Veterinary premises finance: buying or converting practice property

• Buying the building from a retired partner. Many independent practices rent from a former owner who kept the freehold when selling the business. When that owner wants to sell, the practice is the natural buyer.
• Converting a commercial unit. Growing practices often outgrow a converted house or shop and move to an industrial or retail unit that can take a theatre suite, wards and parking.
• Partners holding the property. In partnerships the freehold may be owned by some partners personally and let to the practice, so a new partner may buy into the property as well as the business.
• Keeping the building after a sale. Owners selling to a group frequently retain the freehold and let it to the buyer, becoming landlords.
• Releasing equity. A practice that owns its building outright raises capital against it to fund imaging or a second site; see commercial property refinance.

A lender's valuer looks at what the property would be worth to another occupier. A purpose-built or heavily adapted surgery, with lead-lined X-ray rooms, theatre ventilation, kennel runs and isolation wards, often has a narrower market than an ordinary office or shop, so the money spent adapting it adds little to the valuation. Conversions of industrial units are the opposite case: the shell keeps a broad market, which helps the loan, while the fit-out is funded separately.

Owner-occupier commercial mortgages are commonly offered at up to around 70 to 75% of value, depending on the lender and the property, and repayment is tested against the practice's profit with the rent it no longer pays added back. Rural mixed practices sometimes include a house on the same title; borrowing secured on a home is outside the scope of what we arrange, so the residential part usually needs separating or a different route.

Before committing to a building, check that a veterinary use is permitted. Whether a surgery falls within the commercial, business and service class or needs its own permission depends on the scale and nature of the use, and overnight hospitalisation, kennels and noise near homes can all bring planning conditions. The Planning Portal guide to use classes is a starting point; confirm with the local planning authority or a planning consultant.

The premises will also need to be registered with the Veterinary Medicines Directorate before medicines are supplied from them, as set out in its guidance on registering veterinary practice premises. If you aim for a particular tier of the RCVS Practice Standards Scheme, design the building around its requirements from the start rather than retrofitting. Conversion works are usually financed with fit-out and refurbishment finance, while imaging and theatre kit go on asset finance through our veterinary equipment finance page.

The building can sit in the practice company, with the partners personally, in a separate property company or in a pension scheme able to hold commercial property. The choice affects tax, how rent is paid and, importantly for vets, what happens if the practice is later sold to a group: a building held outside the trading company can be retained and let, while one inside it is sold with the shares. Our guide to buying premises through an SPV or pension explains the structures. Where a partner is joining or leaving, our partner buy-in finance page covers funding a share of the business; take advice so the property and business arrangements line up.

• Deposit, covering the gap between the lender's offer and the price.
• Stamp Duty Land Tax at non-residential rates in England and Northern Ireland, or the Scottish and Welsh equivalents.
• VAT, if the seller has opted to tax. Veterinary services are standard-rated, so most practices can reclaim it, but the cash has to be found until the refund arrives.
• Valuation, survey and legal fees for both you and the lender, plus any arrangement fee.
• Conversion and compliance works, including X-ray shielding, drainage, ventilation and kennel acoustics.

Buying ties capital into a building at the point many practices also want to invest in imaging or staff, and the property is at risk if repayments are missed. Specialist fit-out can leave a building worth less than its cost, which matters if the practice moves or closes. Partners who own property jointly need a clear agreement on what happens when one leaves. A long lease from a supportive landlord may give enough security at lower cost, and keeping the building outside the trading company can preserve choices on exit.