Facing a long-term lease renewal is one of the most significant decisions a GP Partnership will make. An enduring lease with an institutional landlord represents a substantial commitment, and a substantial level of liability. The risk cannot be completely removed, but with the right approach, it can be meaningfully mitigated. At DR Solicitors, we regularly advise practices navigating exactly this challenge, and we wanted to share some real-world strategies.

When Partners sign a long-term lease (15 years, for example), they are committing to a liability that extends far beyond most Partners’ anticipated working lives. Partners in their late 50s or 60s, presumably don’t want to be agreeing to a lease that binds them into their 80s or even 90s. Understandably, taking on liability in this case would be an unwelcome prospect. Hoping that a caretaker practice will come in and take over is not a great strategy to protect you against the risk that circumstances, whether political, economic or regulatory, might change. This is why proactive risk management is essential.

This is often the first thought for GP Partnerships, but in practice is rarely achievable with institutional landlords. These landlords require long-term returns on their investment, with most PHP lease renewals including a condition requiring renewal on the same terms as before. A 3 or 5-year term is unlikely to be accepted. As appealing as it may seem at a first glance, there are clear difficulties with this approach, suggesting that GP Partnerships ought to consider other approaches as well as this one, to avoid a potential cul-de-sac.

In certain circumstances, it is possible to negotiate for the ICB or Hospital Foundation Trust to take the head lease from the landlord, with the practice then taking a shorter underlease from the new tenant – perhaps 5 years. This depends heavily on negotiating leverage and willingness to take discussions to the wire. The ICB and Hospital Foundation Trust have their own budget constraints, risk appetites, and competing priorities, making them generally reluctant to assume additional property liabilities. Nevertheless, a practice with some negotiating leverage, perhaps in the form of a significant patient population or lack of local alternatives, may succeed in persuading these bodies to step in if they can be convinced these primary care services may be lost without intervention.

‘Step-in rights’ from the ICB or Foundation Trust are another possibility but are only triggered in specific circumstances. For example, where the ICB agrees to step in to assume the lease directly or arrange for another provider to take it over if the doctors decide to hand their contract back. This arrangement is typically documented in an agreement between the landlord, tenant (GP Partnership), and a third party (like the ICB).

This can limit partner liability but is primarily a tax-driven decision that typically takes 6 to 9 months to implement. Therefore, it is not an immediate solution, but could be worth long-term consideration for certain GP Partnerships.

For practices remaining as Partnerships, the District Valuer’s funding letter is arguably the most important document after the lease itself. Under the Premises Costs Directions 2024, it is mandatory for the tenant to obtain this confirmation that the lease costs will be funded ‘back-to-back’ with the rent reimbursement from the NHS.

This letter should be treated as a key title document, kept alongside the lease, and reviewed carefully. Any future acquirer conducting due diligence on a potential merger or acquisition will scrutinise this document closely. Think about where the practice is now and where it could be in 3, 5, 10 and 20 years’ time—because agreeing a long-term lease means long-term liability for Partners.

A final point worth noting is that some partners facing long lease commitments consider terminating their GMS contract and shifting to another contract, such as APMS.

A GMS contract is evergreen – it has no end date. An APMS contract, on the other hand, is time-limited – typically 10 years. After which it goes out to tender, with no guarantee of success. Every larger provider, every acquisitive neighbouring practice, every PCN and Federation in the NHS marketplace is looking to acquire GMS contracts precisely because of their permanence. Short-term contracts, conversely, discourage long term investment.

The GPC is currently negotiating with the Government to allow GPs to hold GMS contracts via an LLP, but this is not yet possible and is not a fast fix.

Lease renewals require careful thought about your practice’s current position and future trajectory. The earlier you take specialist advice, the more options you have to mitigate risk and protect partners from disproportionate long-term liability. Whether you are facing an imminent renewal or simply want to review your existing arrangements, our Primary Care team is here to help. If you would like to discuss your situation, please contact us today here.