Model Leases – easy fix or a wolf in sheep’s clothing?
Model leases can be a very useful tool for ensuring uniformity across a wide estate, owned by the same landlord. A good example would be the modern day shopping mall where the landlord wants the comfort of knowing that all tenants occupy on the same terms.
On the surface they can seem attractive – they are familiar, easy to implement and can be put in place relatively inexpensively.
However, the real danger for tenants lurks in the detail – and whilst landlords may prefer to keep things “simple”, very often, this will not be in the tenants’ interests. Landlords and tenants have very different objectives and what can seem an innocuous document on the surface can hold hidden financial dangers for the unwary tenant.
This is especially so in the case of GP leases, which are by no means straightforward compared with other types of commercial leases. Yet entering into a lease will be one of the biggest financial commitments a practice will make. The nature of GP occupancy is complex and nuanced and has evolved over many years; (for example, the arrangements around rent reimbursement and the restriction on being able to “sell” the lease upon retirement etc.).
When negotiating a lease for your practice, there are certain “red flags” that you will need to consider:
- The impact of the arrangements for rent reimbursement
- Your liability to undertake maintenance – and the risks associated with attempting to do so
- Your ability to “escape” liability, either at the time you leave the practice (for whatever reason) or because you have lost your Contract
- The relationship between your lease and any head lease (which could result in additional liabilities being imposed upon you)
- Stamp Duty Land Tax- which can be a sizeable sum depending upon the length of the lease and the amount of the rent
- The strength of your negotiating position may be significant in determining how far you are able to “push” to protect your position – yet some landlords may claim you have no rights as a tenant and that you can be evicted easily if you don’t already have a formal lease in place. This is not always the case and we can advise you on counter-arguments to protect your position – and strengthen your negotiating position
- Notwithstanding you may regard yourselves as part of the wider NHS “family” it is always a sensible precaution to appoint an independent solicitor from that of your landlord. That way you can rely on the fact the advice you receive will be completely independent and any risk of a conflict of interests is removed.
As with any legal document, you need to understand what you are signing up to and if you don’t like it – don’t sign it!
Hempsons has been at the forefront of developing the form of lease which is acceptable to the GP community and which is therefore more of an asset to the business than a burden.
For a fixed fee we would be delighted to provide the following service:
- Comment on the Heads of Terms (which should initially have been drawn up by your surveyor)
- A short report on the model lease (highlighting pitfalls)
- Advice on the next steps if the lease is not in an acceptable form.
In addition we can offer advice on the benefits to the partners individually of entering into a Declaration of Trust, which would govern your joint interest in the lease.
If you would be interested in taking this forward please contact us below:
Harrogate: Carol Bailey