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Viewpoint - Premises and GP partner disputes

Justin Cumberlege says a company and a good lease can stop GP partners from falling out badly.

Your building: without a lease there could be arguments (Photograph: NTI)
Your building: without a lease there could be arguments (Photograph: NTI)

With a GP-owned surgery it is frequently the case that only some of the partners own a share in it.

This can cause all manner of problems, but some of these can be avoided or eased if the property owners set up a company to own the building with them as the shareholders.

A big advantage is that it is much easier to buy or sell shares in a company than to buy or sell property shares as share transfers are made using a simple stock transfer form.

Before dismissing the idea as not for your partnership, why not mull over the whole issue of partners retiring and joining?

Trust deed
The partnership should at least have a trust deed setting out the procedure if one of the property owners retires and want to sell their share. This usually involves having the property valued, calculating the share's value and giving the continuing partners first refusal on buying it. You may be able to raise the money by increasing the mortgage on the surgery - perhaps with the help of an incoming partner buying a share.

But a new partner - assuming the partnership does recruit one - may feel or be unable to buy the share. Then, if the financial arrangements between the property owners and the partnership (all the current partners) as the occupier are informal, serious disputes can easily arise.

Replacing the roof
For example, who is responsible if the roof needs replacing? Will this be a partnership expense or will the property owners pay for it out of the 'rent' the partnership pays them?

Partners without premises shares may argue they should not pay to enhance the value of the property, while the property owners insist that the partnership is responsible for maintenance and upkeep.

With no formal lease in place there is huge scope for argument. Worse still for retired property owners, would be the current partners deciding to move to another building. If the property owners still have a mortgage on the surgery, they will continue to be liable for the mortgage payments without the benefit of the informal 'rent'.

Lease
It is crucial to have a lease which clearly sets out the responsibilities of the partnership for the future - a lease which, incidentally, a company set up by the property owners could grant. With a company, a former or current partner who is a shareholder can raise capital by selling their shares. With a proper lease in place, lenders should be willing to offer favourable terms, and the notional rent reimbursement the partnership receives as tenant can be passed to the company as lease-rent.

The downside is the tax hit when the property is transferred from the property partners to the company, and when the lease is first granted. The amount of stamp duty land tax payable will depend on the property's value, the amount of lease-rent and length of the lease.

A company also means complying with statutory requirements, such as filing an annual return and accounts at Companies House.

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