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Who should be named on the Surgery lease?

This is a question which many commentators, including solicitors, answer with misleading advice.

Leases with a term in excess of 7 years and certain other types of lease must be registered at the Land Registry, where it is only possible to register a maximum of 4 names. The Land Registry is the official and public record of persons who have an interest in land, and is also the source that official bodies will use when seeking to pursue people in respect of civic obligations such as paying tax.

Whilst a lease may be lodged at the Land Registry and thus available for public inspection, the lease itself is a private contract between a landlord and tenant and enforceable as such in the Courts. If the landlord and tenant end up in dispute, it will be the tenants named on the lease (“Named Tenants”) who will be litigating and not the parties who happen to be named at the Land Registry. There is no restriction on the number of Named Tenants, and the Land Registry will simply take the first 4 names from the lease to include in its records.

Most commercial leases are long term liabilities with no value. Becoming a Named Tenant means that you are obligated to pay the rent and fulfil the other obligations such as repairing and maintaining the building for the term of the lease. If circumstances change and you need to extract yourself from these obligations (for example because you wish to move, retire, etc) you will have to negotiate with the landlord. The lease obligations are personal, so normally persist regardless of whether you remain in the partnership, or indeed whether the partnership still exists at all.

This creates an obvious potential for inequity between partners if they are not all Named Tenants. If there is a problem with the lease and the Named Tenants incur costs (which can be significant), they will want to recover a share of these costs from the other partners. Their ability to do so so will then depend on what it says in their Partnership Agreement. If the Partnership Agreement is silent on the matter or is poorly drafted or has become invalid the Named Tenants may well be left paying the bill themselves.

In the current uncertain environment in primary care, our advice is that all partners should normally be named on the surgery lease unless there is a good reason to do otherwise. Such exceptions might be because a partner is undertaking a probationary period or is within a year or two of retirement.

If you are uncertain about the way risks are shared between the partners on your surgery lease, please contact us and we can advise you whether anything needs to be done.

Posted on June 9th 2014 in News and Publications, Newsletters

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