Sustainability Loans are one of the cornerstones of Government support for General Practice in Scotland. They are intended to “increase the stability of general practice and increase the incentive of being a partner in a practice which owns its premises” 1.
Despite being announced in December 2017 as part of the new GP Contract proposals, which in turn came into force in April 2018, there has been no apparent progress with Sustainability Loans in the intervening months. However, that all changed on 28th January 2020 when the Scottish Government issued the next stage of guidance and published the key documentation relating to GP Sustainability Loans. Practices have now received that guidance, the template documentation which will be used to regulate the grant of the loan and BMA Scotland’s FAQ checklist.
The template documentation comprises:-
1. Loan Agreement;
2. Standard Security (i.e. mortgage);
3. Lease (for use if Scottish Ministers exercise their right to purchase the surgery in due course).
At this juncture only template documentation has been provided and there is an acknowledgement that that documentation (and in particular the lease) will need to be amended in some cases, such as where surgery premises are shared or owned jointly.
In due course, practices will expect to receive actual offers of loan from the Central Legal Office on behalf of the Health Board concerned. However, there is no visibility as to when that may be and, given the volume of loans concerned, it seems reasonable to expect there will be at least some delay whilst offers of loan are prepared.
Receipt of an offer of loan is the starting point in a process not the end. Before a Sustainability Loan can be drawn down from the Scottish Government various things will need to be addressed including:-
1. Where you are a Partnership, your title must be held by some or all of the current partners in trust for the partnership. No former partners can have an interest in the surgery.
2. Your solicitor will require to certify to the Central Legal Office that you have a good title to the surgery premises and that it is suitable for Secured Lending. This will require that your solicitor carries out a detailed review of your title to the surgery and that any issues or inconsistencies are addressed.
3. You will need to obtain the consent of any existing secured lender to the Sustainability Loan and agree the terms of a Ranking Agreement with them. The Ranking Agreement must be acceptable to the Central Legal Office. Even if it is not a condition of the Sustainability Loan that all or part of the Loan is used to pay down your existing borrowing, your existing secured lender may nonetheless make it a condition of their consent that some or all of the Sustainability Loan is used to pay down your borrowing with them. You will be required to meet any fees (such as legal fees) incurred by your existing secured lender.
4. If title to your surgery is not registered in the Land Register of Scotland, the Sustainability Loan will trigger automatic registration which in turn will require that your title is mapped onto the Ordnance Survey plan and registered.
5. Where your surgery has been constructed within the past 12 years then copies of all of the construction contracts will require to be disclosed to the Central Legal Office and collateral warranties (quasi-guarantees) provided in favour of the Health Board from the contractor, any member of the professional team (e.g. architects and the like) and any sub-contractor with design responsibility.
You should consider the terms of the Offer of Loan carefully as it contains provisions not just about when it may be repayable but also grants the Scottish Government the right (but not the obligation) to purchase the surgery from you in due course. “In due course” could mean in many years time. The Offer of Loan will also regulate the basis on which you will occupy the surgery if the Scottish Government buys the surgery from you. Decisions made today will commit future doctors to a specific course of action.
It follows that you will also want to consider how the Sustainability Loan is treated as between incoming and outgoing doctors and whether your Partnership Agreement (in the case of Partnerships) needs to be amended.
Whilst some practices have taken steps to address some of these requirements others have yet to start dealing with them.
At Davidson Chalmers Stewart we are already instructed by several practices in connection with Sustainability Loans. If you are interested in finding out more about how we can assist you, please contact lead partner Andy Drane.
 National Code of Practice for GP Premises, Paragraph 10.2