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Landlords to Pharmacy Tenants - An Important Reminder

on Friday, 05 February 2021.

Pharmacies provide an essential service to patients and are often also an important source of income for many practices. However, the coronavirus pandemic has led many pharmacies to reconsider their business models and the spaces they need to operate.

An increasing number of pharmacies are now looking to bring their leases to an end or to assign them to third parties. Where pharmacy tenants choose to assign their leases to third parties, landlords must act promptly.

Responding to Applications for Consent

Most leases require the tenant to obtain the landlord's consent to assign the lease.

Upon receipt of an application for consent to assign a lease, it is important to review the lease carefully. The lease terms will dictate the tenant's rights to assign the lease and your duties as landlord, when considering any application.

Where a lease gives a pharmacy tenant the right to assign the lease with the landlord's consent, the landlord must not unreasonably delay in giving its reasoned response to the application, must not unreasonably refuse to grant consent, and must not impose unreasonable conditions on consent.

The Need to Act Quickly

A reasonable period to provide a reasoned response will depend upon the complexity of the transaction. In a simple case, it may be reasonable to respond within one week, but for a complicated transaction, a reasonable response may take up to around 3 - 4 weeks.

In a busy healthcare practice where time is at a premium, this does not give much time for the management team to meet, assess the proposed tenant, consider what assurances it may need or conditions it may impose, and to seek professional input.

Your response must contain all reasons for your decision (you cannot add to, or change your position later). There are cases where a landlord's informal holding reply inadvertently constituted its response, thereby seriously impeding its ability to justify its decision. With an increasing number of pharmacies looking to vacate their premises, landlords need to be ready to deal quickly with applications received from their pharmacy tenants.

Coronavirus Legal Advice

What If You Fail to Consider the Application Properly?

If as landlord you fail to respond to the application properly, your pharmacy tenant may be able to claim damages.

Your tenant could also validly assign the lease without you being able to impose conditions on the assignment. Imposing reasonable conditions is a valuable right for you as landlord, as this can give you the benefit of direct remedies against the incoming tenants, or to provide additional security (such as rent deposits or guarantors), against future breach.

Tips on How to Manage an Application to Assign a Pharmacy Lease

It's essential that you have processes in place to deal with applications from pharmacy tenants to assign the lease. For example:

  • Put processes in place to ensure that applications and notices are identified and given immediate attention.
  • Keep a copy of the lease handy, so that you can quickly review and understand the terms upon which the tenant can assign.
  • Act promptly in considering the application and in taking professional advice (often valuation and legal advice is needed) before you respond.

If you have received a notice or application from a pharmacy tenant and need professional advice, contact Phillip Sheppard in our Healthcare team on 07384 256178 or complete the form below.

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