Succession Planning
for Practice Owners

As a GP principal operating under a GMS contract or PMS agreement, you face a unique set of challenges when considering retirement or transitioning your contract. Each one needs to be overcome before you can step away from the administrative, clinical, financial, and legal responsibilities of being a practice owner. 

In the following sections, we will delve into each of these challenges in more detail and provide practical advice and strategies to navigate them successfully. Our goal is to make the transition process as seamless and stress-free as possible for you.

When it comes to retiring or stepping down from practice ownership, it’s important to plan ahead and proactively manage the property associated with your practice. Whether you're considering selling your property, becoming a landlord, sale and leaseback, or transferring your lease, each option comes with its own set of considerations.

If you have successors taking over your practice, in most cases they will need to continue to occupy the practice premises as the GP contract defines the property from which the practice must be carried on. However, if you’re terminating your GP contract or your successors will be carrying on the premises from an alternative location, you will need to consider what to do with your property when it’s no longer required for the practice.

Property Ownership

If you own your surgery premises, how you deal with the property on your retirement will be affected by a number of factors such as:

• Whether your successors are in a position to buy the property or whether they would prefer to rent it; 
• Whether you own the premises yourself or whether they are co-owned with others (such as your fellow partners); 
• Whether the premises are leasehold or freehold; and
• Whether the premises are mortgaged. 

Your Successors. If you’re recruiting new successors, you will need to decide whether you would prefer to sell or let the property to them. You will then need to negotiate with them as to the terms on which they buy or rent from you. If your successors are not in a position to buy and you do not want to become a landlord, you may be able to sell the property to an investor who would let the property to your successors. If your successors are going to rent the property, the commissioner must approve the terms of the lease before it’s granted. Occasionally, a successor might agree with the commissioner that they will relocate the service, in which case you will need to consider an alternative use or sale of your premises. 

Co-owned Premises. If you co-own premises with others, you will need to consult the terms of your partnership agreement (if the premises are partnership property) and/or any declaration of trust which governs the co-ownership of the property. These documents should contain provisions which apply if a co-owner wants to sell their interest. If you’re granting a lease of the premises, this will require the consent of all the landlords. You should obtain legal advice on the terms of any legal documents and to understand your legal position if there’s no legal documentation in place. 

Leasehold Property. If the property is leasehold, you will need to check the terms of your lease, which will usually include provisions on how you’re permitted to deal with the property. For example, you might need landlord consent to sublet the property or to transfer the lease to a third party. There might also be restrictions on how the property is used and you might need to consider obtaining an extension to the length of the lease to make it more attractive for a prospective buyer. 

Mortgages. If the premises are mortgaged, you will need to consider the mortgage terms. If you’re selling the property to successor partners, the mortgage will need to be varied (if it’s a partnership mortgage) or discharged. You should check whether any early redemption penalties apply. If you’re planning to let the premises, your lender’s consent will almost certainly be required.

Selling Your Property

If you're considering selling your property, it's important to start the process well in advance of your planned retirement or transition date.

Valuation. Before selling your premises, you'll need to agree on a value. If there’s a partnership agreement or declaration of trust, you should check whether there are valuation provisions and ensure that you comply with these. Any market valuation should be conducted by a surveyor who specialises in valuing GP practices, as the valuation of a GP surgery is different from the valuation of other commercial premises.

Legal Considerations. You should seek legal advice at an early stage when selling your premises. If there’s a partnership agreement or declaration of trust affecting your ownership, it’s essential that you understand your legal rights and obligations, as provisions relating to matters such as exercise of options to sell are usually very strictly interpreted. You will also need a solicitor to deal with the legal aspects of the sale.

Tax Consequences. It's crucial to consult with your accountant about the potential tax implications of selling your premises (versus retaining ownership after retirement) and dealing with the proceeds of sale.

Sale and Leaseback

In a sale and leaseback transaction, your premises are sold to a third party and then leased back to the practice, typically for around 10-20 years. Your practice will continue to occupy the building and provide contracted medical services. If you’re retiring imminently, the lease could be granted directly to your successor(s). If the lease is first granted to you, there would need to be an assignment of the lease to your successor(s) when you retire.

