Closure of large chain pharmacies across the UK - what should healthcare landlords look out for?
Boots Pharmacy have recently announced the planned closure of 300 branches throughout the UK in the next 12 months with further closures expected to follow.
This follows an announcement from Lloyds Pharmacy in January 2023, which stated that they would be closing all 237 of their branches inside Sainsbury's, alongside further high street branches and branches located within GP surgeries (which is still ongoing). There is an increasing awareness in the market that we may see an ongoing trend of pharmacy closures throughout the UK.
As a result of these pharmacy closures VWV have seen a large amount of pharmacy tenants approaching our GP clients (as pharmacy landlords) to either terminate or assign their pharmacy lease.
What this means for pharmacy landlords
If you are a landlord of pharmacy premises, you may be impacted by the increasing number of pharmacy closures. It is important to be aware of what this might mean for you. We recommend reviewing your lease agreements so that you are prepared for how your tenant may request to end or assign their lease.
What to do if you receive a break notice
Some pharmacy leases provide for break clauses which can permit tenant's to terminate their lease subject to certain conditions.
Where the tenant benefits from a right to break the lease and the tenant wants to end the tenancy, the tenant may serve a break notice on the landlord. This is a tenant's notice to terminate the lease in accordance with the terms of their break clause.
The rules regarding how and when a tenant can serve notice to terminate a lease vary from lease to lease so it is important to check whether the lease has a break clause and if so, what the terms are.
If you receive a break notice it is important to seek legal advice to help assess the validity of the notice and to determine what action needs to be taken to ensure that end of lease matters (such as dilapidations claims and reinstatement of alterations) are properly dealt with.
What to do if you receive application to assign
A landlord may also receive an application from their existing tenant to assign the lease. This means that the existing tenant is asking to transfer their rights and obligations under the lease to another party.
Most pharmacy leases provide that a tenant cannot assign their interest in the lease to a third party without the prior consent of their landlord - although this consent usually cannot be unreasonably withheld or delayed.
It is very important to seek legal advice if an application to assign a lease is received. Failure to act quickly could allow the tenant to argue that you have unreasonably delayed consent, and they may be able to proceed with the assignment on that basis without further reference to you. For further information on lease assignment, please see our article, which goes into further detail on this topic.