Dealing with property in a GP practice merger

There is a lot to think about when merging practices. Issues include transfer of staff by TUPE, creating joint accounts, agreeing profit shares, drafting a new Partnership Agreement, aligning ways of working, dealing with the CQC and NHS England, and more.

With so much to think about and with limited time and resources, merging practices are often tempted to put the properties to one side to be dealt with later. In this post we explain why it’s best to have a plan for managing property issues from the outset.

But nothing is going to change?

We are often told that the surgeries will ‘just stay as they are’, or that their ownership can be kept outside of the new partnership. However, it’s not that simple and by taking no action you risk hitting problems later.

A merger involves changing business vehicles. Generally speaking, two or more partnerships become a new, single partnership and most of the legacy business vehicles disappear. Each of the legacy partnerships would have had rights of occupation in their surgery, whether as tenant, licensee, owner occupier, or some combination of all these. Post merger, even if exactly the same partners and staff are working in each building, the occupier will be the new merged partnership.

The consequences of this are significant. Regardless of who has their name on the title at the Land Registry and whether the surgery is freehold or leasehold, the new partnership will acquire rights and obligations associated with the building from the very first day post merger. Examples can include; rights of occupancy; tax liabilities; problems with NHS premises funding; implications for mortgage financing; breaches of covenants, and; unexpected changes in value.

Such problems typically lie ‘dormant’ for some time, before emerging and creating a crisis. When this happens and has the inevitable financial consequences, the partners who were around at the time of the merger may be long gone and it becomes difficult to attribute the resultant costs.

Some questions you need to consider:

• How are the premises currently owned and occupied?
• How will they be owned and occupied following the merger?
• Will any premises be closing and if so, what are the implications?
• Do you need to seek prior approval from NHS England for changes in occupancy/use? (see our article Don’t put your premises funding at risk)
• How are the new owners/occupiers going to be tied into any leasehold obligations?
• How will the changes impact on any mortgage financing and do you need mortgagor consent?
• Do you need to obtain landlord’s consent?
• Is there an impact on the amount of premises funding?
• Tax impacts, such as, stamp duty land tax (SDLT), capital gains tax)

Our recommendations

Our advice is to do your homework in plenty of time before the merger and ensure you undertake appropriate due diligence on all the properties involved. Once you understand the implications of the proposed changes you can consider your options for mitigating the problems. Doing nothing is certainly an option, but it is unlikely to be the best one.

Remember that the Surgery is almost always the most valuable asset in a GP Practice. It therefore pays to get professional advice to protect it and maximise its value.

For more information about practice mergers, property, or any other enquiries, please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com