Times they are a-changing

Sat in a recent client Partners Meeting, we touched on a very interesting subject which is currently preoccupying many of the practices we deal with. This particular client is a large practice with an increasing patient list and a desire to offer a wider range of services.

As the various options to cope with the pressures on space were being discussed, it became apparent that we are beginning to see a change in the way individual partners view their investment in the practice, particularly in the property itself.

As medical centres increase physically in size and consequently the value of the property increases, the equity input required from new partners also increases to the point that individual partners might become uneasy about the commitment they are making.

Existing property partners have always seen investment in the partnership’s property as vital but, as the sums involved increase, are new partners willing to make this substantial investment (or, as our client put it, are they more interested in spending their capital on a new caravan?)? If potential new partners aren’t willing and able, will the existing partners be forced to meet the gap themselves should one partner wish to retire?

One way around this of course is to contemplate a sale and leaseback transaction to effectively remove the property responsibility from the partnership and instead operate on a rental basis met by the PCT reimbursement.

However, this requires careful thought both by the practice as a whole and the individual partners. What on the surface seems an easy solution brings many taxation issues particularly in regard to capital gains and the timing for individual partners who might be seeking to enjoy retirement relief.

The sale and leaseback route does offer its attractions to some practices but not to others.  It is an ongoing issue with no easy solutions.

About Neil

Neil has been a Chartered Surveyor at local, regional and national levels for the past forty years. The health care sector is now a substantial part of his advisory work. Outside the office (when he can manage to escape), he can be found on the golf course or following Leicester City FC's rollercoaster ride each season!

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