NHS Section 106 Funding: A Practical Guide for GP Practices

One of the least understood, but potentially valuable, funding routes available to GP practices is Section 106 (S106) funding. When used correctly, it can support much-needed GP premises improvements and expansion.

This article explains what Section 106 funding is, what it can be used for, how to access it, how repayment works, and how it interacts with notional rent reimbursement.

What is NHS Section 106 funding?

Section 106 funding arises from Section 106 of the Town and Country Planning Act 1990. It allows local planning authorities (LPAs) to enter into legally binding agreements with property developers. This ensures that developers contribute to the additional infrastructure needed to support the growing population of an area.
In areas where new housing will increase patient numbers, councils can secure S106 contributions specifically to mitigate the impact on local GP services. These funds are usually held by the local authority and released to the NHS (typically via the ICB) for agreed healthcare projects.

What can Section 106 funding be used for?

Section 106 funding is capital funding, not revenue funding. It must be used for projects that directly address capacity pressures caused by population growth.

Typical permitted uses include:

  • Extension or reconfiguration of existing GP premises
  • Creation of additional consulting or treatment rooms
  • Improvements to clinical or patient-facing space
  • Accessibility works (e.g. lifts, ramps, compliant toilets)
  • Contribution towards new or relocated health centres

Funding must be site specific and linked to demonstrable growth pressures. It cannot be used for staffing costs, running expenses, or routine maintenance.

How do GP practices apply for Section 106 funding?

While processes vary locally, the typical steps are:

  1. Identify qualifying developments
    Large or multiple housing developments nearby that will increase patient numbers.
  2. Engage early with the local Integrated Care Board (ICB)
    Raise the issue with the ICB primary care estates or commissioning team.
  3. Demonstrate impact and need
    This may include:
    – Patient list growth projections
    – Capacity constraints
    – Estates condition or space shortfall
    – Alignment with local estates strategy
  4. Prepare a capital proposal
    Often alongside other funding sources, such as NHS improvement grants.
  5. Council approval and release of funds
    Funds are released subject to the S106 agreement terms and timescales.

Practices that engage early with their ICB and local planners are significantly more likely to benefit from S106 funding allocations.

Do GP practices have to repay Section 106 funding?

In most cases, no. Section 106 funding is not a loan.

However, repayment (or “clawback”) may occur if:

  • The funds are not spent within the agreed time limit
  • The project does not proceed as approved
  • The premises cease to be used for NHS primary care within a defined period

If unspent, funds may be returned to the local authority or (in some cases) the developer.

How long do you have to use the funding?

Most Section 106 agreements include a time limit, commonly 5 to 10 years from the date the contribution is triggered. If funds are not committed or spent within this period, the council may reclaim them. This is why early planning and a “shovel ready” project are critical.

Does Section 106 funding affect notional rent reimbursement?

As Section 106 funding is not a loan, practices will not be subjected to an abatement of their NHS rental reimbursement.

In fact, capital improvements funded via S106 may increase the current market rental (CMR) value of the premises. Such improvements can trigger a notional rent review and, in many cases, this results in higher notional rent reimbursement. This process is governed by NHS Premises Costs Directions and BMA guidance.

Key takeaways for GP practices

  • Section 106 funding is developer funded capital, not NHS revenue
  • It can significantly support premises expansion and modernisation
  • Practices must work proactively with their ICB to access it
  • Funding is time limited but usually non repayable
  • It may increase the practice’s Notional Rent after review.

Final thought

With continued housing growth across England, Section 106 funding is becoming an increasingly important — and underused — opportunity for GP practices. Early engagement, strong estates planning, and collaboration with ICBs can unlock funding that might otherwise be lost.

Sheffield Children’s Hospital Snowflakes raise a record £437k

GP Surveyors are proud to have helped The Children’s Hospital Charity Snowflake Appeal celebrate its 21st year, by sponsoring one of their snowflakes. 

GP Surveyors chose to support the charity again this year because of the amazing work that all the staff undertake. Unfortunately, one of the team’s little ones has been a regular visitor for the past four years. Sidney, the son of Rebecca Reynard (Sales Director) and Grandson of Jacqui and Chris Johnson (Directors), was born with stage five chronic kidney disease and has required multiple visits to the hospital. He has always received first-rate care and the whole family has been provided with fantastic support.

Rebecca Reynard – GP Surveyors
“The Children’s Hospital have given me and my family so much, we just wanted to give something back and contribute towards helping others and what better way than to bring a bit of Christmas cheer with a twinkly snowflake!”

