This site is intended for health professionals only

At the heart of general practice since 1960

Read the latest issue online

Gold, incentives and meh

NI minister promises NHS reform

Dr John Couch looks at the

future of self-owned premises following a period when young

GPs have been reluctant to buy in

Over the last five years, fewer new GPs have wanted to buy in to the surgery premises. This has been for a variety of reasons. The initial financial outlay has always been daunting. Partnership used to be the only way in to general practice, but the shortage of GPs has spawned a legion of locums quite happy to take on surgeries and visits but not happy to deal with piles of paperwork or take on extra non-clinical responsibilities.

Now large numbers of salaried GP posts are available, providing another option for the new GP.

Again, younger GPs do not want to be tied down to one post for a whole career. Property ownership is seen as an unnecessary encumbrance. As a result, property-owning GPs have had no option, when another property-owning partner has retired or moved on, but to buy them out, taking out more loans to finance the commitment.

In a few cases partnerships have either sold out to private investors of moved to PFI premises, selling their old building, redeeming loans and pocketing any capital.

Inherent dangers

In order to attract partners as opposed to salaried GPs, some practices have made property owning optional. The danger here is that this can create tensions and conflicting interests between the property-owning and non-property owning partners. The concern for property owners is that an ever-reducing number of them end up making an ever-increasing financial commitment. With many such GPs reaching retirement over the next 10 years, there is the potential for crisis here.

What if you retire but your partners refuse to buy your share? What if you are the last one left and don't want to buy? The value of an average four-partner premises is some £400,000-£500,000, a large outlay for one individual.

Non-property owners may feel a 'them and us' atmosphere, where the interests of the partnership are subsumed by the interests of the property owners.

Coping with mixed ownership

In order to minimise potential conflict it is important to formalise arrangements. There should be separate partnership and property agreements drawn up by an experienced solicitor.

Normally rent reimbursement is shared in the same proportions as ownership but this must be stated. The procedure for rent review should be set down.

If one property owner leaves, they should be able to sell their share within a reasonable length of time. Six to 12 months is the usual period. Include clauses detailing the basis of valuation, who should make the valuation and what happens if agreement cannot be reached.

The remaining property-owning partners should have first option on this share, but there should be no obligation for them to buy.

The remaining partners may also wish have a clause to allow the partner who has left to continue to own a property share and draw rent reimbursement. This is sometimes a sensible option for the 'retiree' as return on capital from rent is considerably higher than other safe investments in the current low-interest environment. This option should only be exercisable with the remaining partners' permission.

The bottom line is that if the remaining partners do not wish to buy, the property should be sold on the open market.

This offers protection both to the leaver and also the 'last man in'. It is normal practice that responsibility for external and internal structural repairs to the property is borne by the owners. Outside and inside decoration are borne by the partnership. Both documents should make this clear.

The future?

There is little doubt that by adopting the above approach many practices have been able to attract partners. For the remaining property owners, low interest rates have been a lifeline. In many cases rent reimbursement is greater than loan costs. This means extra profit from day one and longer-term potential for capital growth.

There is little harm in making this known both to non-property owners and salaried GPs. I have already met some salaried GPs who are looking for partnerships and in particular the chance to buy in on what has always been a good financial investment.

It seems that the pendulum of opinion among younger GPs may be turning. In

some cases partners who own the property

are not even offering the option of a share to new partners, clearly wanting to maximise their own profits!

Property agreement should include:

·Names of property owners

·Proportions owned

·Rent reimbursement ­ How is this shared? How is this revalued?

·If one owner leaves, how is sale of share handled and when?

·Who is responsible for building maintenance?

·Under what circumstances can the building be sold?

·If the property owners wish to sell, are the interests of the partnership protected?

John Couch is a GP in Ashford, Middlesex

Rate this article 

Click to rate

  • 1 star out of 5
  • 2 stars out of 5
  • 3 stars out of 5
  • 4 stars out of 5
  • 5 stars out of 5

0 out of 5 stars

Have your say