finalised. However, looking at the sale contracts often used by specialist dental lawyers, it could be that the solution is simpler than you think.

In these instances, it is often possible to get a written assurance from the LAT that they will issue a contract variation following full registration with the CQC even if they won’t actually issue the variation first. The reality is that this written confirmation should be binding upon the LAT under section 295 of the GDS contract, which states that;

“If the Board is satisfied …the Board shall give notice in writing to the Contractor confirming that the Contract shall continue with the partnership entered into by the Contractor and its partners, from a date that the Board specifies in that notice.”

A written confirmation that the LAT will vary the contract is effectively a notice given under section 295.

The effect of this is that sellers should have sufficient paperwork to complete on the practice sale as the sale contract will probably just be conditional upon receiving a section 295 notice and a CQC letter of intent.

However, further thought still needs to be given to the date of completion. Sale agreements often stipulate that completion (and the transfer of the purchase price) should occur on the date specified in the section 295 notice. Again a chicken and egg situation- you need to complete so you can finalise your CQC registration and start the NHS partnership but the date for completion is the start of the NHS partnership.

There are two possible ways around this that I can see. Firstly, the contract often states that completion conditions can be waived by the buyer and the parties can agree to proceed to completion on a date to be agreed between them or alternatively the parties could agree that they will effectively complete the sale but that the purchase price will be paid as ‘deferred consideration’ once the CQC registration is full in place and the NHS partnership has started. This latter option gives little certainty to a seller as the buyer may choose not to complete.

As a final drastic solution, judicial review proceedings could be bought against the LAT, which would seek to establish that the LAT’s approach to this policy. However, judicial review proceedings are expensive, uncertain and subject to strict time limits, so we would recommend that this is only used as a means of last resort. 


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Conditional exchange of contracts on the sale of a dental practice- what is the norm?
Thursday 20th October 2016

Exchange of contracts is the point in a sale or purchase of a dental practice at which the deal becomes binding. The buyer often puts down a 10% deposit and both parties make a formal commitment to the transaction proceeding. However, when dealing with dental practice sales and acquisitions, this commitment is often conditional.

In an ideal world when contracts are exchanged, each party should give the other party a binding guarantee that it will complete the transaction on the agreed date. However, the dental world is unfortunately not this simple. This is because for many transactions the parties are at the mercy of the NHS and the CQC providing appropriate approvals.

For a GDS contract to change hands, the Local Area Team will be given notification of a new partner. A seller would not usually want this to be done until the buyer has made a formal commitment to the practice. Therefore, the notices are often sent to the NHS on or very shortly after the date for exchange (although on occasion the parties will consider serving these notices early with a view to hitting a certain target date for the transaction to be finalised). Exchange of contracts is often then made conditional upon the NHS accepting the notification of the new partner. Although it may be extremely difficult for the NHS to refuse the partnership request, the buyer will want comfort that this has been done and that their name will appear on the GDS contract in the future.

In England, a contract is also likely to be made conditional upon the CQC providing a letter of intent. Although the CQC will not register a buyer with the practice until following the transfer of the business, it will usually issue a letter confirming that it has processed the application and that registration will be possible provided it receives certain notifications before and on completion.

A sale contract may also be made conditional upon the buyer being included in the performer’s list and that it intends to take over the treatment of patients following the purchase.

Less commonly, contracts could be exchanged conditional upon the buyer raising its bank finance. However, it is more usual for a buyer to have all of its finance in place before formal exchange. Either way, a buyer will want 100% commitment from its bank to lend before exchanging contracts without a finance condition. If it isn’t possible to get the bank finance in place and there is pressure on the deal for exchange of contracts within a set timescale, the parties may consider this provision. However, from a seller’s perspective it is something that should be avoided if possible, as making the deal conditional upon raising finance is the equivalent of saying ‘yes I will buy it, if I can afford it’.

