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Vital Signs – GP Surgery Investors to Merge

Date: 27/01/2019 | Healthcare, Real Estate, Blogs

There are many GP surgeries across the UK, including within Scotland, that are owned not by Health Boards or by GP Practices but by third party landlords.  Often such landlords will be investors who specialise in owning and leasing GP surgeries. 

The rent they receive from the tenants (typically GP Practices) is the return on their capital investment.  Doctors sometimes refer to these as “PFI” buildings but in reality they are normal commercial property investments albeit within a very specific sector.

Two of the larger specialist landlords are PHP and MedicX.  PHP and MedicX have recently announced that they are to merge to create what is understood to be the UK’s largest ever healthcare property investor.  The combined group will own approximately 475 GP surgeries with a value estimated at £2.3 billion.  38 of these surgeries are understood to be in Scotland.  

For tenants of the combined group it is likely that business will remain broadly as usual.  It is possible that over time there may be changes in personnel as well as to banking details for rent and other payments.  Beyond this, tenants can expect that there will be a similar level of engagement with their landlord as already exists.

Assignation of leases to Health Boards is a key plank of the Scottish Government’s policy for the future of primary care in Scotland.  It remains to be seen what view the combined group will take to requests by Practices to assign their leases to the local Health Board.  Practices will be aware that engagement with their landlord is a pre-requisite to the Health Board agreeing to take an assignation.  Specifically, such engagement must include:-

  1. obtaining the landlord’s agreement to the assignation. 
  2. ensuring the lease allows use for “health and social care purposes”.
  3. ensuring the lease allows for the grant of sub-leases and licences on different terms from the head lease.  

In each case this will involve a formal process which needs to be navigated carefully.  For instance, if the formal “consent to assign” process is instigated under the lease that will result in the Practice having a liability for the landlord’s professional costs whether or not the assignation ultimately goes through. 

The Davidson Chalmers specialist healthcare team is already involved in advising some Practices who are tenants of what will become the combined group as well as tenants of other landlords.  We would be delighted to guide any other Practices who want to pursue an assignation of their lease to their Health Board through the issues.

Please get in touch if you would like to discuss.

The matter in this publication is based on our current understanding of the law.  The information provides only an overview of the law in force at the date hereof and has been produced for general information purposes only. Professional advice should always be sought before taking any action in reliance of the information. Accordingly, Davidson Chalmers LLP does not take any responsibility for losses incurred by any person through acting or failing to act on the basis of anything contained in this publication.

Written by

Andy Drane | Davidson Chalmers Stewart
Andy Drane

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