The snowflakes are now bringing festive cheer throughout South Yorkshire by illuminating multiple buildings across the region. The big Snowflake switch-on took place on 3rd of December with dozens of beautiful snowflakes lighting up the Sheffield Children’s Hospital. It was a fantastic festive occasion with the pavements outside the hospital, packed with well-wishers.

What began as four snowflake decorations on the Sheffield Children’s Hospital building in 2004 has grown massively over the last two decades. This year nearly five hundred Snowflakes are spread across the region.

 

 

 

 

 

 

 

 

The twinkling snowflakes are illuminating many buildings, including the Ryegate Children’s Centre, the Becton Centre for Children and Young People, Sheffield City Hall, St John’s Church, Owlerton Stadium, the Homes-by-Holmes building in Chesterfield, The Centre in Brinsworth and Woodhouse Community Hub and Library. This year due to popular demand the organisers have added new locations at Vicar Lane in Chesterfield, The Moor, and the Sheffield Olympic Legacy Park.

John Armstrong | Sheffield Children’s Hospital – CEO
“We are absolutely overwhelmed by the support shown this year. Every snowflake represents kindness, community spirit and the incredible support shown for children and families who rely on Sheffield Children’s. We couldn’t be more grateful.”

This year’s snowflake appeal has been an immense success, seeing a whopping £437,000 raised to date, which will be going towards the building of the new National Centre for Child Health Technology. In total, the snowflake appeal has raised well over £3.3m for Sheffield Children’s Hospital since it first began in 2004.

 

To support The Children’s Hospital Charity this Christmas visit their website.

There are numerous ways you can get involved and a fantastic online shop for Crimbo pressies!

 

How to check and challenge your Notional Rent

Notional rent appeal

GP practices must make sure that they are receiving the appropriate income, part of this process should be ensuring that the Notional Rent the surgery receives is fair and reasonable in comparison with other surgeries. GP Surveyors explain just what a Notional Rent appeal involves.

The Notional Rent valuation that a practice receives from NHS England is usually carried out by District Valuer Services (DVS) and the figure is purely their opinion of the value on your premises. Under the terms of your GP contract, you are entitled to get a second opinion of your valuation. When seeking a second opinion on the DVS valuation it is highly advisable to use a specialist primary care surveyor.

Following your surveyors’ assessment of your Notional Rent, you will either be given reassurance that your reimbursement is at the correct level or you will be advised that a challenge would be worthwhile.

When should your practice seek a second opinion on their Notional Rent?

GP practices should seek a second opinion from a specialist surveyor every time they receive a new Notional Rent figure from NHS England (usually every three years).

Even if you haven’t made any physical improvements to your surgery premises, its value can be increased by other external factors. Your surgeries’ value may have simply gone up with the market, which can change significantly over three years. During this period your surveyor is likely to have gathered additional up-to-date comparable evidence, which can be used to support an appeal for an increase. Even if the practice received a large Notional Rent increase last time, you should still seek a second opinion.

How does your practice challenge its Notional Rent?

If your surveyor believes that your practice is being underfunded, they will advise you to notify NHS England that you plan to challenge. You will need to provide NHS England with your surveyor’s details so they are authorised to proceed with the case on your behalf. You should also advise NHS England that your surveyor will provide them with reasons for the challenge including comparable evidence.

How long does your practice have to appeal?

NHS England will sometimes inform you that your practice must submit your appeal within a specific time frame, which is commonly three months. However, contractually you have three years to appeal, from the date stated on your rental figure letter, providing you have not formally accepted the figure.

If NHS England tells you that you cannot appeal because you have not notified them within the correct timescale, please speak to your surveyor who will advise you further.

What does the Notional Rent appeal process involve?

Once you have notified NHS England that you plan to appeal your Notional Rent and have appointed your surveyor, the practice doesn’t need to have much direct involvement with the appeal process.

Your surveyor will present your case for a Notional Rent increase to NHS England and the District Valuer (DV). This will include providing a valuation of the surgery and supporting comparable evidence on similar premises, in similar condition and location. Therefore, it is advisable to use a specialist surveyor who has experience in the primary care sector, specifically with Notional Rent appeals. This should ensure that they have the necessary comparable evidence available. The more specific and up to date the evidence the better.

In the majority of cases, these negotiations will continue until an agreement has been reached with the DV, at which time your surveyor will notify you of the outcome.

What happens if your surveyor and the DV do not reach an agreement?