The increasing size and value of GP surgeries has meant property ownership is often seen as a burden, not least because the scale of borrowing required to buy into practice premises can become an obstacle to prospective GP principals. Sale and leaseback allows the property owners to release their equity in the building. However, it’s important to seek professional advice and to obtain the commissioner’s approval for the sale and leaseback proposal to ensure the lease is eligible for rent reimbursement.

A specialist primary care surveyor like BW Healthcare Surveyors can support the sale and leaseback process. They will inspect your practice and provide you with strategic advice on how to best list your property for sale and leaseback. They will then share a set of options and pricing to help you decide on your listing strategy. The marketing price is often based on the investment value of your property.

Your surveyor will then draft the heads of terms for the proposed lease based on initial discussions with your practice. They will ensure the heads of terms (or draft lease, depending on local NHS area procedures) are agreed and approved by the commissioner for rent reimbursement purposes before listing your property.

Your surveyor will negotiate with any potential purchasers to achieve the best price for your property, coordinate with the commissioner to ensure approvals prior to any completion and liaise with key stakeholders, including incoming GP principals, solicitors, and accountants or tax advisors, to help ensure a smooth transaction.

Becoming a Landlord

If you own your premises and they will be needed by your successor(s), but you do not wish to sell, you will need to agree terms for the practice to continue to occupy the premises following your retirement. You and any co-owners will be the landlords and your successor(s) will be the tenants under the lease.

It’s usually advisable to grant a formal lease to your successor(s) unless there’s a partnership agreement or declaration of trust that sets out alternative arrangements for the practice to continue occupation after your retirement. If none of the property owners are practice partners, then a lease is essential. A lease is a much more robust form of agreement which ensures that the rights and obligations of both the landlord and tenant are clear. Amongst other things, it will set out the rent payable and who is responsible for repairs and maintenance. 

Tax and Mortgage Consequences. Many retired partners view NHS property returns as a smart way to supplement their income given they are secure, i.e. notional rent. However, retaining your share in the premises could have significant tax implications and could potentially breach the terms of your mortgage. It's crucial to consult with your accountant to understand the tax consequences of different courses of action and your bank to understand the requirements of your mortgage.

Protect Your Property Income. Once you leave the practice, you will no longer be entitled to reimbursement of property income from the commissioner (as this is an entitlement of the contractor). You will therefore need to ensure that you have a written agreement in place with the practice (ideally a formal lease) that sets out the sums due to you in your capacity as landlord.

Legal Considerations. It’s important to instruct a specialist firm of solicitors to advise you and to prepare property documents, such as a lease or declaration of trust, as there are specific legal requirements for GP premises.

Transferring Your Lease

If your surgery premises are leased from a third-party landlord, you will need to assign the lease to your successor(s).

Check Your Lease. Review your lease to understand whether you’re permitted to assign the lease and whether landlord consent is required. Your landlord might carry out due diligence on the assignee and might require you to provide a personal guarantee. 

Consult With a Solicitor. Assigning your lease can be a complex process, and it's crucial to consult with a solicitor to ensure that the transition is handled correctly. They can help you negotiate the terms of the assignment and ensure that all legal formalities are dealt with.

In all cases, it's crucial to start planning your property management strategy well in advance of your planned retirement date. This will give you ample time to consider your options, consult with professionals, obtain any required approvals, and make the best decision for your circumstances.

Your practice comprises various assets. As well as the surgery premises, you will hold various contracts in connection with the practice and own various assets, such as furniture and equipment. When handing over your practice to your successor(s), you will need to consider each of these assets.

GP Contracts

The most important assets of your practice will be the clinical contracts, including your GMS contract or PMS agreement and any related enhanced services contracts (GP contracts). These contracts are subject to strict requirements regarding who is eligible to hold them and the processes for transferring them.

The first step is to identify who will take over your responsibilities. This might be existing partners, a replacement partner recruited by you, partners from neighbouring practices or another organisation that is willing to take over responsibility for providing clinical services at the practice, like GPCA.

