What do we mean by “Squat practice”?
Squat practices are dental practices that are set up from scratch and are often established in an empty property or a property that is used for another purpose for example a retail unit, residential property or office building. A squat practice can either be a freehold property which is bought or rented on a leasehold basis depending on what is available on the market.
What are the key considerations when looking at properties as a squat practice?
- You can pick the location rather than being tied to an existing practice. This will of course require planning and research considering the competition in the area, footfall, customer base and even parking.
- Allows you to build your own unique practice with your own stamp, allowing for expansion.
- When looking at the properties you’ll also want to ensure there is sufficient space for plant equipment, possible rooms within the property.
- Would suit someone with entrepreneurial flair as well as clinical experience – allows you to grow your own business in the direction of your choice.
What permissions do I need?
Unless you are purchasing the existing practice and goodwill, it is unlikely that a purpose-built property will be available for sale or rent so it is likely that appropriate planning permissions and building regulations may need to be applied for (if change of use is required or if specific consents are required for the proposed works). It is recommended that appropriate advice is taken from an architect, planning consultant or from the local authority directly regarding what specific permissions and applications are required. If the property is leasehold you will also require the landlord’s consent for the conversion/fit out works in the form of a licence to alter.
From 1 September 2020, there was a big overhaul in the planning use classes, which introduced the new ‘Use Class E’, which amalgamated a number of use classes that were previously under separate classes. The significance of this overhaul means that planning permission is not required to move between the new Use Class E. So, premises that may have been offices (which would have previously fallen within use class B1), for example, can used as a dental surgery (previously D1) without the need for further planning permission.
If the property is leasehold what is the process?
Whether this is a squat practice or a new lease for an existing practice, you will need to negotiate the terms of the new lease with the landlord either via a letting agent if there is one, the landlord directly or their solicitor. Often a document is prepared known as “heads of terms” which sets out the key terms of the lease such as the contractual term, rent, rent reviews, any rent-free periods, the repairing liabilities, provisions in relation to assigning or subletting and requirements for alterations and additions and any potential break clauses. We would always recommend taking legal advice on lease heads of terms to ensure your requirements are met and the lease is not more in favour of the landlord. Once the heads of terms are prepared the parties will instruct their own solicitors to draft and negotiate the legal documents.
There may be a number of legal documents required depending on the landlord’s requirements:
Often when taking on a new tenant, the landlord will require a rent deposit in the form of a number of months rent up front to protect the landlord against any failures by the tenant to pay the rent or breach any other lease terms. Usually this rent deposit is returned at the earlier of (i) the end of the term or (ii) a lawful assignment of the lease. You will also need to take this into account from a cash flow point of view.
If the property needs alterations and conversion works there will also be a document known as a licence to alter which deals with the landlord’s consent for the tenant to carry out works to the property and this will set out the tenant’s specification and proposed plans of the works. Your solicitor will be able to advise upon and negotiate these documents on your behalf.
How long will the process take?
Usually, before preparing any legal documents the landlord will want to see some references from the new tenant in the form of bank statements, financial reference or trade or accountant’s references, This may seem personal but they are trying to get an overview of the tenant’s financial situation and ability to pay the rent due under the lease.
Once the solicitors are instructed, the process of negotiating a lease can take anywhere from a few weeks to a few months, it really depends on the number of documents, the complexity and the conduct of the parties. There may also be third party consents required for example from the tenant’s bank (if they are taking a bank loan or mortgage connected to the lease or development if a squat practice) and if the landlord has a mortgage secured on the property their bank may also need to see the lease and provide consent.
How much will it cost?
Both parties will need to be prepared to pay their own legal fees and also any additional fees for any consents required. If the practice is a squat practice the tenant will also need to budget for the initial build/conversion costs and fit out costs, equipment and any fees for architects/designers and also planning permission or building regulation applications. If Carter Bond were instructed to act on a tenant or landlord’s behalf, we always aim to provide a fixed fee for our legal fees so you have transparency and cost certainty from the outset.