If your surveyor takes on your appeal but is unable to reach an agreement with the DV, they can refer the case to NHS Resolution for a decision. NHS Resolution will check that all possible efforts have been made to resolve the case at a local level before providing a final determination. This process should require minimal input from your practice, as it is usually managed by the surveyor directly. All the practice need do is provide their surveyor with a copy of their GP contract and authority to act.

What happens if the Notional Rent appeal is successful?

If the appeal is successful, NHS England should begin to pay you the increased Notional Rent accordingly. However, it can sometimes take a few months for this to happen and NHS England may need to be chased.

Successful appeals are backdated to your review date and your practice should receive the corresponding back pay accordingly. For example, if the appeal is successful a year after you were initially given your new Notional Rent figure, then you should receive back pay for that year as a lump sum and an increase in monthly payments up until your new review in two years.

What should practices do if they are unhappy with the result of the surveyor’s review?

If your surveyor is unable to achieve a reimbursement increase, following their initial valuation and before negotiating with the DV, nothing is stopping you from speaking to another specialist for their opinion.

How much can practices expect their Notional Rent to be increased by following a successful appeal?

In the previous three years GP Surveyors negotiated average increases of 8% per surgery (over and above NHS England or the Health Board’s initial valuation), amounting to an average five-figure increase per practice over the three-year Notional Rent period.

Some of our Notional Rent cases have resulted in increases amounting to five-figures a year. Which goes to show the importance of seeking a second opinion on your Notional Rent figure.

Speak to a Notional Rent expert

Please complete our contact form and one of the team will get back to you shortly.

How to secure an NHS approved lease & avoid a GP lease rent dispute

GP lease rent dispute

Over recent years the need for practices to have a lease in place to regulate the occupation of the surgery building has markedly increased, largely due to succession issues. New GPs are increasingly reluctant to buy into premises and there is an increase in partners retiring and retaining their share in the property.

GP Surveyors explain the circumstances under which a GP practice requires a lease, how the lease approval and rent review process works and how to avoid a lease rent dispute and the associated costs.

When does a practice require a lease?

Many practices are unaware of when a lease is required to be put in place. A simple rule of thumb is that a lease is usually required when there is an uncommon party. An uncommon party is a GP partner that has retired or left the practice while retaining an ownership share in the property and/or a GP partner that has joined a practice but has no intention of purchasing a share in the property (usually an incoming partner has a degree of protection under the partnership agreement).

 

Avoiding a GP Practice Lease Rent Dispute

The key factors to a GP Tenant and Landlord avoiding a lease rent dispute are for all parties to be suitably represented in lease negotiations and obtain NHS England approval of the lease. When these steps are undertaken, rental disputes between Tenants and Landlords are uncommon. In the event that a rental agreement is not reached with District Valuer Services, the lease should protect GP Tenants from dispute costs. The lease should include clauses stating that the practice must give consent to the Landlord, allowing them to refer a rental dispute to NHS Resolution at the Landlord’s cost.

 

NHS England lease approval process and the Premises Cost Directions

It is crucial that before a GP tenant agrees to a lease with the premises’ owners (Landlord), the GP contractors must apply to NHS England for financial assistance towards their rental costs, under the proposed unsigned lease (Part 5 Section 32 of The NHS General Medical Services Premises Costs Directions 2024).

NHS England will then review the proposed lease and should issue a value for money report to the GPs. This report should either confirm acceptance of the proposed lease or suggest variations that NHS England believes would render the lease acceptable to them. If the lease is varied it should be re-submitted to the NHS, until accepted in writing.

It is important that GP contractors are suitably advised throughout the process by independent specialist Surveyors and Solicitors, to ensure their interests are protected.  Without such advice the implications of NHS England’s suggested variations could be easily misunderstood and adopting variations suggested could change the rental calculation. Specialist advice will also ensure NHS England’s suggested variations are within their remit and linked to value for money.

NHS England should only fail a lease on the following grounds. Firstly, if the proposed rent is deemed excessive. In such a case NHS England should provide their alternate opinion of appropriate rent under the lease, that would be acceptable to them. Secondly, NHS England should fail a lease on the basis that the valuation adjustments made for the commercial terms within the lease are either insufficient or excessive and provide their opinion of appropriate adjustment that they would approve to reflect these terms. Under no circumstances should NHS England fail a lease because they dislike a commercial term that is included in the proposed lease.

NHS England’s valuation advice on these matters is usually supplied by the District Valuer Services. Any decision made by NHS England concerning rental valuation figures or adjustments are usually opinions expressed by District Valuer Services and can be challenged by the practice, as the decision is a contractual matter.

