Buying a Nursery: Ofsted and Assignment of a commercial Lease

Like any commercial matter, the buying of a business and property can often be daunting task trying to understand and undertake. While your immediate attention will be on the numbers and in particular profitability of the business, there are two common problems that affect and severely delay first-time buyers of a children’s nursery. Ofsted and transfer of the premises.

 Ofsted

We all remember the name. The Office for Standards and Education (“Ofsted”) are the children’s day nursery regulatory body. Ofsted’s primary objective is to inspect all childcare services and facilities, they do this by undertaking a number of inspections of suitability. To standardise this process, all children’s nurseries must be registered on Ofsted’ Early Years Register.

This process, while sounding simple enough, can be tedious and costly if not done correctly. The average registration process can take up to 26 weeks to complete and until it does, no nursery will be allowed to operate. If caught unaware, this could result in continuous financial losses for your newly acquired business.

 26 weeks process

The process of registration requires the cooperation of your local authority as well as Ofsted. In the first instance, you and any other individual connected with the nursery must complete a Disclosure and Barring Service (“DBS”) check online. Ofsted will also contact your local authority to see if you are known in connection to a care order or for disclosure on any information that would affect your suitability to work with children.

Ofsted will then require your consent to perform further comprehensive checks on any individuals connected to the nursery including health checks as well as assessing the premises and equipment.

Remember, it is a criminal offence to provide childcare services without being on the Early Years Register. If the seller decides to terminate their Ofsted registration on completion you will be left with children signed up to your nursery with you being unable to provide any care.

Hope for the best, plan for the worst

The last thing you want to happen is being unable to run your new nursery upon completion. It is important to plan for any situations that could cause delay in this process.

One way to do this is by requesting that the seller does not terminate their Ofsted registration until you can have the opportunity to complete your own. Sellers can agree to do this if you indemnify them to cover any associated costs from Ofsted making any claims against the seller after completion of the transaction.

Assignment of a commercial lease

Where it is just the purchase of the business, a fundamental part of the procedure will be obtaining a deed of assignment from the seller to transfer the lease to the premises to you or your company. A crucial factor for you as a buyer is to ensure the Lease permits assignment, in most cases this will be with the Landlord’s consent.

Although the Lease typically states that consent is ‘not to be unreasonably withheld’, there are several considerations to take into account, such as the Landlord may not be willing to assign so easily where there are no issues with the current tenant; and negotiations involving solicitors can lengthen the process as well as landlord’s costs which are to be borne by either you as the buyer or the current tenant as the seller, are forgotten to be budgeted for.

Terms of the Lease

You must be able to understand the terms of the Lease as these will be binding on you once the assignment is complete.

Some of the most important terms of the lease include:

  • Duration of the lease – ensure the period is satisfactory for the future of your business;

  • Rent review – this is usually carried out every 5 years’, you would need to consider whether the possibility of the rent price being increased is something you can budget for and when rent review under the particular lease is carried out;

  • Repairing obligations – some obligations may be more onerous than you can take on, assess whether they are suitable for you; and

  • Protected business lease – where the lease is not protected, you may not be able to remain in the premises once the lease expires. This may affect the value of the business.

  Disclaimer

This content is not intended to be used as a substitute for specific legal advice or opinions. No recipients of content from this site should act or refrain from acting on the basis of content of the site without seeking appropriate legal advice.