If you are a property owning partner who plans to retire and keep your premises as an investment, allowing the practice to continue to run from them, then this blog is for you. We will be looking at some other variations of premises ownership and retirement, in future blogs.
There are many things to consider when you retire, not least being what will happen to what is probably your biggest investment – the surgery building. Here are some of the main considerations:
1. Whilst you have been practising from the surgery, you will have been receiving notional rent under the Premises Costs Directions 2013 (”PCDs”). Entitlement to the notional rent payment arises solely as a result of the partnership holding a ‘core contract’ with NHSE/the CCG and carrying out the services from owner occupied premises.
Following your retirement from the partnership, you are no longer a contract holder and so you lose any entitlement to notional rent. It is the continuing partners who hold the contract and they will become entitled to reimbursement of premises costs under the PCDs.
2. Before retirement, you may have relied on the Partnership Deed to protect your premises income and to identify those property-associated costs which were to be paid by you, as property owner, and those to be paid by the practice, as business occupation costs.
At the point you retire, you are no longer a party to the Partnership Deed so you need to put a new legal arrangement in place to ensure that have your property interest adequately protected. The way to do this is to put a lease in place.
3. A lease will set out the obligations on both you, as Landlord, and the Practice, as Tenant, in resect of the property, as well as protecting both parties’ interests from a legal perspective. The lease may include provision for the repair and maintenance of the building; the length of occupation and any rights of early termination; what costs each party is responsible for and what changes can be made to the property with or without your permission.
There are many factors to consider when deciding what the terms of the lease will be. How long should it last for? What will happen at the end of the lease term – will you be happy for the tenant to have a new lease? Who is to be responsible for the various elements of the building that may need to be repaired over time? These factors, along with others, will need to be thought through in advance of your retirement.
It is important that you take specialist advice from solicitors experienced in dealing with NHS surgery leases, as if you do not have the correct provisions in the lease you risk it not being approved for funding from the CCG.
4. Timing is very important. If you don’t put the lease in place prior to the date of your retirement, you run the risk of the medical practice accruing protected tenancy rights once you leave the partnership. It can also help your negotiating position if you are able to agree terms whilst you are still a partner in the business. Crucially, any lease terms will need to be approved by the CCG in order to guarantee rent reimbursement, which can take a considerable period of time. If you have a mortgage secured over the surgery premises, you will also need your lender’s consent to the granting of the lease.
Our next blog looks at the scenario of a retiring partner who owns a share of the surgery premises along with others who will be continuing in partnership, and the retiring partner wishes to retain his or her share in the premises. This is a scenario that we are seeing more of, as fewer incoming partners are looking to buy-in to premises.
We advise that GP partners start thinking about their property plans at least 2 years prior to their planned retirement date. If you are considering retirement and would like to discuss your options in more detail then please contact Daphne Robertson on 01483 51555 or [email protected]