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When do practices require a lease?

Many practices may not be aware that they require a lease. Paul Conlan explains when leases are needed and the importance of detailing them in partnership agreements.

When is a lease required?

In the first instance, practices need to understand when a lease is required. You will need a lease if you are in a building not owned by the partnership.

But, even in cases where the GP partners own the building, you also need to ask yourself whether 100% of the owner is 100% of the occupier?

If there is an uncommon party, for example a retired partner who still owns part of the premises or an existing partner who does not own any of the premises, then a lease to formalise the situation would be best practice.

What is a lease?

A lease regulates the arrangement between the landlord and the tenant. It is designed to clarify responsibilities and obligations of both parties and provides legal protection and should assist in avoiding costly legal disputes.

A GP contractor needs a building to operate and provide contracted medical services.

If they don’t own a building, a lease should be put in place for a specified period of time (known as a term). This ensures continuity of service provision from that specific location for the agreed term and allows the practice to invest and forward plan with a specified end date.

New and varied leases

Any new or varied lease must be passed to NHS England by the GP contractor (tenant) for approval to determine that it is value for money before it is signed. This process can act as a check mechanism to ensure that the terms entered into are fair, reasonable and consistent with leases on other GP premises.

NHS England approval is a guarantee that NHS will reimburse the rent to the landlord under the terms of the lease for the duration of the term agreed.

GP Surveyors suspects that a reasonable proportion of the current owner/occupier stock should actually be held under a lease as there is often an ‘uncommon party’ such as a retired partner who still holds an equity share and/or a non-equity owning GP partner.

Partnership agreements and leases

The partnership agreement (PA) should specifically refer to the property and stipulate that in order to be a partner it should be a condition of the PA to sign up to the lease.

Leases shouldn’t be seen as an obligation, as securing the rights to the building allows the partner to draw salaries, pensions, profit shares and receive NHS recurring premises cost reimbursements.

It is standard commercial practice for leases to regulate the occupation of a building and normally within England the lease will be within the Landlord and Tenant Act 1954, allowing the tenant to renew on the same terms (except rent) at expiry of the original lease. It is therefore essential to get the lease right first time.

A lease agreement is a legally binding document. Defining responsibilities within a lease will prevent disputes and secure rent reimbursements, this is critical if 100% of the owner isn’t 100% of the occupier and where there is increasingly a ‘uncommon party’.

If you are considering entering into a lease you need to seek advice from property professionals and lawyers with expertise in GP premises and contracts.

  • Paul Conlan is operations director, GP Surveyors a chartered surveyors specialising in GP surgeries. Visit www.gpsurveyors.co.uk for more information.

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