When stepping down from the role of contractor under a GP contract, several changes may be necessary depending on your specific circumstances:

Change of Contract Holder. Depending on whether you hold a GMS contract or a PMS agreement, the process for transferring the contract will be slightly different. Anyone being added as a contractor must satisfy requirements which are set out in legislation.

There must always be at least one eligible person holding the contract in order to prevent it from being terminated, so if you’re a sole practitioner, you will need to apply to the commissioner to add your successor(s) prior to applying to remove yourself as a contractor.

If you hold the contract with partners, subject to the terms of your agreement with your partners, you will apply to remove yourself as a contractor and the other partners would continue as contractors. In the case of GMS contracts, as long as the contractor eligibility requirements are satisfied, you just need to notify the commissioner of the changes, ensuring that you comply with the notice requirements in the contract.

In the case of PMS agreements, the commissioner’s consent is required to change contractors, but this is generally not problematic as long as adequate notice is given. It’s usually necessary to give at least 28 days notice of any contractor changes. We recommend that you seek legal advice from a specialist primary care solicitor like Hill Dickinson LLP to ensure that you comply with the strict requirements for transferring GP contracts in order to ensure that you don’t put the contract at risk of termination.

Adjustment of Services. In some cases, the services provided under the GP contract may need to be adjusted. For example, if you’re responsible for a specific enhanced service, the practice may need to consider whether to continue offering this service and, if so, who will take it over. If any service is not to be continued, you will need to consider the requirements for terminating the contract for that service.

Change in Out-of-Hours Provision. If you have not opted out of providing out-of-hours services for practice patients, the practice may need to renegotiate this aspect of the contract with the commissioner.

Update of Premises Details. If the surgery premises used are to be changed as a result of your retirement, this will need to be negotiated with the commissioner as it requires a variation to the contract.

If you’re unable to put succession arrangements in place, you will need to terminate your GP contract. It’s important that you take legal and financial advice before taking this step.

Physical Assets

You will own various physical assets in connection with the practice, such as furniture, equipment, fixtures and fittings, IT equipment, and supplies. 

Where you’re in partnership, your continuing partners will take over your interest in these assets. If you have a partnership agreement, this should include provisions regarding the valuation of these assets and the timescales for paying you for your interest. If you do not have a partnership agreement, these matters will be determined by partnership law. You should seek to agree to the sums payable to you, and if you’re unable to agree, you may need to seek legal advice. 

If you’re merging with another practice, recruiting a new partner as your successor(s), or working with a third party like GPCA, you will need to agree on what assets they will acquire from you and the price to be paid for them. 

Generally, the assets other than the surgery premises will be valued at the written down book value in the practice accounts, with stock being valued at cost based on an inventory at the handover date. A specialist medical accountant like AMS Medical Accountants will be able to advise on the valuation of practice assets other than the surgery premises. If you own the surgery premises, these will also need to be valued by a specialist surveyor.

It’s usual for all assets to be transferred to your successor(s) “free from encumbrances”, which means that any finance arrangements affecting your interests in any of the assets (such as mortgages, hire purchase agreements, etc) will need to be discharged at the point of sale. 

If you decide to terminate your GP contract, you will need to wind up the practice and either retain the assets or dispose of them. Where you’re in a partnership, the partnership will be dissolved and the assets will need to be dealt with either in accordance with an agreement between the partners or according to partnership law.

Non-Clinical Contracts

You’re likely to hold various non-clinical contracts with suppliers of different types, such as contracts for practice insurance, waste disposal, and equipment maintenance. You should check the terms of these to ensure that they can be transferred to your successor(s). If your successor(s) are unable or unwilling to take over any of these contracts or if you terminate your GP contract, you will need to terminate them and should consider whether there are termination penalties.

Staff

Generally, any staff of the practice will continue to be employed or engaged by your successor(s) on the same terms and conditions as enjoyed under the terms agreed with you. Employment legislation protects the continuity of employment of employees and you should seek legal advice to ensure that you adhere to the relevant legal requirements in order to avoid claims. 

Self-employed staff enjoy less protection and you will either need to agree with those staff and your successor(s) the transfer of their contracts of engagement, or those contracts will have to be terminated in accordance with the contract terms. If there’s no written contract, you will need to give “reasonable notice” and should seek legal advice on what that is likely to mean in practice.

