Care Home Sale and Leaseback UK - Release Property Capital While Continuing to Operate
A care home sale and leaseback allows an operator to sell the freehold property to an investor and immediately lease the property back, allowing the care business to continue operating from the same premises.
The structure can release capital tied up in the care home without requiring the operator to move residents or relocate the business. In a typical arrangement, the property investor becomes the landlord while the care company remains the tenant and continues running the care home. This model is also commonly described as an OpCo-PropCo structure, separating the operating business from ownership of the property.
For care home owners considering retirement, expansion, refurbishment, debt restructuring or further acquisitions, a sale and leaseback can be one option for accessing property capital while retaining operational control.
What Is a Care Home Sale and Leaseback?
In a conventional sale, a care home owner sells the property and leaves the premises.
A sale and leaseback works differently.
The operator:
-
Owns the care home freehold.
-
Sells the property to an investor.
-
Receives the agreed sale proceeds.
-
Takes a lease of the property from the new owner.
-
Continues operating the care home from the same building.
The investor becomes the property owner and receives rent under the lease, while the care operator continues to run the care business.
The arrangement therefore separates two assets that were previously combined: the care business and the property.
Why Would a Care Home Owner Consider a Sale and Leaseback?
The main attraction is releasing capital from the property while keeping the operating business in place.
For example, a care operator may own a care home in London worth several million pounds but have substantial capital tied up in the freehold. Rather than selling the entire business and property, the operator could explore selling the property to an investor and leasing it back.
The released capital could potentially be used for purposes such as:
-
Expanding the care business
-
Acquiring another care home
-
Refurbishing existing facilities
-
Funding business investment
-
Restructuring existing borrowing
-
Supporting succession or retirement planning
-
Releasing value from the property
The appropriate use of the proceeds depends on the operator's circumstances and professional financial advice.
How Does a Care Home Sale and Leaseback Work?
The transaction normally involves several stages.
Property and business assessment
The care home property and operating business are assessed to determine whether the proposed transaction is commercially viable.
The property's location, condition, value and existing lease potential are important, while the operator's financial performance and ability to support the proposed rent are also relevant.
Agreeing the commercial structure
The seller and investor negotiate the main terms, including:
-
Purchase price
-
Annual rent
-
Lease length
-
Rent review provisions
-
Repair obligations
-
Insurance
-
Permitted use
-
Assignment provisions
-
Break clauses
-
Other tenant and landlord obligations
Investor due diligence
The investor will normally investigate both the property and the operating business.
This can include reviewing the property's title, condition and planning position alongside the operator's trading performance and regulatory position.
Completion and leaseback
On completion, ownership of the freehold transfers to the investor and the care operator enters into the agreed lease.
The operator can then continue running the care home as the tenant.
What Is an OpCo-PropCo Structure?
The terms OpCo and PropCo are commonly used to describe the separation between the operating business and the property owner.
The OpCo, or operating company, runs the care home.
The PropCo, or property company, owns the freehold.
In a sale and leaseback, the property may be transferred to an investor or property-owning entity while the operating company remains in occupation under a lease.
This structure can make it easier to treat the care business and property as separate commercial assets.
The regulatory position also needs to be considered separately. CQC guidance states that where a registered care service is sold or transferred to another provider, the incoming provider has its own registration requirements.
A sale and leaseback of the property itself does not automatically mean that the CQC-registered care business has been transferred.
How Long Is a Care Home Sale and Leaseback?
The lease term is negotiated between the investor and operator.
Long leases are common in specialist care property transactions because investors are generally buying an income-producing property and operators need security of occupation.
For example, a 2025 transaction involving three Scottish care homes used 35-year leases with inflation-linked rent reviews. This is an example of one transaction rather than a standard term that applies to every care home sale and leaseback.
The appropriate term depends on factors including:
-
Property value
-
Operator strength
-
Rent
-
Investment requirements
-
Property condition
-
Investor requirements
-
Business performance
-
Negotiated lease terms
What Is the Role of Rent?
Rent is one of the most important aspects of a sale and leaseback.
The operator receives capital from selling the property but takes on an ongoing rental obligation.
This means the proposed rent needs to be considered against the care home's trading performance.
An operator should avoid looking only at how much capital can be released. It is equally important to understand whether the business can sustainably meet the rent alongside staffing, utilities, food, insurance, maintenance and other operating costs.
