Buying a dental practice when the NHS is the landlord – key points to know

There are a number of points that you will need to consider if you are buying a dental practice where the NHS is the landlord.  These will apply if you are going to be taking an assignment of an existing lease or getting a new lease directly from the landlord as part of the transaction.

You will need to consider the following:

1. Timing – due to their extensive portfolios of properties and specific procedures, getting documents agreed and signed for completion can be more protracted than when dealing with a private landlord. This will need to be considered when looking to agree completion dates with the seller of the practice.
2. Negotiations – most NHS leases will be in a standard form and little / no amendments will be accepted. If you are buying a practice and are raising finance with a lender, the lease will need to be referred to them as soon as possible for approval as it is likely that the lease won’t comply with the lender’s standard instructions and will need approval from their credit team.
3. Service charges – if the NHS is the Landlord then it is likely the practice will be part of a health centre or other NHS building. In addition to your rent you will also be required to pay a service charge to contribute towards the maintenance of the building.  The amount of additional cost due should be ascertained at the start of the transaction so it can be budgeted for.
4. Rent Reviews – a lot of NHS leases will have rent reviews which are RPI or CPI linked which are unlikely to have a cap. Unless the Landlord agrees to a variation, you won’t be able to change this for an assignment of an existing lease.  For any new lease negotiations, you may want to consider agreeing a cap if the lease has to have an RPI or CPI rent review or considering whether it would be better to have an open market rent review.
5. Security of Tenure – because of the way NHS properties are usually held, it is likely that the lease will not have security of tenure. This means you will not have a statutory right to remain in the property at the end of the term and request that the landlord grants you a new lease on substantially the same terms.  You can always look to negotiate this with the landlord before your existing lease expires but there is no obligation on the landlord to agree to this.  If you are funding the acquisition with the aid of a lender, they will need to be made aware that the lease does not have security of tenure as soon as possible as this might impact their valuation.

When acquiring a practice with an NHS landlord, it is best to get the landlord engaged in the transaction as early as possible to avoid the transaction becoming protracted.