Changes are often made to the partnership structure of a GP Practice, with partners joining and leaving various practices frequently, but little thought is often given to how the partnership property is dealt with and what considerations the partners should have when making these changes.
Some of the main points to consider are listed below:
Is the Property Freehold or Leasehold? If the property is a leasehold tenure it may mean that consent of the landlord is required before any changes can be made. There may also be restrictions in the lease that mean additional requirements need to be satisfied or which prevent the changes being made altogether.
Is the Property subject to a Legal Charge? Many GP Practices are subject to mortgages. Where this is the case, lenders will impose additional requirements on the partners to protect their security in the property. It may be that they decide to keep in place the original lending and ask the partners to give covenants and releases in relation to that original lending or, as is often the case, the lender might decide to redeem the existing charge and re-charge the property with a new mortgage. It is important to ascertain the lender's preference at the outset of the matter as this will affect the procedure that is taken.
Is Stamp Duty payable? Payment of Stamp Duty Land Tax can be costly, especially if changes are made to the partnership frequently. However, under the Finance Act 2000, if the property is a non-investment partnership property, as is often the case for GP Practices, no stamp duty will be payable. If the Finance Act does apply, proper reference must be made to it in the transfer documents.
How many partners will be owning the Property? Many are unaware that there can be a maximum of 4 names on the title to a property. This means that if there are more than 4 property owning partners, the partnership will need to allocate 4 partners to hold the Property on trust for the remaining partners.
Finally, is there a Partnership Agreement in place? A Partnership Agreement will govern the terms of the partnership, including how it is run, in what percentage each of the partners holds the business and the property and also what happens when a partner wishes to leave the partnership. We would therefore strongly recommend that a partnership agreement is put in place upon the creation of a partnership and regularly updated, where necessary.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
