Q: How can we release equity from our existing surgery premises to pay for retiring partners?
A: We have assumed the property is held by all or some of the partners with outstanding loans maturing at different times. The most straightforward option is for the premises to be sold, capital released and the remaining partners simultaneously enter into a lease with the purchasers at an agreed rent.
The value realised will be influenced by a number of factors but primarily:
Q: How can we release equity from our existing surgery premises to pay for retiring partners?
A: We have assumed the property is held by all or some of the partners with outstanding loans maturing at different times. The most straightforward option is for the premises to be sold, capital released and the remaining partners simultaneously enter into a lease with the purchasers at an agreed rent.
The value realised will be influenced by a number of factors but primarily:
Q: How can we release equity from our existing surgery premises to pay for retiring partners?
A: We have assumed the property is held by all or some of the partners with outstanding loans maturing at different times. The most straightforward option is for the premises to be sold, capital released and the remaining partners simultaneously enter into a lease with the purchasers at an agreed rent.
The value realised will be influenced by a number of factors but primarily:
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Lease rent.
The level of rent payable under the new lease will broadly equate to the current market rent as assessed by the district valuer and reimbursed to the practice by the primary care trust (PCT). Any valuation will take account of projected rental increases if a rent review is imminent.
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Length of lease.
A lease term of 20 or 25 years will be required with rent reviews every third year either to open market value or, if the PCT will agree, index linked.
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Lease repairing obligations.
In broad terms, you can enter into:
i) A full repairing and insuring lease when the practice is directly responsible for all maintenance and upkeep – internal and external. Under the terms of a negotiated sale and leaseback, the practice should retain a percentage of the rent reimbursed to contribute to the cost of annual upkeep – with a consequent adverse impact on the value realised.
ii) An internal repairing and insuring lease, leaving the landlord responsible for external repairs, although an additional annual service charge may be due. Liability for the replacement of lifts and boilers will generally rest with the new landlord.
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Existing condition of the premises.
Any significant capital expenditure required to deal with Care Quality Commission (CQC) issues or updating will be reflected in the price realised. If capital works are required this may well give the opportunity to consider enhanced service provision from improved premises, subject to discussion with the clinical commissioning group and the PCT.
Two specific issues to be aware of:
- i) Existing loan redemption penalties – this payment may fall due to any existing lender on a transfer of ownership, particularly premises funded through loans from Aviva (the General Practice Finance Corporation).
- ii) Stamp Duty Land Tax (SDLT) – you cannot escape this liability and it will apply to any new lease.
The sale and leaseback route may seem unduly complicated but is a well used mechanism to release capital. With correct tax, legal and valuation advice, sale and leaseback can safeguard the continuation of the practice in existing premises.
