What are the benefits of leasing versus buying premises for my practice?
How renting sessions, leasing and buying compare on cost, flexibility and control, the lease terms that matter, and the tax points GPs often miss.
The short answer
Leasing needs far less capital and lets you move as the practice grows, which is why most private GPs rent sessions or lease before they ever buy. Buying gives you control over the building and a long-term asset, but ties up a deposit, adds purchase taxes and makes you responsible for everything. For most new practices the sensible order is sessional rooms first, then a lease with a break clause, and buying only once the practice is established.
Key points
- Renting rooms by the session is the lowest-risk start and needs no lease.
- A lease needs less capital than buying, but read the repairing, dilapidations, rent review and break clauses carefully.
- In England and Wales, business tenants usually have a right to renew under the Landlord and Tenant Act 1954, unless the lease contracts out of it.
- Buying brings Stamp Duty Land Tax or its Scottish or Welsh equivalent, as well as legal, survey and fit-out costs.
- Because most private medical services are VAT exempt, VAT charged on rent by a landlord who has opted to tax is usually a real cost to you.
Three options, not two
Before choosing between a lease and a purchase, consider whether you need your own premises yet. Many private GPs start by renting a consulting room by the session in an existing clinic, or by working under practising privileges at a private hospital. That tests demand with almost no commitment. See where you can practise and choosing a location.
| Rent by the session | Lease | Buy | |
|---|---|---|---|
| Upfront cost | Very low | Deposit, legal fees, fit-out | Deposit, purchase taxes, legal and survey fees, fit-out |
| Ongoing cost | Per session | Rent, service charge, repairs under the lease | Mortgage, all repairs, insurance |
| Flexibility | High | Medium, depending on term and break clauses | Low, as selling takes time |
| Control over the building | None | Limited by the lease | Full, subject to planning and building control |
| Registration | Often the host's | Yours | Yours |
| Long-term asset | No | No | Yes |
The case for leasing
- Less capital. You keep cash for equipment, marketing and the months before bookings build. See start-up costs.
- Flexibility. You can move or expand as your patient base changes, especially with a short term or a break clause.
- Shared responsibility. Depending on the lease, the landlord may handle the structure, communal areas and building services.
The catch is that you are bound by the lease terms and the landlord's consent for changes, and rent will rise at review.
Lease terms that matter
- Permitted use. It must allow medical services to the public.
- Length and break clauses. A tenant-only break clause gives you a way out if the practice doesn't work.
- Repairs. Under a full repairing lease you are responsible for the building's condition, which can be expensive for an older property. A schedule of condition at the start limits your liability.
- Dilapidations. When you leave, you may have to pay for repairs or return the property to its original state, including removing clinical fit-out.
- Rent review. How and when rent can rise.
- Alterations. Consent for sinks, partitions, signage and cabling.
- Assignment and subletting. Whether you can sublet sessions to other practitioners, which can offset rent.
- Service charge and insurance. What you pay towards the building and what is covered.
In England and Wales, a business tenancy usually continues at the end of its term, and the tenant can ask the court for a new one, under Part 2 of the Landlord and Tenant Act 1954. Landlords often ask to contract out of this, which is only valid if they serve the prescribed notice first. Understand what you are giving up before you agree. Scotland and Northern Ireland have different law.
Always have a solicitor review the lease, and ideally a surveyor for older buildings.
The case for buying
- Control. You can adapt the building to your needs without a landlord's consent, subject to planning and building control.
- Stability. No rent reviews or risk of losing the premises at lease end.
- An asset. You build equity and may benefit if the property rises in value. You could also let spare rooms to other practitioners.
The costs are real. You need a deposit and usually a commercial mortgage, which lenders price on the strength of your business plan. See funding your practice. You pay for all repairs, and property values can fall as well as rise. Money tied up in the building is not available to the business.
Tax points
- Stamp Duty Land Tax. In England and Northern Ireland, SDLT on non-residential property starts at £150,000 at the time of review. It can also apply to new leases. Scotland has Land and Buildings Transaction Tax and Wales has Land Transaction Tax.
- VAT on rent or purchase price. Letting commercial property is exempt from VAT unless the landlord has opted to tax, in which case rent is standard-rated. Most private medical services are exempt, so you are unlikely to be able to recover that VAT. Ask before you sign. See VAT for private GPs.
- Business rates. Payable whether you lease or own, although small business rate relief may apply.
- How you hold it. Owning personally, through your company or through another structure has different tax effects. Take advice from an accountant. See tax implications.
How to decide
Ask yourself three questions. Are you confident of demand in this location for the next five to ten years? Do you have capital you won't need for the business? Would owning the building let you do something a lease wouldn't? If the answer to any is no, lease or rent sessions for now. Many GPs buy later, once the practice is established and they know exactly what space they need.
Frequently asked questions
Can I lease a property and sublet sessions to other practitioners?
Only if the lease allows it. Subletting rooms can offset your rent, but you remain responsible to the landlord and need clear agreements with each practitioner.
What is a typical lease length?
It varies widely. Negotiate the shortest term that gives you security, with a tenant break clause, rather than accepting the first offer.
Is it better to buy through my limited company?
It depends on your tax position and plans. Get advice from an accountant before you commit, because moving property between you and a company later can trigger tax.
Does leasing or buying affect my CQC registration?
Either way, the premises must be a registered location and meet regulation 15. Moving later means applying to change your registration.
