GP partnership changes and your premises
James Molloy, real estate specialist at Hempsons, explains the key premises elements to consider when there is a change to a GP partnership.
Surgery premises are usually the most valuable asset and potentially costly liability a GP partnership will hold. It is therefore vital to consider the legal implications when a partner retires, or a new partner joins.
With the day-to-day responsibilities and pressures GPs face, these considerations are often overlooked, leading to future problems which can be costly and time consuming to unravel. As such, planning ahead and knowing what to do when partnership changes occur can save significant time and cost.
This article outlines 4 tips to help avoid these problems arising for your practice.
Tip 1 – Make sure the premises are in the names of current partners
Partners should routinely check that the title to the premises is registered in the correct names. This can be done by a simple Land Registry search, unless the partnership holds a lease, in which case there are other checks that can be done by your solicitor.
Retiring partners should, in most cases, be removed from the title and ideally replaced by incoming partners. This may seem obvious, however in our experience this is often overlooked creating risks for all concerned. From the partnership’s perspective, it means it does not have control over the legal title to the premises. Retired partners risk remaining liable for partnership mortgages and/or lease liabilities.
Tracking down a retired partner can sometimes prove very difficult, particularly where there is time pressure to get signatures.
Tip 2 – Make sure leases are “GP friendly” and be prepared for conditions on a lease assignment
If the partners hold a lease, it is important to understand whether it can be assigned (transferred) between the partners, ideally without the Landlord’s consent. If consent is required, you will need to understand what conditions may apply (for example, a guarantee from the retired partner).
Either way, there is usually a minimum number of tenants required to hold the lease at any one time, and it may be that a retiring partner cannot be released until this requirement is satisfied.
Obtaining advice from specialist medical surveyors and solicitors when leases are first negotiated can save significant costs (perhaps several thousand pounds) when partnership changes arise.
Tip 3 – Make sure valuation terms are clear.
If the surgery is owned by the partnership, it is important that the partners document the assumptions that apply to its valuation and these are followed consistently in partnership changes. Otherwise, some partners inevitably risk feeling aggrieved when valuations do not match expectations, which can lead to costly disputes.
The terms on which the surgery is to be valued should be set out in the Partnership Agreement and discussed with a specialist medical surveyor.
Tip 4 – Make sure lender requirements on refinancing are actioned promptly
If the surgery is mortgaged, then a retiring partner will often need to be released from their obligations to the lender. For incoming partners, the lender will likely have specific requirements which need to be dealt with before funds, and sometimes retired partners, can be released.
Lenders may have specific due diligence requirements (for example, property searches) that must be satisfied before releasing mortgage funds. These requirements can take several weeks to process. We often see these being left to the last minute which can cause issues, particularly where a retired partner is anxious to receive funds often with tax deadlines looming. Therefore, advanced planning is essential.