If you have a
leasehold practice that you’re thinking about selling in the near future, then it’s
really important that the terms and conditions of the lease are fit for a sale
when the time comes.
More and more
practices are now coming to the market as leasehold and whilst banks are happy
to lend against a lease, they do insist the lease has at least seven (ideally
ten) years remaining as they will secure the loan around the years left on the
lease. So, if your lease has less than ten years to run, we suggest that now
might be a good time to get the term extended without telling the landlord your long-term
plans.
Alternatively, if you own the freehold and are your own landlord that will certainly make life much simpler. And if you are considering retaining the freehold (possibly to put it into your SIPP) and will be creating a lease you should be clear what your terms will be. Make sure you discuss the property with a chartered surveyor.
We tend to see issues arise mainly from a third party landlord who is either disinterested and not engaging in the process, or sees it an opportunity to benefit financially from the sale by holding the principal to ransom. Issues with a lease and landlord can delay a practice sale considerably as we’ve seen recently with a leasehold sale we were involved in. Once the sale was underway, it was disclosed that the lease contained a clause stating that on any application for consent to assign, the tenant must first offer to surrender the lease to the landlord and as soon as the landlord realised it was a sale, he insisted on this. The principal’s lawyer thought the provision was un-enforceable and sought Counsel’s opinion to confirm this (yes, not cheap!) and sadly it wasn’t quite as black and white as they had hoped. Counsel said that the landlord could insist that the principal had to offer to surrender the lease to the landlord first, but that if he accepted, the landlord then couldn’t force the principal to actually surrender it, he could however block the assignment. This left a bit of a stalemate and eventually the landlord did agree to surrender and re-grant the lease, but for a shorter term and with additional changes. Whilst all of this was happening the principal continued with his usual workload and was kept busy ensuring that his practice remained on track. Added to the fact that the sale was delayed by many weeks!
Alternatively, if you own the freehold and are your own landlord that will certainly make life much simpler. And if you are considering retaining the freehold (possibly to put it into your SIPP) and will be creating a lease you should be clear what your terms will be. Make sure you discuss the property with a chartered surveyor.
We tend to see issues arise mainly from a third party landlord who is either disinterested and not engaging in the process, or sees it an opportunity to benefit financially from the sale by holding the principal to ransom. Issues with a lease and landlord can delay a practice sale considerably as we’ve seen recently with a leasehold sale we were involved in. Once the sale was underway, it was disclosed that the lease contained a clause stating that on any application for consent to assign, the tenant must first offer to surrender the lease to the landlord and as soon as the landlord realised it was a sale, he insisted on this. The principal’s lawyer thought the provision was un-enforceable and sought Counsel’s opinion to confirm this (yes, not cheap!) and sadly it wasn’t quite as black and white as they had hoped. Counsel said that the landlord could insist that the principal had to offer to surrender the lease to the landlord first, but that if he accepted, the landlord then couldn’t force the principal to actually surrender it, he could however block the assignment. This left a bit of a stalemate and eventually the landlord did agree to surrender and re-grant the lease, but for a shorter term and with additional changes. Whilst all of this was happening the principal continued with his usual workload and was kept busy ensuring that his practice remained on track. Added to the fact that the sale was delayed by many weeks!
For more advice on selling your dental practice call 0330 088 11 56 or visit our website www.ft-associates.com
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