Once a lease is approved by NHS England, a practice should be reimbursed actual rent for as long as the practice continues to provide contracted medical services from the property.

The Directions also allow a practice to apply for financial assistance towards stamp duty costs and grants towards surrendering a lease early (in the last 5 years) with the support of NHS England. Such decisions are usually linked to either merging estates or new improved premises that are deemed to be in the wider public and patient’s best interests for future care provision.

Appointing suitably experienced Solicitors and Surveyors is essential to establishing a robust lease and ensuring your lease has the standard protection mechanisms required.

 

The Leased Rent Review Process

A practice’s NHS approved lease should set out the rent review process in full and this process should always be followed. It is important to remember this rent review process has been approved by the NHS, so any references by the NHS to standard (or local) policies can be misplaced.

Usually, the rent review process is instigated by the Landlord (owners) serving a rent review notice upon the Tenants (occupiers).  What happens next will depend upon the stipulations within the individual lease. Some leases require that this notice be forwarded to the NHS within a set timescale and some require that the Landlord and Tenant engage to agree on the rent and complete a rent review memorandum before this is sent to the NHS for ratification. The latter scenario usually requires appointing a suitably experienced surveyor.

Effectively, if the lease was drafted correctly there should be protections in place to cover the rent review process. Whereby, the NHS rent reimbursement should always cover the rent paid out to the Landlord under the lease.

The lease and the NHS rent reimbursement are separate contractual arrangements with different parties and as such, they have different mechanisms to regulate them.  Usually, the only crossover is concerning the lease rent and the NHS rent reimbursement payments. In this scenario, there should be a protective clause stipulating that the GP practice cannot pay a higher rent than agreed with District Valuer Services or determined by NHS Resolution, following a dispute application. This assumes that the lease is approved by the NHS and has been drafted appropriately.

 

Summary

As a GP Tenant or Landlord, it is of paramount importance to use suitably experienced representatives and obtain NHS approval for the lease before signing and completing it. A fit for purpose NHS England approved lease should protect the GP Tenant at rent review and mitigate the risk associated with rental and other property disputes between the Tenant and Landlord.

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Preparing for GP partnership change

Partnership change and GP Property

In recent years general practice has seen a significant number of GP partners taking early retirement and with the proportion of GP partners aged over 55 rising above 30% for the first time, this trend is set to continue. With many practices undergoing partnership change or set to, GP Surveyors examines what to consider regarding property.

GP property valuations and partnership change

The first option for most partnerships to consider is to buy out the exiting partner or to seek incoming partners to buy into the partnership.

However, recruiting new partners has become more problematic in recent times, with GPs unable or unwilling to buy into partnerships. The responsibility and risks related to property ownership and or the perception of risk are widely stated as the main reasons alongside financial limitations.

If existing or new partners do wish to buy out an exiting partner, the process can be quite straightforward. The practice will simply need to ensure that an accurate Market Valuation is obtained from a specialist GP surveyor. Instructing a specialist is important because the valuation of a GP surgery differs from the valuation of other commercial premises. It is prudent to ensure the firm of surveyors undertaking the valuation possesses a substantial number of comparable GP premises valuations to arrive at a fair price for the subject property.

Sale and Leaseback

If the property-owning partner/s are retiring and the remaining partners do not wish to buy out the exiting partner/s, or new partner/s cannot be found to buy in, then Sale and Leaseback can be an attractive solution.

In a GP practice Sale and Leaseback transaction, the freehold or leasehold of the property is sold to an investor. Subsequently, a lease is granted back to the GP partners, enabling them to continue occupying the premises and providing medical services.

GP Practices should thoroughly evaluate the following factors when determining whether Sale and Leaseback is a suitable option for them:

Are all the property-owning partners happy to sell? If yes, Obtain a Market Valuation from a specialist GP surveyor, and if all the partners are happy to sell at the proposed price, the process can begin.

Who can/will sign the Lease? A minimum of two Tenants are needed to sign the lease. Many investors will not be interested in purchasing the practice building if there is only one signatory, as they would view the building as an insecure investment.

Transferring the GMS Contract

If there are no Tenants in place to sign a lease, transferring the GMS contract can be a viable solution. If the remaining partners want to remove the liabilities and risks of becoming Tenants and signing a long-term lease, transferring the contract is also an attractive route.

