United States: A Purchaser's Guide For Preparing A Closing Checklist In A Skilled Nursing Home Property Acquisition

Below is a guide generally outlining the types of questions a purchaser should consider when planning to purchase, finance or develop a property on which a skilled nursing facility exists or will be built.

Prior to acquiring any real estate, which will be operated as a skilled nursing facility ("SNF"), a purchaser should perform a thorough due diligence investigation as to any material facts or issues relevant to the intended use of the property and any ancillary uses. Generally, a commercial real estate seller will negotiate to limit its liability as to the property conditions in the purchase and sale agreement (the "PSA"). Accordingly, it is the purchaser's obligation during the inspection period to conduct examinations and determine whether there are any problematic facts or issues relating to the acquisition. This article is intended to guide a purchaser in preparing a checklist that will assist in conducting a meaningful due diligence investigation for a property that is intended to be used as a SNF.1

I. Putting Together the Checklist

The first step is to create a closing checklist, which is a consolidated list of all the transaction documents. This includes the transfer, loan and title documents and delivery requirements necessary to close the deal. In drafting the initial checklist, the drafter should review (a) the PSA, which outlines the property conveyance terms and lists the documents and diligence items to be delivered by purchaser and seller and (b) the loan commitment or application, which identifies the documents and diligence items required by the lender (if any).

II. Acquisition and Property Diligence

In preparing the list of diligence/delivery requirements, the drafter should consider the following questions:

  1. What is the type of property (vacant land, improved land, etc.)? Is there an existing tenant/operator? Are there any other third parties with rights to the property? Is seller holding back any rights or restricting the transfer of the property? To answer these questions, a drafter should request items such as a certified rent roll, all leases, licenses or other occupancy agreements, any management agreement(s), the certificate of occupancy or other applicable building permits and property level financial statements, tax returns and bills.
  2. What is the planned use of the property? Is this a permitted use? This is a two-fold question in a SNF transaction.

    • As to the real estate: Is the property zoned for such use? What are the rules and restrictions? Is there appropriate street access, sufficient utilities, parking, etc.? To address these concerns a purchaser typically orders an appraisal, zoning report and engineering/architectural evaluations.
    • As to the operations: Is the property duly licensed or can it be duly licensed to operate as a SNF? If the existing operator will continue to operate the SNF, the operator should already be licensed and in good standing in the state in which it is located. If the operations are being transferred to a new operator, the new operator must take the appropriate steps to become duly licensed, and, as applicable, enrolled in Medicare and Medicaid through the Centers for Medicare and Medicaid (CMS). Please note that even if the operations are not being transferred, the local state licensing agency may require certain notifications or other related reports or disclosures with respect to the property transfer. In evaluating the operations, a purchaser should request items such as a standard form of residency agreement, copies of all existing state licenses, copies of all Certificates of Need (if applicable), CMS survey reports, material correspondence with government programs and/or payor intermediaries, Medicare and Medicaid Participation Letters and Provider Agreements, claims loss history, etc.
  3. If there are improvements, what physical condition are they in? Are they structurally sound? Typically, a purchaser will order a Property Condition Report (including code searches) and review copies of seller's O&M plans and insurance certificates.
  4. Is the property environmentally sound? Has there been any previous contamination either on the property or from neighboring properties? Are there underground storage tanks (UST's) or any recognized environmental conditions (REC's)? A purchaser will typically order a Phase I Environmental Assessment Report to address these concerns.
  5. Are there any encroachments onto the property, or from the property onto other lands? Any liens or encumbrances on the property that either need to be removed or taken subject to? The property section of the checklist will usually contain items such as a Title Commitment, copies of all recorded documents/exceptions, a Pro-Forma Title Policy with endorsements and a survey.
  6. Who are the parties to the PSA? If the parties are not individuals, what type of entity is involved, where was the entity formed, is it in good standing and does the individual executing documents have the necessary approvals and legal authority to enter into this transaction? These questions are answered by a review of the relevant organizational documents, including all entity formation and governing documents, resolutions authorizing the transaction, and good standing certificates.
  7. What documents are required to consummate the transfer of the property? Customary requirements are a deed of real property, bill of sale of personal property, assignment and assumption of contracts, FIRPTA and applicable lease documents (if necessary).

III. Financing Diligence

In the event the purchaser is obtaining acquisition financing, then the checklist drafter will need to include a list of lender requirements, which requires the consideration of the following questions:

  1. What are the loan terms between the purchaser, as borrower and its lender? What is the collateral and loan type? Typically, a lender will issue a term sheet that sets forth the basic requirements of the loan, including customary fees to be paid and the required documents to evidence and secure its liens.
  2. What other types of financing arrangements are the purchaser, the purchaser's tenant/operator or the property currently subject to? The purchaser's mortgage lender will typically require copies of loan documents for any accounts receivable financing/credit facility (a SNF operator will almost always have a credit facility in place), affiliated financing or mezzanine financing. In addition, the purchaser's mortgage lender may also require that an Intercreditor Agreement be entered into between the mortgage lender and any other secured party/financing source of purchaser or purchaser's tenant.

IV. Conclusion

Conducting a thorough due diligence investigation can be a critical component of a real estate transaction, or the termination thereof. The contractual "due diligence period" typically provides an opportunity for the purchaser to walk away from the deal (and possibly even receive a repayment of some or all of its deposit), if a purchaser determines its intended use for the property is not possible or feasible. The above guide should provide the purchaser of a proposed SNF property with a meaningful place to start its investigation; however, every transaction is different and it is important that a purchaser tailor its due diligence review to the facts and circumstances surrounding the specific property and business that will be purchased.


1 Please note that the scope and focus of any due diligence investigation depends upon the party for whom the investigation is being conducted, as it will vary according to the party's role in the transaction. Also, factors such as where the particular property is located, the intended use of the property, whether that use is for-profit or not-for-profit, as well as other deal specific factors, will dictate what additional due diligence should be conducted.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions