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How to avoid disputes on GP premises

Just five years ago, I would have said that it would be unusual to find a surgery with non-GP partners owning a share of the building. It used to happen sometimes where a GP died and his estate passed the share of the surgery to his or her beneficiaries, but it was rare to find non-partner ownership.

This week, five of the practices I have visited have non-partners owning a share of the premises. In one case, a share of the surgery is owned by a local property developer; in another, the practice manager has bought in, and in the remaining three, partners have left continuing to own their share of the property.

Why has this changed? Well, rental income from GP surgeries is a stable source of income, and as a pension, it gives a pretty decent return. Partners joining practices are not able to borrow money as easily as before, and the mortgage rates are not as attractive as they used to be. Some practices are not replacing partners with new partners, and so they are faced with the choice of buying a further share from the retiring partner, or allowing the retiring partner to continue to hold a share and receive the rent.

Does this matter? No, but there are some issues to think about. For the partner who has left, continuing to hold on to the property will jeopardise the entrepreneur relief from capital gains tax, and may see the tax rate increase from 10% to 28%.

The interests of the property-owning partners may be different to the partners working in the surgery. It may be beneficial for the practice to spend money moving walls to create a better working environment but it may actually reduce the value of the building and so not be in the interest of the property-owning partners.

By far the most contentious issue is the apportionment of expenses. In none of the practices I visited this week was there an agreement over what costs should be borne by the medical practice and the property-owning partners. The usual basis of apportionment is that the property-owning partners pay the costs of maintaining the structure – for example, painting the outside, replacing rotten windows etc. – while the GP practice, as tenant, pays for the internal costs since they are using the building. There are of course a number of expenses where it is not clear where the responsibility should lie, and in two of these practices, there is a clear disagreement over the responsibility of the expenses.

The gold standard solution is a lease agreement between the property owners and the GP practice tenants, but this is expensive, carries with it a Stamp Duty charge and will probably take some time to agree. What is needed is an agreement making it clear who is responsible for each expense. It may be time consuming to produce a list at the outset but it will save time and grief later.

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