I want to sell my dental practice and the lease is due to expire – what should I do next?

17th January 2022

If possible, do nothing

If you have security of tenure with your existing lease, it is possible to continue to occupy the premises under this lease even after it has expired. You will be able to do this until the landlord serves notice requiring you to enter into a new lease or because they want to bring the lease to an end. If the latter occurs, you will need to ensure that your position is protected by serving the relevant counter-notice and you will need to speak to a solicitor as soon as possible.

On sale, most buyers require a minimum 15-year term on the lease from completion, as this is typically in line with any bank finance being used to fund the purchase. If you are able to hold over under your existing lease, it is often more advantageous for your buyer to look to agree a new lease directly with your landlord as part of the sale process.

This has several benefits:

  • Clean break

Unlike when you assign a lease, where the landlord is granting a new lease to the buyer directly, you will not be required to enter into an Authorised Guarantee Agreement (AGA) whereby you have to guarantee the obligations of your buyer. This could be particularly onerous if you have entered into a new 15-year lease shortly after selling your practice. The AGA would remain in place until the lease either came to an end or there was a further assignment.

  • Full release of liability

As part of the process of a new lease being granted, your existing lease would be simultaneously surrendered by way of a Deed of Surrender. As part of this document, the landlord may agree to a full release of your liability for any historic breaches, meaning you can be sure that, on completion, there will be no claims in the future from the landlord.

  • Acceptable lease

Many lenders have specific requirements for leases. It is often easier for these to be included at the initial draft stage rather than to try to update the lease when it has already been granted or is in the process of being assigned.

  • Additional costs

If a new lease is being granted directly to your buyer, they will be responsible for paying any Stamp Duty Land Tax (SDLT) which is due, together with the Land Registry fees for registering the lease. Likewise, if you are assigning your lease, you will be required to cover your landlord’s fees for dealing with the assignment.

It may not always be possible to sit tight and hold over under your existing lease, or for the landlord to grant a new lease to your buyer directly, in which case you should seek to agree terms with your landlord for a lease renewal now.

As mentioned above, buyers and lenders will have certain requirements for their leases. So, if you do decide to renew your lease now, you should speak to a solicitor and try to pre-empt these requirements.

This will help ensure that upon sale the assignment of the lease, the lease is already in a form which will be acceptable to all parties. Your solicitor will also be able to ensure that the correct SDLT filings are made and that the lease is registered at the Land Registry.