Numerous options exist for transferring a GMS contract to an alternative GP provider. These include GP Federations, Primary Care Networks (PCNs), other practices (through practice mergers), third-party organisations, or the NHS.

Establishing a Lease Agreement

An alternative option to sale and leaseback is establishing a lease between the retired GP partners and the current GP partners. This option allows GP partners who wish to keep ownership of the premises and their investment to do so.

When putting a lease, both Tenants and Landlords need to be aware of the following key considerations:

NHS Approvals: It is key for Tenants and Landlords that the lease is fully approved by the NHS before signing. This approval ensures the terms are fit for purpose and there is no rental shortfall between the NHS reimbursement and the rent being paid under the lease.

Rent Reviews: Landlords and Tenants should always obtain professional advice before signing a lease and when a rent review is instigated. This ensures that the practice is safeguarded against agreeing to a rental amount that may not be reimbursed by the NHS. This also ensures the Landlord protects their investment as the rent is set at an appropriate level.

Repairing Obligations: It is essential for both the Tenant and the Landlord to understand their repairing obligations under the lease before signing. There are two main kinds of lease, a Tenants Internal Repairing (TIR) and a Full Repairing and Insuring (FRI) lease. Under a TIR lease the Tenant (GP Practice) is responsible for the internal repairs only. Under an FRI lease the Tenant (GP Practice) is responsible for the entire building.

Landlord & Tenant Act 1954: All parties should be aware that upon the expiration of the lease, Tenants have the right to automatically renew their lease under materially similar terms to the existing lease. Unless this right is specifically excluded from the lease agreement.

Alterations: It is essential that Tenants fully understand any limitations under the lease before undertaking any property alterations. The Landlord may require the Tenant to remove any alterations that are not permitted under the lease agreement.

Service Charges: It is crucial for Tenants to fully understand the scope and estimated costs associated with any service charges. As the lease may require a Tenant to pay additional charges for services such as cleaning, decorating, repairing, and maintaining communal areas, especially in multi-occupied buildings. These service charges can be significant expenses for a practice and are not recoverable from the NHS.

Summary

Which ever route is chosen by practices, it is advisable to seek guidance from specialist primary care surveyors, accountants, and solicitors to make informed decisions that benefit yourself, the partnership, the practice, and the patients.

 

Contact us

If you have any questions concerning you GP Property and partnership change, please get in touch and one of the team will be happy to help.

£102 million allocated to modernise GP practice buildings

The government has announced that funding will be provided to approximately one in six GP practices in England to help improve their buildings. Approximately £102 million is being allocated to expand and modernise practices, with work set to begin in summer 2025. The government has said this marks the largest public investment in healthcare facilities in five years.

This funding initiative comes at a time when satisfaction levels with GP services have reached record lows, and data indicates that 40% of GPs believe their premises are not fit for purpose.

Health Secretary Wes Streeting described the funding as a “significant step” but cautioned that it would not resolve all existing issues immediately. The plan includes projects such as converting office spaces into clinical consulting rooms and constructing new practices.

Mr. Streeting said.

“These are simple fixes for our GP surgeries, but for too long they were left to ruin, allowing waiting lists to build and preventing doctors from treating more patients. It is only because of the necessary decisions we took in the Budget that we are able to invest in GP surgeries.”

Professor Kamila Hawthorne of the Royal College of GPs welcomed the funding announcement as an “encouraging interim measure” but emphasised that long-term investment is needed to address the “inadequate infrastructure.” She noted that poor infrastructure negatively impacts both patients and practice staff, limiting the care and services that can be provided.

Ruth Rankine, the primary care director at the NHS Confederation, stated that doctors would welcome the £102 million boost to “deliver high-quality care, closer to home, and fit for the 21st century.” She added that sustained investment in primary and community estates, equipment, and technology is essential for shifting care from hospitals to communities, from sickness to prevention, and from analogue to digital.

It remains unclear which of the 6,252 GP surgeries in NHS England will benefit from the new funding.

In Loving Memory of Andrew O’Dowd

We are deeply saddened to share the news of the passing of Andrew O’Dowd, one of the founders of GP Surveyors. Our heartfelt thoughts are with Andrew’s wife, Teresa, his children and all their wider family and friends at this difficult time.

Andrew founded GP Surveyors with Chris Johnson in 2000, and they became the first primary care surveying company in the UK. Through years of hard work and the support of their families, they built the company from humble beginnings, a tiny office in Nottingham, to becoming the leading primary care surveyors in the UK.

