If you are starting to consider succession planning and have a leasehold practice, you really need to ensure the terms and conditions of the lease are fit for a sale. We see more practices come to the market as leasehold, and whilst banks are happy to lend against a lease, they do insist the lease has at least seven (ideally ten) years remaining, as they will secure the loan around the years left on the lease. So, if your lease has less than ten years to run, now might be a good time to get the term extended without telling the landlord your succession plans.
If you own the freehold and are your own landlord, that will make life much simpler or if you are considering retaining the freehold (possibly to put it into your SIPP) and will be creating a lease, you should be clear what your terms will be, and you can do this by discussing the property with a chartered surveyor.
Where we see issues, it is usually from a third-party landlord who is either disinterested and not engaging in the process, or may see an opportunity to benefit financially from the sale by holding the principal to ransom. We have recently been involved in a leasehold sale where it was disclosed that the Lease contained a clause stating that on any application for consent to assign, the tenant must first offer to surrender the lease to the Landlord. When the Landlord realised it was a sale, he insisted on this. The principal’s lawyer thought the provision was unenforceable and sought Counsel’s opinion to confirm this (yes, not cheap!), and sadly, it wasn’t quite as black and white as they had hoped. Counsel said that the Landlord could insist that the principal had to offer to surrender the lease to the landlord first, but that if he accepted, the landlord then couldn’t force the principal to actually surrender it; he could, however, block the assignment. This left a bit of a stalemate, and eventually the Landlord did agree to surrender and re-grant the lease, but for a shorter term and with additional changes and whilst all of this was happening, the principal was undertaking his usual workload and keeping his practice on track. The sale was delayed by many weeks, and both the seller and the purchaser started to feel the strain.
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