Selling your dental practice – what happens to your building now?

No dental sale practice is identical to another, and it will vary depending on your circumstances. If you are considering selling your practice, there will be various aspects to consider, particularly in relation to the building. Whether you own the building outright or have been granted a lease, this article will help you to consider what options are available when you come to selling your dental practice.

Sale of freehold

If you are the legal and beneficial owner of the building, you may decide that you want to sell the freehold of the building to a proposed purchaser and you will no longer have any interest in that building.

You may consider that you want to retain the freehold interest in the building, and instead grant a new lease. When granting a new lease there are several clauses to consider:

• Term of the lease
• Annual rent
• Security of tenure
• Break clause
• Rent review
• Full repairing lease

The above are just a few examples of terms that will need to be considered. Of course, this will all depend on whether the buyer is purchasing the practice with cash or if they have a lender involved. If there is a lender, the proposed purchaser will also need to consider their requirements, which may mean that further negotiation is required.

Assignment

If you do not own the building and have an existing lease in place with a landlord or third party landlord, you may be able to assign the existing lease to the proposed purchaser. When assigning an existing lease, this will involve transferring your legal interest to another – meaning the incoming tenant will step into the shoes of the outgoing tenant and take on the obligations under the lease.

If you decide to assign your existing lease, your landlord will ask you to enter into an Authorised Guarantee Agreement (“AGA”). You should ask your solicitor to check if this is an obligation that is required under your lease.

If you are required to provide an AGA, the outgoing tenant will be required to guarantee the performance of the tenant covenants incorporated in the lease by the new tenant. If the incoming tenant fails to perform these, which include payment of rents and repair obligations, the AGA allows the landlord to pursue the outgoing tenant under the terms of the AGA.

There is a continuing obligation for the outgoing tenant, and it is important that your solicitor advises you on the pros and cons of taking on an existing lease.

If you do not want to assign the existing lease, you can always surrender the existing lease and grant a new lease to proposed purchaser.

One thing to bear in mind when selling a dental practice, is that you must ensure that you have in your possession all compliance documentation to assist with the due diligence process. Your solicitor can assist you with this to ensure that all documentation is appropriate.