For GP partners who own their surgery, whether on a freehold or a long lease, it will undoubtedly be their most valuable asset.
However, as there is no definitive legislation governing the specific nuances of valuing GP premises, it is vital for the partners to safeguard their investment by setting down the valuation principles they agree between themselves in a document that is then signed by all of them.
Some partnerships choose to do this as part of their partnership deed.
Declaration of trust
However, it is 'best practice' to deal with the issues relating to the ownership and valuation of the surgery in a freestanding 'declaration of trust' deed.
This is because the partners may inadvertently let their partnership deed lapse (by not updating it when a partner leaves or joins, for example), whereas a freestanding declaration of trust will not become invalid. Also, only one or some of the partners may own the surgery.
Property valuation is more an art rather than a science, and it is common for different valuers to come up with different price tags.
A wise precaution, therefore, is to give some guidance within the declaration to the valuers you appoint about the valuation principles they should use, not least in the hope this will bring the resultant figures closer together. A series of assumptions should be included in the declaration of trust.
One of these should cover the deemed use of the surgery. For example, are you prepared for it to be valued for any purpose including redevelopment, if appropriate, which may attract a far higher value? Or do you wish to limit the deemed use to its value as a surgery (being the basis on which premises reimbursement is assessed)?
Another vital point to consider concerns the mortgage, if there is one. In the case of a joint mortgage, is there an obligation for the purchasing partners to take over the share of outgoing partner in the mortgage (which might be set at a higher rate than is current at the time of a subsequent sale and might also be subject to an early redemption penalty?)
This is the most common arrangement – but as it can raise concern, it is essential to set out the terms clearly in order to avoid misunderstandings arising at a later date.
If a purchasing partner requires a top up mortgage (in addition to taking over a share of the existing mortgage) do the other owning partners have any objection to it being secured against the title to the property?
Once again it would be usual to agree to this – although usually only on the basis the new mortgage is arranged with the same mortgagee which already holds the first legal charge on the title. However, the other partners should be aware that to the extent a new mortgage is registered against the title to the property, for practical purposes, they will effectively be guaranteeing that new mortgage. Again, whilst this is not unusual, it should be spelled out in the deed to avoid misunderstandings.
Other issues to consider include:
- Guidance within the valuation clause in relation to timescales for buying in or selling.
- Guidance within the valuation clause on whether just one valuation will be binding or whether the seller and purchaser may each require a separate valuation.
- How to deal with the failure of different valuers to reach agreement; (referral to arbitration is usual).
It is always easier (and far more cost effective) to resolve these potentially sensitive issues from the outset rather than to allow misunderstandings to arise – and subsequently to fester – as a result of your failure to address the position.
- Lynne Abbess is a partner and head of the practitioner team in specialist healthcare solicitors Hempsons, www.hempsons.co.uk