Contracts may also be exchanged conditionally upon property issues being resolved. For example, when selling your practice, it may be sold conditionally upon your own landlord granting a new lease to the buyer. Alternatively, if you have an existing lease which is transferring to the buyer, the deal might be conditional upon the landlord consenting to the transfer (which may be a requirement in your lease). Another example of where a transaction could be conditional upon property issues being resolved, is where the property is occupied by a third party. Here the deal could be conditional upon such third party vacating the premises first.

With so many conditions common on exchange of contracts with dental practice sales, the parties need to be aware that a formal commitment is not a guarantee that completion will take place. However, steps can be taken to ensure that the conditions are kept to a minimum and that the parties commit as far as possible to the deal that they both want to achieve. 


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Buying a dental practice with underperformance issues, how your dental lawyer can protect against loss or reduction in value of an NHS contract
Wednesday 12th October 2016

In any financial year, an NHS practice must perform no less than 96% of its contracted UDAs, and by the halfway point in the year the requirement is to have performed at least 30%. Failure to achieve this can lead to NHS England (“NHSE”) serving a breach notice on the practice.

Where underperformance is an issue for a practice, NHSE has powers to revalue a contract and this could mean it imposes a lower UDA volume and/or a lower UDA price. In more dramatic circumstances NHSE may also choose to withdraw the NHS contract completely.

In the past NHSE has been more likely to take action only where there have been consistent previous breaches over a prolonged period. However, with a squeeze on NHS budgets we may start to see NHSE taking action by reducing contract values based on single year breaches or practices that have fallen only just short of their target.

If you are buying a practice you are, unfortunately, not able to defend yourself by claiming that the underperformance related to the actions of the seller. Where an NHS practice changes hands by way of the partnership route, the buyer assumes the performance history of the seller and previous year’s underperformance will be taken into consideration if you underperform again in the future.

With potentially such devastating consequences, what steps can you take to protect yourself if you acquire an underperforming practice?

Firstly, a dental lawyer will assist you with carrying out the appropriate due diligence. They will ask for end of year statements for previous financial years, the most recent mid-year statement of activity and current pay and activity statements. They will also request copies of any breach notices and other correspondence with NHSE. The information provided in response to these enquiries will enable you, as a buyer, to assess the level of risk associated with underperformance at the practice.

If a history of underperformance is uncovered the necessary action will depend on whether you have been able to establish if this is a reoccurring or an isolated problem.

An isolated minor incident can often be dealt with by way of ensuring that a sale agreement contains provision for any clawback to be repaid either prior to completion, or from the purchase price. However, if the missed targets are larger or have happened consistently for a number of years, there is more of a cause for concern. In these instances, it may be advisable to seek a promise from the seller to protect the buyer from all losses arising from either withdrawal or reduction in value of the NHS contract. Where such protection is offered, the seller may look to limit this to ensure that the protection only kicks in where the contract is withdrawn or reduced directly as a result of prior underperformance. This means that in circumstances where the buyer continues to underperform following completion, and the contract is withdrawn due to a combination of the seller and buyer’s underperformance, the protection is worthless. The buyer should therefore ensure that they have the appropriate staffing and tools in place not to miss future performance targets.

It is also advisable to seek to work out how such protection from the seller would work in practice. A seller’s promise to protect the buyer is only as good as the amount of assets that the seller has available. If they spend the entire sale proceeds immediately following completion the buyer may find that the seller has insufficient funds to give this protection. This can be avoided if funds are kept aside in a solicitors bank account until the end of the financial year (or at such time when it is ascertained whether NHSE have agreed to allow the contract to continue on the same terms), but such a course of action may not be acceptable to a seller, who will want their money sooner rather than later.

You also need to carefully consider how to quantify any loss you suffer as a result of the NHS contract being reduced in value. The loss to a buyer is effectively ongoing as they will be unable to generate the same NHS income for years to come. However, should a buyer be recompensed permanently or is the true loss to be found in the difference between the goodwill of the business with the benefit of the full NHS contract, or the value of the business with a reduced or withdrawn NHS contract.

