12/1/22 – Why do GP surgeries close and what are the property considerations?

To many the thought of a GP surgery closing is a highly unlikely occurrence, however the trend since 2013 indicates that closures have become increasingly common. According to figures produced by industry publication Pulse, there were 18 closures in 2013 across the UK increasing substantially to over 120 closures per year in 2016, 2017 and 2018. Closure rates for 2019 and 2020 declined to around 100 because of increased NHS funding and support available to surgeries and a growth in medical student numbers and increased capacity on general practice training schemes.

There are a variety of reasons why this has been happening, but the main reason cited is recruitment shortages with many older GPs retiring and practices unable to recruit new Partners. Other contributing reasons include declining list sizes; increasing workloads; poor financially viability; significant and potentially significant surgery liabilities; mergers of nearby practices into a larger group or an improved facility in the same town attracting patients away. In addition, for many medical centres the physical nature of a property and the practices inability to meet latest NHS/CCG standards or perform certain services forces closure.

The closure of a medical centre has a huge effect on the whole community from those involved with the business itself, to patients, to suppliers and to the wider primary care network in the area.   However, it’s the impact on the GP Partners concerned that is particularly challenging. A closure, or even the possible threat of a closure, is especially difficult for the Partners involved with the additional stress and worry surrounding patients, practice staff, finances, potential personal debt, possible litigation, dealing with premises, the NHS contract……the list goes on.   All whilst continuing the already difficult job of providing clinical care.

The first port of call for any practice in this position is to contact the relevant NHS body/CCG, and it might be they can support a solution through financing improvement works or facilitating a merger, or they may be able to assist with emergency staffing. It must be noted that the reasons and possible solutions for practices facing closure are numerous and complex, and unfortunately there is no one solution for each situation. Closure is however very much viewed as a last resort situation.

The purpose of this article, therefore, is to highlight some of the property aspects that should be considered when a practice is facing such a situation, which may help address some of the difficulties experienced by GPs and their practices when going through this process.

Leasehold Properties

For surgeries that occupy property as leasehold tenants, practices are urged to take advice from a healthcare property specialist, such as Aitchison Raffety, to establish their position with regards to their existing lease. Firstly, initial checks should made with regards to the key points such as passing rent, lease term, date of expiry, the existence of any break clauses and which Partners are named of the lease. At the same time, it is important to understand the latest Partnership Agreement and its relationship to the lease. Very often both documents do not align with the current situation or existing Partners which can cause ambiguity in the situation.  A more detailed examination of lease terms should consider the detail behind other important aspects such as the existence of any break clauses and the tenants repairing obligations.

A break clause or an option to determine the lease at a certain time may be included, or not. Many surgery leases include an ‘armageddon’ style break clause allowing a practice to break the lease if the NHS contract is withdrawn, however this option may not apply if the practice itself decides to withdraw from the contract due to another reason. With regards to repairing obligations, it is important to understand if the property is held on internal or full repairing terms, the latter being more onerous and potentially more expensive for the Partners. Therefore, it is imperative that all leasehold tenants fully understand the terms of their occupation. It is not uncommon for practices to occupy period buildings (sometimes Listed) for the last 30-40 years on full repairing leases with minimal maintenance undertaken during their occupation, and the tenants will be liable for extensive repairs. Often this obligation falls to the last remaining Partners. Aitchison Raffety’s Building Surveyors are experts in healthcare property and by seeking early advice from a surveyor, a practice can minimise the potential financial costs of a dilapidations claim from the landlord and can help guide a practice through the negotiation process.

Freehold Properties

For freehold owner-occupied property, it is unlikely the practice owns the building outright and a bank loan is in place. In this situation, it is important that practices understand their current loan obligations and repayment terms and have a strategic plan for the future of the property. It is unlikely for many surgeries that the property will be used as another medical centre, and therefore, the Partners will need to dispose of the asset to minimise their void holding costs. Aitchison Raffety’s healthcare team can provide early advice to practices on the disposal options available and can help advise property owners on the various methods of disposal to maximise value and advise on taking into account potential alternate uses for the premises and associated planning requirements.

In addition to the above considerations, there are several other property related factors that practices need to deal with when faced with closure. Practices in this situation are advised to plan where possible for all aspects such as the removal/disposal of furniture and equipment; cancelling facilities contracts and returning hired in equipment; carrying out any emergency repairs; securing the premises upon closure (alarms, keyholders and regular inspections); draining down services and recording utilities information; notifying insurers and the Local Billing Authority regarding business rates.

If you would like to discuss any of the above, please contact Dom Rosenbaum on 07815 483427 or via email to dom.rosenbaum@argroup.co.uk.