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Premises dispute

Two of us own the surgery which we bought from a third partner last year. We have a mortgage with a monthly payment significantly higher than the borrowing costs reimbursement. The non-owning partner claims that, as the property owners, we are responsible for all the expense of repairing the building's exterior and for the internal fixtures and furniture. We spent a lot on the roof and redecorating the nurses' rooms last year. Our primary care organisation (PCO) is not funding the full mortgage interest, or anything for repairs and maintenance.

The general rule is that where the property-owning partners receive notional rent or current market rent reimbursement, they should bear the responsibility of paying for the buildings (not contents) insurance plus the cost of external repair and decoration, and structural repair.

The partnership, regardless of which partners own the premises, should pay for contents insurance and for internal decoration and repair. This is because when the district valuer (DV) assesses the notional rent or current market rent for the PCO, normally between 5 and 7.5 per cent is added for external/structural repairs and buildings insurance.

The situation is more complicated if you receive borrowing costs (formerly called cost rent) as this is not based on the DV's assessment but is a percentage of the land purchase and building costs. It does not include any element for external repair and buildings insurance. So while you continue to receive borrowing costs reimbursement, the three of you will need to come to some form of compromise agreement.

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