Any buyer purchasing a practice with an NHS contract which is at risk of withdrawal or reduction due to the seller’s underperformance should carefully consider what the business would be worth to them without the contract. If the contract is withdrawn, they could be left with owning a business which is not suitable for their personal goals and ideals. The risk of any NHS contract being withdrawn can be discussed and weighed up with a specialist dental lawyer.

 


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Restrictive covenants that could prevent you from practising dentistry following a dental practice sale
Thursday 6th October 2016

A restrictive covenant is a clause imposing a limitation. They are common in the sale and purchase of dental practices to prevent the seller setting up in competition near-by. The starting point when considering restrictive covenants in respect of dental practices is, rather unusually, that clauses which out-right prevent a seller from practising dentistry are unenforceable. A dentist has a right to earn a living and any contractual provision which prevents them from doing so won’t be taken seriously by a court.

Fantastic, I hear you mutter; but if they are unenforceable, why do we bother inserting them in the contracts?

We insert them because the situation isn’t quite as clear-cut as it may appear. A court will enforce a restriction on trade where it is reasonable in all of the circumstances, taking into account the reasons why the provisions were entered into in the first place, the distance covered and the timeframe within which the dentist is prevented from working.

Provisions in a sale agreement which restrict a seller in practising dentistry will often refer to a ‘restrictive covenant period’ and ‘restrictive covenant area’. This means that the selling dentist will be prevented from carrying out dentistry or competing with the practice that they are selling for a radius of x miles and for a period of y months. Where the provisions are included in a sale contract they are designed to protect the goodwill of the business that the buyer has purchased. Provided the distance and timeframe are reasonable they are considered to be enforceable.

What is a reasonable period and distance will depend on the practice in question and, when setting the values, you should consider the geography and patient list of the practice. In rural Cumbria, for example, it might be more reasonable to set a 10 mile restrictive radius. However, in central London, that is less likely to pass the reasonableness test. When considering reasonableness, think of how far a patient might be willing to travel in order to stick with an old dentist who they know and trust, rather than trying the new one.

Restrictions in dental practice sale contracts often prevent not only the practise of dentistry but owning or having an interest in another practice, advertising the services of a dentist, poaching staff or treating patients who have been seen by the practice in the period leading up to completion. A seller should be careful with restrictions relating to advertising, particularly in the modern world of digital media which could well reach within the restricted area.

If you are selling a practice and already know what your plans are for the future, it is important that you discuss these with your solicitor at an early stage. Your solicitor can then ensure that your future plans are not caught within the restrictions in your sale contract (provided the buyer agrees!). It is common for exclusions to be specified such as ensuring an ongoing ability for you to continue to treat family members, for you to be able to employ certain staff members (such as a spouse or loyal nurse), allowing you to work as a salaried hospital officer or continue to own an existing additional practice.

If, following the practice sale, a previous owner is intending to stay on as an associate, you must consider whether the restrictions should apply either from the date of the practice sale, or from the date that they terminate their associateship.

When negotiating restrictions in a sale contract, the parties should be aware of a possible tactic that could be used by a seller- in that they could agree to extensive provisions for a significantly lengthy period of time. As stated above, regardless of what is written into the agreement, if a court does not consider them to be reasonably necessary to protect the goodwill of the business being sold they won’t enforce them. Buyers should be particularly wary of a seller agreeing to or suggesting restrictions such as 100 miles or 10 years, in the knowledge that setting such a high bar is likely to mean that the restriction won’t work at all!.

 


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When I sell my dental practice, how will my practice’s stock be treated?
Thursday 29th September 2016

The answer to this question will depend on what you agree with your buyer. There are several options.

