Negotiating a Purchase and Sale Agreement by Jason Punzel
Negotiating a Purchase and Sale Agreement (PSA) is one of the most important aspects of a senior living transaction. We have found that the key in successfully negotiating a PSA is hiring the right attorney, whether Buyer or Seller. The attorney should have experience in skilled nursing, assisted living/memory care or independent living transactions and not just in real estate or healthcare. Selling a senior housing community is much different than selling an apartment complex or commercial building and it is important that the attorney has the appropriate experience.
When selling an apartment complex or commercial building, what is being sold is the real estate only and the new buyer is assuming the leases that are currently in place with the residents or businesses. In a transaction involving a skilled nursing, assisted living or independent living community, what is being sold is the real estate and the operating company, which is typically held in two different LLCs. Often times this requires a PSA and an OTA (Operating Transfer Agreement) if there are two nonaffiliated parties that make up either the buyer or seller. In both situations, the buyer is usually buying just the assets, and not the actual LLCs, to help limit the liability that is being transferred to the new owner.
Since both the business and real estate is being sold, typically a higher level of Representations and Warranties are expected from the seller than in a standard sale of a commercial building. This is due to greater future liability for the new owner including past issues with employees, residents, and Medicare. Additionally, for assisted living and skilled nursing communities, the attorney needs to be familiar with the State’s CHOW process for efficient licensing of the community for the new owner.
Conclusion:
There are many additional factors involved in the sale of a seniors housing community compared with a commercial building. Given this, it is imperative for both the buyer and seller to have an experienced attorney that can handle the transaction to protect each parties’ interests.
To discuss the possible sale of your community, please contact Jason Punzel at 630-858-2501 x 233 or punzel@slibinc.com
