The true cost of a handshake deal: safeguarding primary care premises and profits

We know from experience that primary care providers encounter an incredibly diverse range of issues every day. However, whether they’re general practitioners, pharmacists, dentists, or optometrists, the question they ask more than any other is, “Am I better protected by not committing to a formal lease of my premises?”

It’s perhaps not hard to see why: lease negotiations involving many tiers of stakeholders do have the potential to slow matters down, often creating situations in which:

• A tenant remains in situ at the end of a lease while the terms of a renewal lease are negotiated; or

• The parties to a proposed new lease may have little option but to put a short-term arrangement into place pending completion of the negotiations and a formal lease at a later date.

These are situations which we see far less frequently in other sectors.

So, what is the answer – given the choice, are parties ‘better protected’ by not committing to a formal lease? An undocumented occupation brings uncertainty because the terms of occupation must be inferred from conduct or the terms of a prior, documented arrangement. While this can provide a degree of flexibility that some practices crave, by and large, primary care providers need the certainty that a lease brings especially general practitioners who rely on premises funding from the NHS Commissioner. Having the terms set down on the page means the parties don’t have to argue about whether a particular provision should be inferred or not.

A lease will set out key terms that have been agreed between the parties, such as the extent of the premises, the rent obligations, and the duties that the parties owe to one another throughout the term. So far, so good? Not always – the wording of the lease must be applied to the day-to-day practicalities of the relationship. The most common problem our primary care clients face are service charge disputes. For example:

• What services must the landlord provide under the lease?

• Is the landlord entitled to charge for them?

• How is the cost of services to be apportioned between multiple occupiers?

• What if the cost bears no correlation to the quality of the service?

• And what if there are accounting discrepancies?

However, it’s not all doom and gloom – the overwhelming majority of landlord and tenant relationships operate successfully with few issues for the duration of the lease, precisely because a comprehensive, written lease serves as a clear framework for resolving tension before it escalates into litigation.

Moreover, beyond day-to-day operational details, a formally executed lease provides vital legal and financial protections that undocumented arrangements simply cannot replicate. In the primary care sector, this protection is critical for four important reasons:

1. Securing NHS reimbursements

NHS England and Integrated Care Boards (ICBs) strictly scrutinise premises funding. Without an approved, formal lease in place that aligns with the NHS (General Medical Services - Premises Costs) Directions, a practice severely jeopardises its entitlement to rental reimbursement. Operating on an undocumented basis could leave partners funding substantial premises costs entirely out of their own pockets.

2. Safeguarding Security of Tenure

For healthcare providers, patient 'goodwill’ and operational continuity are tied to a specific location. An undocumented arrangement can leave statutory rights exposed, particularly during negotiations for a renewal lease. Crucially, a formal lease ensures the parties clearly define whether the tenancy is protected by the Landlord and Tenant Act 1954, giving the practice a statutory right to renew at expiry and preventing an unexpected eviction.

3. Facilitating partnership succession

Primary care partnerships are inherently dynamic; older partners retire and new ones join. A well-drafted lease includes clear mechanisms for the assignment of liabilities and the formal release of outgoing partners. An undocumented tenancy creates an unmitigated mess where retired doctors remain personally and indefinitely tied to premises liabilities long after they have left the practice.

4. Certainty on compliance and capital expenditure

Primary care properties face rigorous Care Quality Commission (CQC) standards and strict statutory compliance (such as legionella, asbestos, and Minimum Energy Efficiency Standards (MEES)). A robust lease explicitly establishes who is responsible for structural capital expenditure and statutory upkeep. Without this on paper, a practice faces the risk of catastrophic, non-reimbursable budget surprises if the premises fail to meet regulatory standards.

Conclusion

While the flexibility of an informal handshake might seem appealing during busy operational periods, it is a false panacea. In primary care property, uncertainty is the precursor to costly litigation. A written lease is not a bureaucratic hurdle; it is an indispensable shield protecting funding, partnerships, and operational longevity.