Included in the sale price at no additional cost:

From a buyer’s perspective, this is certainly the best option. The buyer receives the seller’s stock and they pay no more than the price that they have already agreed with the seller for the practice. With this method, there is no need for a stock take but the price that you might agree for the practice could be slightly higher than if the stock were not included in the purchase price. It might be preferable for a buyer with limited cash flow to agree a slightly higher purchase price in exchange for the stock being included, as this way the buyer can include the stock within their bank finance application.

To be paid for directly:

The sale agreement could make provision for the stock to be paid separately and for a stock take to be undertaken either immediately before completion, on completion or within a set number of days following completion. Once the stock take has been undertaken, the buyer should pay the seller for the stock separately. The benefit of choosing this option is accuracy, in that you will receive the price for the stock that is actually being transferred. However, the disadvantage of this option is that a stock take is required. From a buyer’s perspective, they need to have the extra cash available on the completion date to pay for this.

Unopened, which has three months left on the expiry date and is no older than 9 or 12 months:

It is relatively common for a sale agreement to make provision for the buyer not to have to pay for all of the stock that is present in the practice. Instead, the buyer will often only be required to pay for stock which is unused and opened, which has at least three months left on its expiry date and is no older than none or twelve months. This can limit the price that the seller receives for the stock and can slightly complicate the stock take.

To be maintained at current levels:

A sale contract may include a provision that, following exchange of contracts, stock must be maintained at the usual levels. This could mean that you will need to continue to buy and replenish stocks to leave the practice at the level where the buyer can continue to run it smoothly following completion. However, if this provision is not present in the contract, you may choose to reduce the stock levels, which will be particularly beneficial to the seller when the stock is to be included in the sale at no extra cost.

To have no substantial expenditure prior to completion:

On the other side, the sale contract may include provision that you are not to enter into any significant contract or incur any significant expenditure without the consent of the buyer between exchange and completion. This could prohibit the seller from placing large stock orders which the buyer would have to take over.

When negotiating the price, it is important to consider what your preferred option is for treatment of the stock. Communicating this with your solicitor will give them the opportunity to ensure that the sale contract reflects your intentions.


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Dental Lawyer’s Guide to 20 Key Phrases That Could be Used When Selling or Buying a Dental Practice (and what they mean!)
Wednesday 21st September 2016

For most dentists buying or selling a business isn’t an everyday activity. It is something which takes you outside of your comfort zone, which can lead to stress and worry. A simple way of reducing this is to ensure that you are on the same page as your solicitor. At Brabners we believing in communicating in a way that is easy to understand. However, you may find it useful to have a glossary of some key phrases that are often used during sales or purchases to hand.

Apportionments:
The determination of a division of money between seller and a buyer, often for ongoing business costs or payments for uncompleted courses of treatment.

Charge/Mortgage:
A loan or other obligation secured against a property or other business assets. In the event of non-payment, there is usually a right to repossession.

Completion:
The day on which the purchase or sale of a property or remortgage occurs.

CQC comfort letter/letter of intent:
A letter from CQC confirming that they will formalise a CQC registration immediately following completion of an acquisition providing certain conditions have been met.

Deposit:
Part of the purchase price which is paid on exchange of contracts to confirm commitment to the purchase. This is often 10% of the purchase price but in some circumstances can be negotiable.

Disclosure:
Facts or information given to the buyer from the seller relating to the business, often standing against the warranties. Disclosures are often collated into a ‘Disclosure Letter’ which is a document to be agreed between the buyer and seller which sets out all of the matters deemed to be disclosed.

Exchange of Contracts:
The stage at which the transaction between the seller and the buyer becomes legally binding.

Goodwill:
The established reputation of a business regarded as a quantifiable asset and calculated as part of its value when it is sold.

Indemnity:
Security or protection against loss or another financial burden.

Indemnity Insurance:
An insurance taken out usually by way of a one off payment to cover a ‘defect’ found in the title to a property, such as a lack of rights or a breach of planning permission or building regulation approval. It usually covers the owner and their lender against financial risks associated with the defect.

