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The End of the GP Practice?

on Tuesday, 24 November 2015.

There's plenty of doom and gloom around at the moment given that practices are finding such difficulties recruiting. I was pleased to be able to advise a client recently that things weren't nearly as bad as they seemed.

This client was expected to buy into the property but was worried because a friend of his was at a practice that had failed recently. He recognised that if he didn't buy in (as he had previously said he would) it would lead to great upset. However, he had to put his family's finances first! He wanted to know the worst-case scenario.

Buying in to a Freehold

The worry for any GP partner buying in to a freehold (or long leasehold) building is that they take on responsibility for the loan, which means becoming jointly and severally liable for the whole thing. So if the other partners disappeared off to Brazil, the one remaining partner would be the one the bank would come after looking for repayment of the whole thing. The more realistic worry, though, is the practice dissolving (perhaps because of a failure to recruit), which could lead to the value of the building dropping considerably (a GP surgery is - generally - worth rather more when there is a GP practice in it, with a notional rent being paid - than when it is empty). If this were to happen then all the partners could suffer a loss.

This is the stark reality - but it isn't always as bad as it seems.

Whatever happens, the patient list has to be serviced by someone. In some cases, comfort can be taken from the fact that the only realistic place that primary care services can be delivered in that particular area is at that particular building. If that is the case then NHS England or the LHB (or a successor practice) will, in reality, be likely to have to occupy the building to service the patient list, which means they would have to pay a rent to the property owners. That's not guaranteed, and it depends on where the building is etc. In other cases, the building itself may have an alternative use. In this particular case, the building stood on a site in an attractive part of town which would probably allow it to be converted for residential use fairly easily, without much loss of value.

What if the practice collapses?

Yes if the practice collapsed there would be stress, and costs incurred in converting the building (or selling it) - but if the worst came to the worst, the proceeds of sale of the building would probably pay off the loan. As worst-case scenarios go, this wasn't too bad - and the partner involved decided that the (definite) benefit of receiving a share of notional rent was better than the (potential) risk of the practice collapsing. Not everyone is in this fortunate position - but this particular partner was relieved to realise that his situation wasn't half as precarious as worrisome reports in Pulse had led him to believe.

For more information, please contact Oliver Pool in the Healthcare team on 0117 314 5429.