GP Sustainability Loan Agreements

We have advised several GP practices on the issues to consider when entering sustainability loan agreements and have negotiated the detail of the loan documentation.

Entering into a sustainability loan agreement requires careful consideration, as there are disadvantages to entering into such loans. It is best seen as the first step along a road that leads ultimately to the health board acquiring ownership of the practice premises. The partners of the practice should be clear that this is what they want. Are they satisfied that giving up control of the premises fits with the practice’s long termer occupancy requirements? Is the practice content to depend on the local health board making important decisions on the practice’s location and future premises? Perhaps, the answers are yes but you want to be clear on these issues, before embarking on the journey.

There are also complimentary (or even alternative) ideas to making a GP practice more sustainable. Most GP practices in Scotland operate as traditional partnerships but an arguably better legal model exists – a limited liability partnership – to serve the needs of general practitioners. At the same time as considering the merits of a sustainability loan, a practice may also wish to consider converting from a traditional partnership to a limited liability partnership. If the practice enters into a sustainability loan agreement, there are often practical reasons for the practice wanting to convert to an LLP, although the precise circumstances of the practice requires to be taken into account.

There are many practical consequences of a practice choosing to enter into a sustainability loan, including:
• Often a requirement to update the names of the individual partners on the title to the surgery premises and any standard security which the practice’s lender will hold
• The requirement to agree with the practice’s existing lender changes in the loan documentation and for the lender to reach agreement on the ranking of the proposed health board standard security over the practice premises
• A requirement to re-value the practice premises, in order to calculate whether the sustainability loan valuation is accurate

Our solicitors will be happy to guide you on both the high-level considerations and detail involved in negotiating the sustainability loan agreement and consequential or ancillary matters.