Looking for a new care home site: practical and legal considerations for securing a new site

By James Khakpour-Smith

Partner

10 June 2025

Insights News

Increasingly care home operators are looking for new sites to build care homes and are entering into a land option agreement with the landowner, to give them the security of applying for planning permission which if successful, leads to the acquisition of the site for an agreed price or lease terms.

Changes to local plans, updates to national planning policy including the new “Grey Belt’ as part of the government’s plan to encourage more house building means sites which previously were ruled out might now be successful in gaining planning permission.

When care homeowners consider entering into land option agreements (i.e. the option to purchase or lease land at a future date), there are several important legal, commercial, planning, and operational factors to think about.

Purpose and Strategic Fit for your business
Consider your long-term strategy and if the land is suitable for expansion, new build, or relocation. Is there the demographic need in the area for additional care home facilities (e.g. aging population, NHS discharge rates). Does the site offer regulatory alignment, and will the location meet Care Quality Commission (or equivalent) registration requirements.

Due Diligence on the Land
Once the site has been selected then it is essential to carry out thorough due diligence to ensure the landowner has clean legal title and ownership of the whole site, including access and the capacity to grant the option to you.

Consider if there are any third-party interests such as restrictions, covenants, easements, or rights of way that might affect your development and use of the land. Consider what the site was previously used for and if there are any contamination/environmental issues. It can be expensive to carry out remedial work to the land.

Planning and Development Potential
Look at the planning potential for the site and if the site has planning permission already and if not, how likely is it to be granted by the local authority. Consider if there will be any local opposition.

Look at the Local Plan inclusion and if the site is on an area earmarked for development under the Local Authority’s plan. Consider access to the site for the construction phase and beyond and if the general infrastructure roads, utilities, and public transport are available and suitable. It can add considerable cost to get services to a site.

Terms of the Option Agreement

Once you have found the site you need to consider how long will the option last and will there be an ability to extend it if the planning process is delayed.

Decide what are the trigger events that allows you to exercise the option. Is it when the full or outline planning permission is obtained.

Is there an option fee to be paid upfront to secure the option and is this deductible from the final fee or in addition to it.

Confirm what the purchase price is and if it is fixed now, or to be calculated on exercise (e.g. market value at the time), which some landowners prefer.

Are there any overage/uplift provisions and will the landowner seek a share in the future development value.

Financial and Operational Impact
Look at options for financing the acquisition and build-out of the home. Interest rates are expected to fall further over the next 12 months, which will see some increased competitive lending options available.

As part of the business model and to support the investment, the home operator needs to think about if the care home residents will be privately funded, NHS-linked, or a mixed model and how does this location support this and ensure the fit out is consistent.

Also as part of the business model what are the interruption risks and will the new site cannibalise your existing homes or create logistical issues and how long will this last.

Exit and Risk Management
Risk is a significant factor with applying for planning permission on a new site, so you need to consider what happens if planning permission is refused or if you change your mind and don’t want to proceed. In this scenario it is advisable to have an assignment/sub-sale clause, so the option be assigned to another operator or developer.

Are there any clawback clauses in the terms of the agreement and what is the risk of financial penalties or obligations post-exercise.

Regulatory and Local Stakeholder Engagement

Not everyone will be happy with a new care home being built near where they live so community consultations are essential, and early engagement may help with achieving planning consent and longer-term goodwill from local residents.

Liaise early with the regulatory bodies such as CQC, environmental authorities, and planning officers as many of these agencies have stretched resources and there may be some delay in them coming back to you.

Professional Input
Finally it’s important to have the right team in place to support you on this journey from the beginning. As well as having an experienced solicitor to draft and negotiate the option agreement and carry out the due diligence, you will need a planning consultant to advise on likelihood of obtaining planning permission, a valuer/surveyor to appraise the site and advise on commercial viability and architects and care home specialists for designs that meets regulatory and practical care needs.

At Taylor Walton LLP we have successful experience in acting for both landowners selling to care Home owners and care home owners acquiring from landowners including the finance arrangements to facilitate these transactions and work alongside the relevant industry professionals to ensure the client needs from beginning to end are met.

If you have any questions regarding the contents of this article, you can contact Taylor Walton’s commercial property team here. They would be happy to assist you with any issues or queries you may have.

Disclaimer: General Information Provided Only
Please note that the contents of this article are intended solely for general information purposes and should not be considered as legal advice. We cannot be held responsible for any loss resulting from actions or inactions taken based on this article.