Care Home Property and Asset Management

The operation of a care home can be split into two categories: the care being provided and the actual building itself. Many owners have entered the care home business because they were caring individuals. This second category is the business. This page is about the property side of the business and how to manage a care home building in an efficient way so the care side of the business is not negatively affected.

A care home building is a care home business first and foremost. A care home operates continuously (24 hours a day, 365 day of the year) and so the care building is a business that is continuously open. This constant operation leads to a lot of wear and tear that makes a care home building totally different from most other commercial buildings. When a building system that is essential to the operation of a care home fails, it is much more serious than a regular repair. For example, a broken lift in a 2-storey care home building means that you must close some of the resident bedrooms. An inspection failing care home kitchens means you can’t accept new resident admissions either. This shows that the actual care building needs to be considered a part of the business of care and must be adequately managed as such.

The first priority should be scheduled maintenance instead of reactive maintenance. Most homes tend to wait until things break before attempting to fix them. This strategy results in paying a larger fee to fix things quickly. A scheduled maintenance strategy entails paying a slightly larger fee initially and a significantly smaller fee in a year. You walk the building, note the condition of every major system, then set a date for a replacement before it completely breaks. Planned maintenance can be applied to the replacement of the boiler, lifts, fire doors, flooring, the call system, and the roof. Each of these systems has a replacement cost and lifespan. Once these are known, planned replacement can be budgeted. If this maintenance is not planned, the cost of replacement will be incurred unexpectedly.

The cost of capital expenditure is underestimated most by owners. The standards for care keep improving and the buildings need to be enhanced to keep up. The improvements for flooring, wider doorways, and a proper dementia layout are not optional and are required by the standards. The homes that have postponed these improvements have had to make them after a fall or other emergency. A capital expenditure budget should be set aside each year. It must be considered a cost of doing business.

The condition of a care home impacts the building’s value. The income from a care home drives the value, which is impacted by occupancy and fees, in addition to the home’s rating from CQC. Each of these metrics is negatively impacted by a care home in poor condition. Poor condition buildings are difficult to keep full, require reduced fees, and in addition to scaring self funders away, are more likely to receive poor ratings and inspections. Value protecting maintenance investments is a rational and logical way to look to protect the investments from additional losses.

There is the consideration of the care home’s property investment structure itself. A care home can be a self operating and self investing freehold in a lot of ways, but ties up a lot of the capital. A lease freeholds the care home investment, and allows care to be the investment focus, but be careful of the full repairing and insuring leasehold, which can cause unexpected investment costs. Always read the lease and the dilapidation clause in particular before signing and renewing. Care home operators have been badly impacted by the costs of dilapidations after a care home lease.

Compliance sits over all of it. The building must fulfill the fire safety law, and since Grenfell, care homes have come under tighter scrutiny, so fire doors, compartmentation, and fire risk assessments must be current and evidenced. Then there is gas safety, fire safety, and electrical testing, along with lifting equipment under LOLER, legionella, and asbestos in older buildings. None of this is optional and all must be evidenced. Because the inspector asks, and when the time comes, you must have the papers to prove it. Maintaining that paperwork is in itself a management task, so it is worth giving someone clear responsibility to prevent that task from drifting.

Energy crept up on everyone as a cost. A care home is heated to an elevated temperature around the clock and a care home uses a lot of hot water, so the costs are large and rising. There is also the EPC issue, and the rules surrounding the minimum energy ratings for let buildings are worsening, which is relevant if you have the property on a lease or let it to an operator. Better controls, insulation, and lighting have a faster payback period than in the past. Rather than guessing where the waste is, it is worth getting a proper assessment.

Whether you are already a care home owner, or you are investing in your first buy-to-let, there are some tips on asset property management that will help or hinder the performance of your portfolio. The management of asset property doesn’t only apply to acquiring capital assets but also it has financial implications. More specifically, paying attention to every single cent and maintaining a strict eye on its movement is a crucial point for constant operational profits and, of course, taking into account all the taxes this investment implies.

Care and good asset management on a care home come down to knowing the building as well as you know your care. Walk it, log it, plan for it, and fund it.

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