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Lloyds Pharmacy disclaim pharmacy leases as part of ongoing liquidation - what do GPs need to know?

on Tuesday, 09 April 2024.

As part of Lloyds Pharmacy's ongoing liquidation, several GPs who are landlords of Lloyds Pharmacies have received notices from liquidators informing them that the Lloyds Pharmacy have disclaimed their lease.

Lloyds Pharmacy has recently undertaken a year-long divestment campaign which has reportedly included the selling of all 1,054 of their high street and community pharmacies. We have recently reported that this has led to several GPs requiring assistance when their pharmacy tenants have requested the consent of their GP landlord to enable Lloyds Pharmacy to assign their pharmacy leases.

Lloyds Pharmacy has now entered voluntary liquidation. News indicate that Lloyds Pharmacy owes £293 million in debts, with only £8.2 million of assets left to pay this off. Many of their creditors are therefore likely to be left significantly out of pocket.

What to do if you receive a notice from Lloyds Pharmacy's liquidators

A number of our GP clients who were landlords of Lloyds Pharmacy leases have received notices from Lloyds Pharmacy's liquidators disclaiming their leases. These notices effectively terminate the lease from the date of the notice and prevent Lloyds Pharmacy from incurring any further liability under the terms of that lease.

If a landlord receives a notice of lease disclaimer, they are immediately entitled to possession of the leased property. However, in a number of cases new pharmaceutical providers have already taken occupation of pharmacy premises without formally taking an assignment of the pharmacy lease. This means that the new provider is in occupation of the pharmacy premises without any legal documentation in place.

If you receive a notice from Lloyds Pharmacy's liquidators stating that your pharmacy lease has been disclaimed, it is important to seek legal advice swiftly. This is especially important if a new pharmaceutical provider has begun to occupy your property and no formal agreement is in place. The longer that an occupier remains in your property, the higher the risk that they will acquire undocumented rights in relation to the pharmacy premises. This risk is increased if you accept rent from the new pharmaceutical provider. It is crucial that you seek legal advice to assist you in the next steps prior to accepting any rent.

What to do if Lloyds Pharmacy has not been paying rent

Where Lloyds Pharmacy remain the formal tenant of our client's properties, we have seen several cases where Lloyds Pharmacy has failed to pay rent for the last few months, leaving some of our GP clients out of pocket. Unfortunately, their current financial position means that many of their landlords are unlikely to recover outstanding rent from them.

Often, new pharmacy operators have been in occupation of the pharmacy premises for a period in respect of which Lloyds Pharmacy has not paid rent. Some of our clients are seeking to agree new leases with the new pharmacy operators and there is a possibility that such negotiations could involve a requirement that the new pharmacy tenants settle the outstanding rent which was due to be paid by Lloyds Pharmacy.

Obtaining legal advice will be able to help you identify the best course of action.

What to do if your new tenants are failing to pay rent

A number of the leases held by Lloyds Pharmacy were assigned to new pharmaceutical providers, often with Lloyds Pharmacy providing an Authorised Guarantee Agreement (AGA). An AGA is an agreement whereby an outgoing tenant (eg Lloyds Pharmacy) guarantees that the new incoming tenant will observe and perform the obligations under the lease, including payment of rent.

Unfortunately, in light of Lloyds Pharmacy's liquidation and financial position, any AGA entered into as part of a lease assignment is unlikely to be valuable security in the event that the new tenant fails to pay the rent due under the pharmacy lease.

We have acted on a number of lease assignments where guarantees have been provided by corporate entities or individuals connected with the incoming pharmacy tenants. We are also aware that a number of incoming pharmacy tenants paid rent deposits to GP landlords to hold as security in the event that rent went unpaid. Enforcement of these guarantees or drawdown from a rent deposit may be an appropriate way to recover unpaid rent.

If your lease with Lloyds Pharmacy has been assigned to a new provider who is now failing to make rental payments or observe their obligations under the lease, you should seek legal advice on what next steps are available to you.

If you have any queries regarding the above or would like assistance with resolving any matters surrounding a pharmacy lease of which you are the landlord, please contact Kirsten Brown in our Healthcare team on 07467 220 900, or complete the form below.

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