Licence to assign:
A formal permission sometimes required from a landlord to enable a buyer to purchase a leasehold property.

Official Copies:
A copy of the title to a property showing the information registered at the Land Registry. This document should also confirm who owns the property.

Retention:
Monies held back from completion pending either conditions being met or in reserve in anticipation of possible warranty claims.

SPA/BSA:
The business sale agreement or the sale and purchase agreement.

TUPE:
The Transfer of Undertakings (Protection of Employment) Regulations 2006.

Warranties:
Promises given by the seller or buyer, often relating to the condition of the business.

231 Notice:
A notice to the LAT adding or removing a new partner to an NHS contract where the contract is already held in partnership names or will continue to be held in partnership names.

292 Notice:
A notice to the LAT adding a new partner to an NHS contract where the contract is currently held by an individual.

295 Notice:
A response from the LAT to a 292 Notice stipulating that the new partnership has been accepted and the start date.

299 Notice:
A notice to the LAT retiring a partner from an NHS contract and leaving an individual.

The above list doesn’t cover every phrase that your solicitor might use. However, if you aren’t sure what somebody means you shouldn’t hesitate to ask. It is vital that you understand the transaction and the paperwork that you are signing and it is your solicitor’s job to explain it to you. 


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Selling an orthodontic NHS practice - all change?
Tuesday 13th September 2016

Dental practitioners may not realise that there’s an inequality between dentists and orthodontists when it comes to buying and selling their NHS practices.

Although all NHS contracts prohibit the sale of the goodwill deriving under the contract, a dentist with a General Dental Services contract (GDS) can usually transfer on their business by adding the buyer as a partner then, following the sale being finalised, retiring from the contract. A general dentist with a Personal Dental Services contract (PDS) has the ability to convert to GDS contract, which then allows them to add and remove partners therefore giving them the ability to transfer on the NHS contract.

NHS orthodontists don’t have the ability to practise under a GDS contract. If they wish to sell their business and want the PDS contract to transfer to the buyer, until now their only option has been to hold the PDS contract as a limited company and to transfer the shares. To transfer the PDS contract to a limited company technically requires the old PDS contract to be terminated and a new PDS contract to be  entered into with the company - something which might not always be possible. Practitioners should note that this can only be achieved with the consent of NHS England.

However, in January 2016, NHS England published the Policy Book for Primary Dental Services (the “Policy Book”) within which it makes it clear that a PDS contract cannot be held by a general ordinary partnership. NHS England does, however, allow for a PDS contract to be held in a limited liability partnership (an LLP). The Policy Book also states that although there are no provisions for adding and removing LLP partners in the PDS agreement:

“If the contractor is currently an individual dental practitioner and they wish to have one or more individuals join them under that agreement, then they must seek the Commissioner's consent in writing for any such variation to the contract”.

The Commissioner then needs to assess the suitability of the incoming dentist and notify the contract holder of its decision.

Once the PDS contract has been moved to joint names:

“If the contractor is currently two or more individuals and wish to change to an individual contractor, then they must seek the Commissioner's consent in writing for any such variation to the contract.”

This seems to suggest that the owner of a Personal Dental Services contract has the ability to apply for a new partner to be added to the PDS contract, and for an existing partner to be removed. This is something which before now has only been possible under the terms of a GDS contract.

However, there is need for caution. The Policy Book does not stipulate that the Commissioner must accept all suitable candidates - whether a new partnership or a retirement is accepted it entirely at the discretion of the Commissioner. This could lead to a situation whereby the new partner is accepted but the retirement is not.

It is not clear yet how the policy book will be interpreted and whether the different local area teams will react favourably towards partnership applications under orthodontic PDS agreements.

If you are an orthodontist with a PDS contract held in your individual name, the dental lawyers at Brabners LLP can talk you through your options for selling to find the best solution for you and your practice. 


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