A specialist care property adviser can help model the relationship between the property's value, rent and lease terms before the transaction is marketed.
Full Repairing and Insuring Leases
Care home sale and leaseback transactions can involve full repairing and insuring, or FRI, leases.
Under an FRI structure, the tenant generally takes responsibility for repairing the property and insuring it in accordance with the lease.
Care-specific sale and leaseback arrangements have historically used long leases with FRI obligations and provisions relating to regulatory compliance and CQC requirements.
The exact obligations should always be reviewed by a solicitor before signing.
What Are the Advantages for a Care Home Operator?
A care home sale and leaseback can offer several potential benefits.
Release capital without relocating
The operator can remain in the same care home rather than selling the property and moving the business.
Access property equity
The transaction converts property value into capital that can potentially be redeployed into the business.
Continue operating the care business
The operator retains its business and continues providing services from the property, subject to the lease and regulatory requirements.
Potentially fund expansion
An operator with a successful existing business may consider using released capital to develop or acquire additional care facilities.
Separate property from operations
The transaction creates a clearer distinction between the property asset and the operating company.
What Are the Risks?
A sale and leaseback also changes the operator's long-term position.
The most important consideration is that the operator gives up ownership of the freehold.
After completion, the operator becomes a tenant and must comply with the lease.
Potential considerations include:
-
Long-term rental commitments
-
Rent reviews
-
Loss of future freehold appreciation
-
Repair obligations
-
Restrictions on alterations
-
Restrictions on assignment
-
Consequences of lease breaches
-
Dependence on continued business performance
The structure should therefore be assessed on more than the initial amount of capital released.
A transaction that releases substantial capital but creates an unsustainable rental burden may not be suitable for the business.
What Do Investors Look for in a Care Home Sale and Leaseback?
Investors are likely to examine both the property and the tenant.
Factors can include:
-
Property location
-
Building condition
-
Lease length
-
Proposed rent
-
Operator financial strength
-
Occupancy
-
Care home performance
-
CQC position
-
Management experience
-
Fee mix
-
Property demand
-
Planning position
-
Quality of the facility
This is why a strong operating business and a suitable property can be important when seeking an institutional investor.
Care Home Sale and Leaseback in London
London care homes can present a specialist property investment opportunity because the transaction involves both a healthcare operating business and an underlying real estate asset.
For example, an established care operator in North London may own a purpose-built facility but want to release capital to acquire another home.
Rather than selling the operating business, the owner could explore a sale and leaseback of the freehold.
The investor would acquire the property, while the care company would remain in occupation under the agreed lease.
The feasibility of such a transaction depends on the individual property's value, operator performance, rent affordability and investor requirements.
Is Sale and Leaseback the Same as Selling a Care Home?
No.
Selling a care home can involve selling the property, the operating business, or both, depending on the transaction structure.
A sale and leaseback specifically involves the owner selling the property and leasing it back so the operator can continue occupying the premises.
This distinction matters because the operator may retain the trading business even though it no longer owns the freehold.
Professional Advice Before a Sale and Leaseback
A care home sale and leaseback is a significant property and business transaction.
Before agreeing terms, an operator should obtain appropriate professional advice covering the legal, financial, tax, property and regulatory implications.
The lease should be reviewed particularly carefully because it determines the operator's obligations after the freehold has been sold.
The parties should understand:
-
The rent
-
Rent review mechanism
-
Lease term
-
Repair obligations
-
Insurance
-
Permitted use
-
Alteration rights
-
Assignment provisions
-
Break clauses
-
Default provisions
-
End-of-lease requirements
Specialist legal and financial advice can help identify obligations that may not be obvious from the headline sale price.
How Fraser Bond Can Help
Fraser Bond can support care home owners and investors with specialist property requirements surrounding care assets.
Depending on the transaction, support can include:
-
Care home property assessment
-
Property valuation coordination
-
Investor marketing
-
Buyer and investor sourcing
-
Sale and leaseback structuring support
-
Lease negotiation coordination
-
Property refurbishment
-
Building works
-
Property management
-
Investment advice
-
Landlord and operator support
For an owner considering a care home sale and leaseback, the starting point should be a realistic assessment of the property's value, the operating business and the rent that the business can sustainably support.
A carefully structured transaction can release capital while allowing the care operator to remain in the same premises, but the long-term lease obligations need to be considered just as carefully as the initial sale proceeds.
