Ask The Experts - Premise Priorities

Published:01/10/2010

Question

We are four partners of whom three (including me) own the surgery. We verbally agreed a rent from the fourth partner when we bought the premises from him two years ago. The practice gets notional rent reimbursement. We have now decided to increase the rent, and made the fourth partner a written offer. On a solicitor’s advice, we offered a licence to occupy rather than a tenancy agreement, but have not yet received a response. I wonder what we should do if the partner rejects our offer and we cannot reach an agreement.

Answer

You need to closely liaise with your solicitor as, by accepting rent, you could be deemed to create a legal tenancy. I have assumed that the three of you (including the non property owner) are a partnership and in essence it is the partnership that receives the Notional Rent from the PCT and then the partnership that pays the rent over to the two owning partners. It therefore follows that the rent under the terms of either a lease or a licence should follow the level of Notional Rent agreed with the PCT.

The Notional Rent is reviewed every year and, after an inspection and assessment by the District Valuer, the new figure will be proposed to the Practice (all three of you) by the PCT. If you disagree with the level of rent, you have the right to make representations to the District Valuer (usually through appointing your own qualified and specialist valuer). If you do not agree with the result after such discussions, you would also have the right to appeal to the NHS Litigation Authority.

The vast majority of Practices in a similar situation to yours would use this route to establish a fair and reasonable rent to pay from the Practice to the property owners. If you actually had a legally binding lease, rental disputes would normally be determined by applying to the President of the Royal Institution of Chartered Surveyors to appoint an Independent Expert or Arbitrator to determine the rent. This process is not inexpensive as you would have to appoint a valuer to represent you and then, on top of this, there would be the cost of the Arbitrator or Independent Expert. The “NHS route” described in the preceding paragraph can be successfully used where doctors are both owners and GPs within the Practice and, with the lesser costs involved, this as noted is the preferred direction.