Read the small print: Signing a new lease
Tessa Ellis of law firm Cripps Pemberton Greenish advises caution when signing up to a new lease, even if it is with NHS Property Services Limited, which owns many of the NHS primary care properties in England.
NHS Property Services Limited is a private company, with the sole shareholder the Secretary of State for Health. However, their stance is one of a private landlord when it comes to negotiating terms for a new lease; therefore, it is important you obtain appropriate legal advice to deal with these negotiations.
The way GP practice premises are owned, or the basis of their occupation, can vary from practice to practice. In many cases it is likely the occupation is not fully documented. GP practices may have acquired security of tenure rights of occupation under the Landlord and Tenant Act 1954. This gives business tenants a right to remain in occupation when the tenancy ends on substantially the same terms as before, and the landlord can only end the right to occupy on certain limited grounds. The terms provided for in proposed NHS Property Services leases could be more onerous than your current ones. Some things to look out for:
- Check the service charge provisions. Can you afford them?
- Check plans are accurate. You should be aware of shared areas and general communal areas. This will determine what parts of the premises you have to repair and decorate, and what the landlord will do as part of the service charge you pay
- The term of the lease. Are you thinking of moving or merging? Does it go beyond the retirement of the partners? These and other factors should be taken into account. The partners, as individuals, will be responsible for the rent whether or not there is rent reimbursement. If you think a short period is better, remember NHS Property Services will exclude the security of tenure provisions of the Landlord and Tenant Act 1954, which means the practice has no right to remain at the premises at the end of the lease term
- Ease of transfer of the lease. As partners retire or join, you will need to transfer the lease easily, without paying for the costs incurred in obtaining consent: you will want a deemed consent provision
- Break clauses are useful, but ensure these are acceptable to you and the requirements of the practice. For example, ensure the break is effective even if all the repairs have not been done.
NHS Property Services’ Heads of Terms may include financial incentives such as a contribution to legal fees or stamp duty land tax to encourage you to enter into the lease quickly, but beware the cost of entering into onerous terms in a hurry. Practices should only sign the lease once they are happy with all the terms. A lease contains long-term financial liabilities and responsibilities, so proceed with caution.
This article first appeared in Practice Management, February 2018.