Tom Lumsden, a partner at CooperBurnett LLP, looks at the advantages and the disadvantages of taking on a leasehold care home and discusses some of the most common and important issues that should be considered by operators
Although many care home buildings are freehold properties, they remain an attractive asset for property investors and a large proportion of recent care home investments have been ‘new builds’ that are pre-let on a new 25 to 40 year lease with Retail Price Index linked rent reviews.
Care homes are expected to remain a popular investment because of continued high demand and also because of the limited number of new homes that are being built. Ultimately, this is likely to drive prices higher and sharpen yields. Given leases of 25 to 40 years, it is now more important than ever that operators are properly advised, since the adverse financial and other consequences should they sign up to a badly drawn lease could be significant.
Unlike residential leases, there is little statutory regulation or protection for commercial tenants. Once a lease is in place, tenants are generally stuck with that document, no matter to what extent the lease may be drafted in favour of the landlord.
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