Licences and Registrations

You will hold various licences and registrations in connection with your practice, such as CQC registration. These registrations will need to be amended to ensure that your successor(s) are registered to carry on the practice. You should ensure that you submit all required notifications to the relevant authorities so that they are aware that you’re no longer responsible for the practice.

When transferring your interest in your practice, it's crucial to ensure that all agreements are formalised in writing. Formal written agreements provide a clear record of what has been agreed upon and can help to prevent misunderstandings or disputes later on. They also provide legal protection for all parties involved. 

When you’re in partnership, an existing partnership agreement will be the first point of reference, but if there’s no partnership agreement or you’re seeking to vary the terms of the partnership agreement, we would recommend that you put in place a deed of retirement which clearly sets out your retirement terms.

If you’re recruiting a successor, merging with another practice, or making arrangements with another organisation like GPCA, you will need to negotiate appropriate documentation setting out the terms on which they will take over responsibility for the practice.

Here's what typically needs to be included in these formal agreements:

• Transfer of GP Contract. The agreement should clearly set out arrangements for transferring your rights and obligations under the GP contract to the remaining partners or other successor(s). 
• Financial Settlement. The agreement should detail the financial settlement, including the valuation of your share of the practice's assets and how this will be paid.
• Assets, Non-Clinical Contracts, Staff and Apportionment of Income and Liabilities. The agreement should clearly set out what assets are being transferred, arrangements relating to non-clinical contracts, provisions relating to the transfer of staff, how income and liabilities will be apportioned between you and your successor(s), and, if you’re transferring the practice to a newly recruited successor or third party organisation, you might be required to provide certain warranties and guarantees in respect of the conduct of the practice under your ownership.‍
• Terms for Remaining in Practice. If you’re going to remain working in the practice as a salaried or locum GP or as a non-clinical consultant, the agreement should specify the terms of your new role, including your salary or fee, working hours, and responsibilities, as well as any agreed fixed term for that role. You would also require a separate contract of employment, or consultancy agreement, setting out the terms agreed.

Challenge

Dr Singh, a GP principal, was facing significant challenges in managing two practices in Sheffield and Rotherham. The retirement of a senior partner and the reluctance of an incoming partner to be part of the Sheffield practice left Dr Singh as the sole GP principal of both practices.

The workload was intense, with Dr Singh covering six to seven sessions at the Rotherham practice and several sessions at the Sheffield practice, dealing with emergencies, and handling additional work after staff went home.

This workload was affecting his work-life balance and causing significant stress. Additionally, the small list size and location of the Sheffield practice in a deprived area made it difficult to sell the property, leaving Dr Singh with a financial burden.

Solution

GPCA stepped in to appoint nominated GPs to take over the GMS contract of the Sheffield practice, allowing Dr Singh to focus on his clinical work. The transition was smooth, with GPCA accepting the valuation of the practice property and completing the sale within six to eight weeks. GPCA also took over the responsibility for preparing for CQC inspections, further reducing Dr Singh's administrative burden.

Results

GPCA has had a positive impact on Dr Singh's work-life balance. He no longer has to worry about managing the practice, dealing with emergencies, or handling administrative tasks after patients go home. He can take annual leave without worrying about the practice, and he no longer has the financial burden of the practice property.

The staff at the practice have also benefited from the transition. Their contracts are more secure and they have been well looked after. The practice has even been able to employ more staff. Dr Singh and the team have found the team at GPCA to be honest, professional, and committed to patient care, and he would recommend GPCA to other GP principals facing similar challenges.

Stepping away from practice ownership is a significant step that requires careful planning and execution. By following the steps outlined in this guide, you can ensure a smooth transition that safeguards the continuity of patient care and complies with contractual obligations. 

Whether you’re retiring or remaining in practice as a salaried or locum GP, it's important to communicate effectively with all stakeholders and seek the necessary legal and financial advice.

Remember, this is not just a business transition but also a personal one. Take the time to consider your own well-being and future plans as you navigate this change.

We understand the complexities involved in transferring a practice. Don't hesitate to reach out for support and guidance as you embark on this new chapter in your career: