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Can I sell on my share of our building to an incoming partner at the original build cost, or will I have to accept the new lower valuation and leave with a debt?


3 June 2011

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Question in full:

Question in full:

I am contemplating retiring in the next few years. The practice partners own the building we work from, which was built a few years ago. On retirement I would be selling my share of the building to a new incoming partner. If the valuation of the building shows that I am in a negative equity situation, can I sell on my share of the building to an incoming partner at the original build cost, or will I have to accept the new lower valuation and leave with a debt?

Answer:

Essentially, you can sell your interest in the building at whatever price you can commercially agree with both the incoming partner and the existing partners, subject to that price not including any payment in respect of goodwill.

Usually, that would be at the market value – or your share of it – of the premises at the date you retire from the partnership. On that basis, if your share of the premises is worth less than the value you paid for it, then this is usually a loss you would suffer. While you could agree to value the share of the premises at the original cost, you need to be very careful because there is still a statutory prohibition on the sale of goodwill in an NHS GP practice, and a disposal of a partner’s share of the building on retirement at substantially over market value could be deemed a ‘disposal of goodwill’ 
in the practice and constitute a criminal offence.

If you wanted to sell at the original cost but you are concerned you are at risk of being in breach, it may be possible to seek clearance from the Family Health Services Appeal Unit. Whether it is worth your while doing this will depend upon how great the shortfall in valuation is – and therefore how much over the market value you are proposing to sell.

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