When Do You Need a Lease of Your Surgery?
The question of when a GP partnership should put a lease of the surgery in place comes up frequently, usually where the makeup of the group of partners (or former partners) who own the surgery is not the same as the medical partners.
Where surgery premises are owned by retired or some (but not all) continuing partners, considerable thought should be given before accepting that a lease is required.
This is for several reasons: leases create ongoing personal liability for Tenants who sign them, they are expensive, and also give rise to legal costs. Leases attract stamp duty land tax, and need NHS England's (or your LHB if in Wales) prior consent.
Your Bank's consent will be required and creating a lease can change the tax position of the property owners, and therefore it is essential to have a specialist tax advisor to assist.
Our view is that if all the property owners are also medical partners, (even if some of the medical partners don't own a share in the property), then you don't need a lease.
If there are one or more partners who haven't bought into the premises - you can deal with all the relevant provisions to enable non-property owners to occupy the premises in the partnership deed itself.
However, if any of the property owners have retired and will continue to hold a share of the premises into retirement, then you will in most cases require a lease. Our view is that it is important for the retired partner - and the practice - to have certainty over who is obliged to do what and the key terms of occupation. A lease makes it clear for both the retired partners - and the continuing partners - what their respective rights and obligations are.
If no lease is put in place and more partners retire and retain their share in the premises, you can quickly get to a situation where there is a majority of property owners who are not medical partners, and their interests will be as property investors and will diverge from the interests of the medical partners.
Our view is that if a retired partner is going to retain a share of the premises into retirement, then you do require a lease.
Alongside the lease, the property owners should put in place a separate property owners' deed setting out the arrangements for ownership as between them, as the medical partnership deed will no longer apply to them. Some practices already have separate property owners' deeds outside their medical partnership agreements which may do this job.
What is the right time to put the lease in place?
The easy answer is "immediately before a property owner retires and carries on holding a share of the premises". However , it is often the case that a property owner is not bought out immediately on retirement and it can take some time for their property share to be transferred. To put a lease in place as a temporary arrangement is best avoided for all the reasons set out above.
There are real potential liabilities for a Tenant under a lease, not least for the repair of the building. As the rent is covered by NHS rent reimbursement (note the need for NHS consent mentioned above before the lease is put in place), and assuming the building is maintained in repair, the main liabilities would in all likelihood be limited, assuming that the practice continues to operate at the premises for the term of the lease and the NHS rent reimbursement continues.
This article highlights the main points to bear in mind, but leases are complex contracts creating personal liabilities - and are not standard form documents. There are numerous other details to consider, both commercial and legal and it is a subject which should be treated formally and approached with the benefit of gaining specialist legal, accountancy and property advice.