Regular readers of my blog will know that the issue of GP surgery ownership is one which I have referred to previously, with the pros and cons of both ‘Sale and Leaseback’ transactions and GP ‘owner occupation’ having recently been considered. The reason for this is that it is an issue which seems to be cropping up frequently amongst the GP practices with whom I am in contact.
One of the difficulties is that GPs within the same practice will often have conflicting interests. This may depend on whether they hold a share in the ownership of the surgery and whether they are at an earlier or later stage in their career. It is also notable that these issues are accentuated in smaller practices (typically with four or less partners) where there is less flexibility within the partnership to deal with the difficulties that arise.
It is fair to say that in most situations, it is not a question of one party being in the right and the other in the wrong but it is simply that they have a different perspective on the same issue.
In my opinion, the significant increase in the value of GP surgeries over the past 15 years has been a major factor in the difficulties that many GPs are now addressing. No doubt this increase is due in part to the general increase in the value of all property (both residential and commercial) in the UK over this period of time but I also believe that the significant increase in rent reimbursement, ( which is not unrelated to the above) has also been a factor. This increase in the value of GP Surgeries is important as it is proving to be one of a number of significant deterrents to GPs in the early stages of their careers who are considering whether to enter into a partnership.
Where the prospective partnership occupies the surgery premises as owner occupiers, becoming a partner typically involves a commitment to purchase a share in the partnership assets, the most significant of which is usually the partnership premises. As a result of the increase in property values, it is likely that an incoming partner would be faced with the prospect of committing to a significant level of debt when purchasing a share in the practice premises; a 25% share in a modest GP surgery could easily be valued at £250,000 at current market values, which is two or three times the amount required 15 years ago. This is quite a commitment for an individual GP given the current levels of uncertainty and discontent within the primary care sector.
OR RENT ?
As a result of the increasing number of practices who occupy their surgeries as tenants, it is quite likely that an incoming GP partner will be faced with the prospect of entering into the responsibility of a long term occupational lease rather than as an owner occupier as described above. There is a sense that this is no less daunting a responsibility than that of an owner occupier as the majority of GP surgery rents are probably now in excess of £50,000 per annum and most leases are structured for rents to be reviewed on an upwards only basis.
One of the issues at play in this scenario for younger GPs (particularly in smaller practices) is that they face the prospect of being the ‘last man standing’ with regard to the responsibility to fulfil lease obligations when senior partners retire if it is not possible to recruit new partners in the future.
BETWEEN A ROCK AND A HARD PLACE
The scenarios described above help to demonstrate some of the dilemmas facing GPs considering the prospect of partnership and offer an explanation as to why in some areas it is becoming increasingly difficult to recruit incoming GP partners.
If you have any queries relating to GP Surgery ownership or any other issues relating to GP surgery premises, please contact Bryan Wootten on 01904 410810 or firstname.lastname@example.org or visit our website at http://woottendean.co.uk/ to find about more about us.For a brief, informal chat about how we may be able to help you, please call Bryan Wootten on 01904 410810 or email us.