Long-Term Care Home Due Diligence

Due diligence on a long-term care home under LOI is about verifying two things a purchase agreement cannot fix after closing: whether the regulator will actually approve you as the operator, and whether the home’s real cash flow and obligations match what you were told before you signed. Neither question gets answered by reading the financial statements alone, and both have specific documents and searches attached to them that a generalist diligence checklist will not surface on its own.

Start with the compliance and inspection record

Start with the compliance and inspection record, and treat it as a primary document rather than a supporting one. Pull the actual inspection reports, not a seller-prepared summary, and read them for the pattern behind any findings — a single resolved finding from years ago reads very differently from a recurring finding on the same issue across multiple inspection cycles, even if both show up as "resolved" on paper. Because the regulator weighs this history heavily when it decides whether to approve your own application as incoming licensee, a finding that looks minor operationally can still be the thing that slows down or complicates your own approval, which makes this the one diligence item that affects the deal even if you decide the operational risk itself is acceptable.

The licence-transfer application file

The licence-transfer application file deserves its own close look, separate from the purchase agreement your lawyer is negotiating. Understand exactly what the regulator will require from you as the applicant, what supporting information about the seller’s operating history it expects to see, and whether anything in your own background — financial capacity, existing operations elsewhere, prior compliance history — could complicate or slow that specific application. A purchase agreement that is otherwise ready to sign is worth little if the application behind it has not been thought through with the same care.

Bed redevelopment and capital obligations

Quantify bed redevelopment and capital obligations as precisely as the seller’s records allow, rather than accepting a general assurance that the building is "in good shape." Ask for whatever engineering or facilities assessments exist, and if none do, treat that absence itself as a finding worth pricing into the deal rather than assuming the obligation is smaller than it might be. An undisclosed or understated redevelopment obligation surfacing after closing is one of the more expensive discoveries a buyer can make in this sector, precisely because the capital cost is not optional once a provincial deadline attaches to it.

Reconciling per-diem revenue against funding class and acuity

Financial verification in this sector has a wrinkle most small-business diligence does not: a meaningful share of revenue is a government-set per-diem rather than a market price, so the usual diligence question of whether revenue is sustainable at its current level matters less than whether the funding class and case-mix acuity behind that revenue are correctly represented and likely to hold. Reconcile the per-diem revenue actually received against the funding class and acuity level the home claims to qualify for, and treat any gap between the two as a question for the seller before you rely on the number, not after.

Staffing records and union agreements

Staffing records and union agreements need verification independent of what the seller’s summary says about them. Confirm actual registered nursing staffing levels against schedules and payroll records, not against a stated ratio, since a gap between the two is common and is exactly the kind of thing that turns into a compliance issue under new ownership. Where a collective agreement is in place, read it in full rather than relying on a summary — grievance history, scheduling rules and any pending disputes all bind you as the successor operator the moment you close, and none of them are things you can renegotiate on day one.

Resident admission agreements and occupancy

Verify resident admission agreements and actual occupancy against what the seller has represented, bed by bed where practical. Because occupancy and admission terms continue automatically under provincial resident-rights protections rather than resetting at closing, any gap between represented occupancy and actual, verified occupancy is not something you can correct after the fact — you are buying the occupancy exactly as it stands, so confirming it before closing matters more here than it would in a business where occupancy could still be built up post-close.

The findings that actually stop a long-term care deal

Taken together, the findings that most often stop a long-term care deal in its tracks are the ones that touch the licence itself: an undisclosed compliance order, a redevelopment obligation larger than represented, or an approval process that stalls, gets conditioned, or is denied outright. Each of those changes the deal’s value or its viability in a way a purely financial finding rarely does, which is why this diligence process has to run in parallel with, not after, the ordinary financial and legal review.

Real property, environmental and title checks

Where real property is part of the transaction, run the same environmental and title checks you would on any commercial real estate purchase, but do not treat them as a formality layered on top of the healthcare-specific diligence above. A building that needs environmental remediation on top of a redevelopment obligation the province has already flagged is a materially different capital picture than either issue considered on its own, and the two are easy to evaluate separately and miss the compounding effect of both landing on the same buyer at once.