What happens when a dentist wishes to sell their practice but the lease is due to expire?

There are a couple options open to you in this scenario with each depending on your lease terms and your relationship with and the position of your Landlord:-

  1. Lease renewal:

You could speak to your Landlord direct (or initially via their agent or managing agent) to request a longer lease term.  This can be achieved either by putting in place legal paperwork which extends the term of your existing lease or by the grant of a new lease for a longer term, say 15 or 20 years.   A longer lease term will provides more security at the property for your business.

 

This is an excellent opportunity to negotiate new and potentially more favourable lease terms with your Landlord for example a tenant only break clause allowing you to exit the lease early on a specific date.

 

It is advisable to make an approach to the Landlord or their agent in good time before the lease expires where possible.

  1. ‘Holding over’:

You could continue to trade from the property under the existing lease complying with its terms paying the rent etc as it is possible to continue to occupy the property from which your practice operates under a lease even after it has expired, known as ‘holding over’.

There are many benefits to the practice owner of holding over, including:-

  • New Lease: A new lease granted directly to your buyer ensures that your legal costs are reduced as you will not have to pay for your solicitors or the Landlord’s Solicitors time in negotiating the new lease nor pay the Stamp Duty Land Tax and Land registry fees on a new lease. The buyer is also happy as they have a lease on terms acceptable to them and their lender.

 

  • Release of all liability: Where a new lease is granted, your existing lease would be simultaneously terminated and your Solicitor will seek to include in the legal paperwork a full release of your liability for any historic breaches of the Lease.  This ensures that from completion of the sale you will have no liability under any future claims by the Landlord.

 

  • No Guarantee: In contrast to a lease assignment to a buyer, where the landlord grants a new lease to the buyer direct, you, as the outgoing tenant, will not be required to enter into an Authorised Guarantee Agreement (whereby you guarantee that your buyer complies with the Lease terms and effectively step into their shoes to rectify any breach of the Lease). This can be harsh where you enter into a new 15-year lease with your Landlord shortly before selling your practice as the guarantee remains in place until the earlier of the lease expiry or further assignment.

 

In the event that your lease has ‘security of tenure’, you will be legally entitled to a new lease upon expiration of the lease.  A solicitor will need to check the terms of your Lease for this protection.  If you are seeking a renewal of the lease using this legal right, you will need to follow a specific legal procedure with which your Solicitor will assist.

If you are a concerned about your lease expiring soon or are buying or selling a dental practice, contact Leah Groves, a specialist dental solicitor at Fisher Jones Greenwood who can help with your dento-legal needs: 01245 457 092 or [email protected].