By Aidan Welton
It is quite common for pharmacists to want to share occupation of their pharmacies with third parties – for example, chiropodists, chiropractors, beauticians or other healthcare or beauty specialists. Often these third parties occupy separate treatment rooms and may provide their services for only a few hours on irregular days.
There is no ‘one size fits all’ answer as to whether a pharmacist can share occupation of their pharmacy. Instead, it will depend upon the exact wording of their pharmacy lease. In this article, we cover some of the most common restrictions and points to note for pharmacists seeking to share occupation.
Landlords may be reluctant to permit tenant pharmacists to share with third parties as such sharing would dilute the landlord’s control over who is in occupation of the pharmacy.
Where it is prohibited
Sharing occupation with third parties may be expressly prohibited in a lease and where this is the case the permission of the landlord will be required to do so. The landlord will have entire discretion as to whether to authorise such sharing and does not have to be reasonable in considering a pharmacist’s request. The consent may be restricted to a specific third party or only for a period of time. The landlord may also require the payment of a sum of money in return for such consent.
Where a landlord’s consent is provided, it should be documented by a formal licence or a side letter.
Where lease is silent
If a lease is silent on sharing occupation then it is not prohibited. However, there may be a general sweeper clause preventing any ‘dealings’ unless expressly permitted by the lease and where this is the case, sharing will not be permitted. The definition of dealings includes assigning, underletting, charging, sharing occupation or parting with possession of the pharmacy.
Where it is permitted
Leases may permit pharmacists to share occupation with third parties in certain circumstances and subject to conditions.
The usual position is that sharing is permitted without the landlord’s consent with a ‘group company’ of the pharmacist. Group Company will be defined in the lease by reference to legislation. Whilst the tenant and third party remain ‘group companies’ the sharing will be permitted.
A lease may also permit a pharmacist to share with a third party (not being a group company) provided that a relationship of landlord and tenant is not created. Landlords want to prevent a relationship of landlord and tenant being created to ensure that the third party does not acquire ‘security of tenure’ under the Landlord and Tenant Act 1954. If security of tenure was acquired, the third party would have the right to remain in occupation of the pharmacy after expiry of the lease term, preventing the landlord from being able to re-let or otherwise deal with the pharmacy. Whether a landlord and tenant relationship is created will depend upon the factual occupation by the third party. For example, if the third party has exclusive use of a defined area at the property and are paying rent, such a relationship may be created.
Where a lease prevents sharing, or a pharmacist is concerned that they would be unable to comply with conditions imposed on sharing, underletting of part of the pharmacy may be an alternative option. Putting an underlease in place with the third party is more formal and will usually require the landlord’s consent (such consent not to be unreasonably withheld or delayed).
An underlease is only likely to be suitable where the pharmacy can accommodate a third party on a full-time basis in a definable separate area, for example a consulting or treatment room.
If a lease does allow sharing, it will also be necessary to ensure that the third party’s business is an ‘authorised use’ under the lease. All pharmacy leases will specify what the property can be used for. This may be as specific, for example as a “pharmacy” or more broad, for example, retail use. If the third parties proposed use is not permitted, you will need to obtain the landlord’s consent to that use.
Given that it is now not unusual for pharmacists to want to share their pharmacy with third parties, sharing is something that should be considered when new lease terms are being agreed. A pharmacist tenant should think carefully about the type of third party that they might like to share with during the lease term and ensure that any new lease allows such sharing and subject to only minimal conditions.
The above is a general overview and we recommend that independent legal advice is sought for your specific concerns. If you require further information in relation to the points raised in this article you should contact Aidan Welton who is a solicitor and member of the Pharmacy Transactions Real Estate Team at Charles Russell Speechlys LLP. Aidan can be contacted on aidan. firstname.lastname@example.org.
This article also appears in the November issue of Pharmacy Business.