June 2016

Providing Trusted Resources For GP Partnership Change

No business can be all things to all people. When you build a network of specialists, you become focused with a common goal for a GP.

One area that binds professions together is the issue of GP Partnership change.

We can all become stronger by working with collaborators by building a team of skilled resources. As a GP medical property advisor, we do not liaise with nursing homes and we do not advise GPs in how to run their practice.

To provide context, Jerrard Keats & Wolley provide an overview of GP property related matters by distilling information and ensuring longevity for existing and future GPs and their staff.

We provide a flexible team who are the right people for the right job with the objective to make the entry, during and exit of the work place functional and financially enjoyable.

Pooling resources helps develop better property related support. This allows you to plan the delivery of primary care services more effectively.

From legal, to valuation, to accountancy, all these professions play a key role in the decision making, strategic planning process. A huge amount of intellectual capital from someone else can help determine better judgments and alleviate risk.


The Issues For Change

One resource does not have all the answers, which is why combining those with skills and knowledge provide direction and guidance on GP matters.

When it comes to Partnership change in GP practices at both ends of the generation gap, we set out to explore some of the current Partnership Agreement challenges that GPs face today.

We approached three key people in this sector with whom we regularly work and whom we consider as trusted advisors to share some of the common issues for GPs within their dedicated profession.


The Legal Direction


Susan Cowan, Partner from Lester Aldridge solicitors specialises in partnership agreements for GP medical practices.

When it comes to joining a Partnership, Susan highlights, “It is important to understand what expenses the partners are expected to pay personally, what the arrangements are for providing sickness cover and for bearing the costs of that cover?”

“If the premises are leasehold, it is important to understand the length of the lease, the liabilities under the lease and what those liabilities mean for each partner. If the premises are freehold, will the new partner be required to buy a share of the premises, if so, when and at what price? Is the basis on which the premises are valued clearly established and fair in the circumstances?”

“It is rare for a new partner to carry out any level of investigation into the title of the premises they are buying-in to, but this is something that they should do.”

Susan also explained the issue of shares; “GPs also need to consider what the arrangements are in the partnership agreement for buying and selling shares in the premises when partners retire. What is the age profile of the other partners and are there any restrictions on the number of retirements that can take place within a given time scale?”


The Valuation Issues

Moving from the legal side, we approached Adam Thompson, from Primary Care Surveyors on the valuation issues for GPs.

Adam Thompson (2)Adam explained the importance of the Partnership Agreement, “When a partner leaves or joins a Practice, the first consideration is the Partnership Agreement, if one exists.”

“The agreement should include details of how the property is to be treated, but should also provide direction to the valuer as to the basis of valuation. This can be either to assume the property is to remain in use as a doctors’ surgery (existing use value), or to consider what else the property may be used for (alternative use value).”

Adam continued if restricted to existing use, “The valuation will have regard to the prevailing notional rent as received by the practice, together with the valuer’s opinion as to whether that notional rent is likely to increase or decrease in the future. There may also be practices who are on cost rent, in which case this may form the basis of value depending on how long the Cost Rent is likely to continue for.”

“If alternative use, then the valuer needs to consider the suitability of the premises for the ongoing provision of healthcare, since it may be that the correct course remains for the property to be valued as a surgery. This will depend upon whether the premises are modern and purpose-built or of the dated house-conversion type nearing the end of its operational life.”

Adam highlights the issues where the valuation is prescribed as existing use, but the premises are nearing the end of their operational life. “This can create a situation where a property may be given an artificially high value, which is correct in accordance with the Partnership Agreement but is significantly higher than what the property may be worth in the property market, particularly where the property may be suitable for redevelopment.”


The Accountancy Focus

Moving from one specialist to our final point of reference, Bob Senior, from RSM, highlights an accountancy direction for GPs and the myriad of options that are open, when it comes to Partnership change and agreement challenges.

BOB SENIOR head and shoulders HR (2)“Young partners have always been keen to maximise their monthly drawings as quickly as possible once they become a partner.” Bob states. “That is particularly the case now since many new partners are paying off sizeable student loans and facing higher superannuation contribution rates than was previously the case.”

“As a direct result of that young partners are increasingly reluctant, to take on a bank loan to fund their share of a practice property unless the notional rent they receive at least covers the bank interest and loan repayments. The position can be eased if they are taking on a share of a practice loan, part of which is on an interest only basis.”

Bob continued in the option of loans, “However if they have to raise their own bank loan then banks are less keen to enter into interest only arrangements with individuals, so individual loans would commonly be on full repayment basis.”

“If the new partner is young then a long repayment period to minimise the monthly outgoings is possible. Sadly that is not the case for a new partner in their forties of fifties where the repayment period will be much shorter.”

Bob highlights the issue of time, “The result of all this is that it is commonly taking much longer for a new partner to actually buy in, and as a result it is often taking longer for retired partners to be paid out.”


The Collaborative Effort

Creating a network of collaboration is about acknowledging that the provision of services and GP advice focuses on a common goal. What do GPs need to be aware of today to plan for tomorrow?

For a collaborative effort to work, people need to be carefully pooled together who genuinely care about an issue and have a combined interest in solving a problem or better still not letting a problem arise. From legal, to valuation, to accountancy, all disciplines have a vital role to play.

The needs of a medical practice have never merited a ‘one size fits all’ model to solve challenges. Locations vary and so does human behavior.

Property forms the backbone to the Primary Care service in this country.The delivery point, the working environment for contented staff,retaining staff, attracting staff and new Partners. The cost, the investment and the risk of delivering the service all relate to property. This has nothing and everything todo with the NHS and your life choices. How much time does the Practice Manager and Partners spend worrying and planning and dealing with property issues?


Lets Bring To A Conclusion

What matters is the ability to deliver a plan with the best options for you now and in the future. That’s when all the team is needed to address all the various facets and come up with a plan. Fail to plan, plan to fail, it is an old phrase but still resonates today.

Jerrard Keats & Wolley have long experience of property development, understanding opportunities and the various challenges that all these aspects impact on each other, which can drag down even the most buoyant individual when trying to piece together all these various options of property and people interests.

It is our objective to bring clarity to the situation to orchestrate the correct skills and to focus on the impact of the different and divergent advice that can be received. Simply put, we pull it all together.

When it comes to overview planning and trying to work out what’s in store over the coming years, have a conversation with Jon. Call 01202 744990 or email jon@jkwproperty.co.uk he can help pull it all together.