Following on from part 2, this article focuses on agreeing the documents for the overall transaction.
Once the main heads of terms have been agreed, each party will instruct their solicitor to deal with negotiation of the lease itself, as well as the transfer document and any other documentation, which applies to the particular deal in question.
The investor's solicitor will send the first draft to the partnership's solicitor to review. The partnership's solicitor will read the lease, take instructions from the partners, mark up any amendments and return it to the investor's solicitor. The process will be repeated until the documentation has been agreed between the parties.
As with any property purchase, a well advised investor will investigate the title to the property. It is likely that this process will include searches and enquiries based on the Commercial Property Standard Enquiries (CPSEs) to which the partners should give replies. The CPSEs can be daunting if you have not come across them before, but it is important to give prompt and accurate responses in order to keep the matter progressing. We are of course always happy to assist you in preparing your replies.
You should ensure that all of your property compliance documentation is properly in order, so that the relevant enquiries can be easily answered. This will include items such as an Energy Performance Certificate, asbestos survey, fire safety assessment, Equality Act compliance documentation, and legionella risk assessment.
There may also be matters which need to be rectified before the transaction can complete, which is likely to come to light as part of the title investigation.
Generally, when a tenant takes a new lease, it will be subject to the Stamp Duty Land Tax (SDLT) regime. This means that an SDLT return will need to be submitted to HMRC and tax may be payable, depending on the value of the rent and any premium payable.
The lease part of a Sale and Leaseback transaction usually benefits from a special relief, meaning that whilst an SDLT return must still be submitted, no tax is payable. It is important to note, however, that this relief will only apply if the identity of the sellers is the same as the identity of the tenants. If your property is currently registered in the names of retired partners, or those who will retire in the near future, it is important to ensure that you take SDLT advice as soon as possible to ensure that you know what your tax position will be if the transaction goes ahead.
Once the lease has been agreed between the parties, you must obtain NHS approval of the draft lease to ensure that you will benefit from rental reimbursement going forward. This process differs considerably between different geographical areas.
Depending on where your practice is located, it will involve contacting either the Local Health Board, local NHS England team, or CCG. They may want to see the whole lease, the heads of terms or just confirmation as to the value of the rent. It can also take varying lengths of time to obtain the approval.
The best way to ensure that NHS approval is received promptly is to make sure that you engage with your local body early in the process, and obtain the contact details of the relevant individual who will be able to assist you in pushing through the process.
We will draft a full report to you on all of the documentation which is entered into as part of the transaction, and encourage you to ask any questions you have about the documentation. It is very important to ensure that you are comfortable with the terms of the lease in particular, as it will typically involve a term length of at least 20 years'.
Usually, the investor and the partners will sign separate copies ('counterparts') of the transaction documentation, which they will then return to their respective solicitors to complete.
If the property is subject to a mortgage, we will redeem the loan/s as part of the completion process, and arrange for the lender to remove their restriction from the property's title.
The investor's solicitor will apply to register the transfer of the freehold, and then the partnership's solicitor will apply to register the lease. The solicitors will also send one another the counterparts (so that each party retains copies of the documentation signed by the other) and any other documents which are relevant to the overall matter.
There is no set timescale for this, as it will vary between different properties and different deals. However, you should expect a straightforward Sale and Leaseback transaction to take in the region of 3 to 4 months to complete, once the heads of terms have been agreed.
If you are considering entering into a Sale and Leaseback or would like further information on what it may involve we would be happy to talk you through your options.
We would highly recommend an in-depth read of part 1 (December 2017 Healthcare Law Brief) and part 2 (January 2018 Healthcare Law Brief) of this series of articles if you have not yet done, as we cover the advantages and drawbacks of Sale and Leaseback transactions, and how to go about negotiating a deal with a Sale and Leaseback investor and key steps to take.
We pride ourselves in ensuring that you have all the useful information and guidance that you require in order to assess and help make an informed decision as to whether to consider a Sale and Leaseback for your own practice.