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Buying shares in GP premises

Lynne Abbess has some legal advice for partners buying a stake in the surgery's bricks and mortar.

(Image: Istock)
(Image: Istock)

As independent contractors, every GP partner has a duty to provide appropriate premises, but it does not necessarily follow that they must have a financial stake in them.

A GP partner may occupy the surgery as a tenant under a lease that provides security for the lease's duration. Or they may even have a licence permitting lawful, day-to-day occupation but without any long-term security.

Before joining a partnership, if some or all partners own the building, will there be an opportunity for you to buy in? Or is the offer of partnership conditional on you buying in?

If the answer to either question is 'yes', you should not proceed unless you are sure that buying in is viable for you. Primarily this will depend on the building's price tag.

Agree a valuation
You will need to agree a valuation with the seller, who may be a retiring partner or, say, the current premises-owning partners, each of whom is willing to sell you part of their share.

Either agree to appoint a valuer (a surveyor) jointly or, as is more common with incoming partners, agree that each side appoints their own valuer. The valuers are unlikely to come up with the same figure so you may need to negotiate a figure between the two valuations.

Check whether your share of the premises reimbursement will cover your outgoings such as loan interest on any mortgage you take on. There could be a shortfall as the building's value and the reimbursement are not inextricably linked.

You also need to know if you will have to fund part of the cost of buying a share through taking over any pre-existing mortgage on the share of the partner(s) selling.

If the building was bought on fixed rate mortgage terms, a change in the owners would trigger an early redemption penalty if the change happens before the end of the mortgage period. Otherwise, if agreeing to take over a variable rate mortgage particularly troubles you, flag up your concern at the outset as this might mean you are unable to join the partnership.

If there is equity in the property (value exceeds mortgage debt), as well as taking over the share of any pre-existing mortgage, you will need to arrange a further loan for the balance payable for your share.

Financial advice
It is advisable to speak to an (specialist medical) independent financial adviser about the various funding options. Indeed, you may find that some traditional GP lenders, such the big high street banks, are not willing to lend a further sum secured on the surgery.

However, one difficulty about approaching a lender other than the one granting the first mortgage on the property, will be that a second mortgage is less attractive to them. It may be a lot less costly to persuade the original lender to extend the mortgage.

If you are buying as an incoming partner, it is advisable to ask a solicitor to investigate the title for you. Even if the partnership has occupied the premises for many years, you cannot assume that the title is 'clean' (without restrictive covenants and so on).

Certificate of title
If you go in with your eyes open, this will give you the opportunity to try to put right at this stage any problems the title investigation flags up. Your lender will ask for a 'certificate of title' before releasing the finance.

You may be advised that you can borrow more cheaply by extending the loan on your home. Bear in mind that if you cannot meet the higher mortgage payments, your home could be repossessed.

It is more usual for partners' buying-in mortgages to be secured against the surgery. If you do this, all the premises-owning partners are effectively indemnifying each other: if a partner defaults on their part of the mortgage, the other partners are liable for repaying it.

You should not complete your purchase without ensuring that you and your co-owners have a clear understanding of the basis on which you own a stake in the building, your respective shareholdings and the 'get out' arrangements when you want to sell. So you should have a specific document recording the agreement in writing between you and the other owners.

This usually takes the form of a 'declaration of trust' which stands alongside your partnership agreement, and provides clarity for the future.

Hopefully this advice will enable you to make a good investment when buying in - one that adds to your pension pot if you sell your share at retirement.

Buying-in essentials
  • Before joining a partnership, check out the premises arrangements. If they are GP-owned, do you want to buy in?
  • If you do want to, agree the premises value with the partner(s) selling you a share. Appoint a valuer to act for you.
  • Check if your premises reimbursement share will cover your outgoings on any mortgage finance you raise.
  • Get the help of an (specialist medical) independent financial adviser if you need a mortgage. Try to avoid increasing the mortgage debt on your home to buy in.
  • Employ a solicitor to do a property title investigation.
  • Before completing your premises share purchase, get arrangements for a declaration of trust drawn up. This should spell out the buying in and selling up (for example, on retirement) and should be signed by you and the premises-owning partners.

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