Throughout GP Surveyors 25-year history, Andrew went above and beyond to help thousands of clients and mentored countless surveyors to learn and perfect their skills. Everyone who has had the pleasure of working with Andrew would agree that he was a warm-hearted, compassionate man who was always generous with his time and had a fantastic willingness to help others. He would always have a ready smile and a catalogue of Dad jokes to brighten up the day.

He will be sorely missed.

For people wishing to leave Andrew´s family a message or attend the funeral details are available here: https://www.funeralguide.co.uk/obituaries/137265

Andrew´s family have nominated Nottingham Hospitals Charity in recognition of the excellent care he received and to honour his memory. To make a donation please visit: https://andrewodowd.muchloved.com/

The GP Property Podcast Launches

 

GP Surveyors are thrilled to launch our brand new podcast series, The GP Property Podcast hosted by Rebecca Reynard, our new Director of Agency and Sales.

Rebecca is happy that GP Surveyors can offer GP practices this new channel of free advice and is looking forward to delivering the next podcast already…

“Podcasts really are a fantastic way for us to help GP practices and offer an alternative format to our webinars, for all those GP Partners and Managers who are so pressed for time. Through this podcast series we will explore key topics, challenges and opportunities surrounding GP property, from leases to rent reviews and valuations to ownership. We’ll also discuss, funding, regulations and legislation in the complex world of healthcare premises. To kick off this podcast series, we chose to start with notional rent. What it is, how we challenge it and how we can look to increase it, and what that means for succession.”

People can now watch or listen to The GP Property Podcast on Spotify or YouTube. GP Surveyor hope you enjoy our first episode and follow us for all future episodes.

Contact

If you have any questions about Notional Rent or any other GP Property manner, please get in touch and the team will be happy to help.

The New GP Contract 2025/26: A Property Perspective

The GP Contract for 2025/26 introduces significant changes, including increased funding, streamlined procedures, the end of national collective action and expected improvements in primary care for both patients and staff. In this article, GP Surveyors explore how the GP contract might impact property in the primary care sector.

Primary Care Networks (PCNs) are central to the new contract, with key clauses and funding structures supporting the model. Dr Amanda Doyle (National Director for Primary Care and Community Services) even concludes her statement by saying “I hope the changes to the contract in 2025/26 will be seen as positive for practices, PCNs and for patients.” This backing should give PCNs the confidence to make further strategic decisions regarding their structure, but it does not eliminate all uncertainty and risk. We foresee that PCNs operating under flat or lead practice models will see further practices adopt mergers as a risk reduction strategy.

Since the establishment of PCNs, GP Surveyors have observed numerous practice mergers. The need for primary care to provide a more diverse range of services has driven up patients’ desire to register for larger practices that provide these services. These larger practices need more space to deliver these services, and the specialisms of GPs from smaller practices to deliver them. Coupled with growing partnership succession issues, mergers are often seen as a solution to these issues and an effective method of reducing risk.

Practice Mergers – Property Considerations

As a starting point to a merger, practices should consider whether they share the same culture and ethics; this will significantly contribute to the success of the merger and future working relationship running smoothly. Then, a combined partnership agreement should be completed by all the merging surgeries. This agreement should be drawn up by a specialist primary care solicitor to ensure it is fit for purpose.

To avoid major property issues during a merger, we strongly recommend that the surgeries neutralise their equity and liabilities at the outset. As each partner’s share is equal, this should prevent future bias, enabling decisions to be taken that benefit all parties equally. This avoids a scenario that would benefit one surgery above others, e.g. one property closing, creating a loss for one party and/or another property expanding, creating a profit for another party.

In order to accurately equate property shares, each surgery should be valued to ascertain its current market value. Valuing GP premises is a specialist area, as the basis of valuing a GP surgery is different from the valuation of other commercial premises. A firm of experienced healthcare surveyors should have access to a significant amount of up-to-date comparable evidence, which will enable them to produce a reliable market valuation of a practice.

Once equity and liabilities are neutralised, then an estate’s strategy can be implemented. There are many estate strategies open to surgeries during a merger, depending upon the circumstances of the parties involved. Factors to consider include the profile of the estate now and what it would look like in 5, 10, or 15 years’ time, as it’s likely to be very different. A key consideration is whether the type of property fits into the profile of buildings in the NHS Long Term Plan.

The GP Contract and property – In summary

GP Surveyors foresees the new GP contract as further evidence that PCNs are here to stay. Coupled with the rise in practices facing succession issues, we anticipate additional practice mergers. Although practice mergers can present some property challenges, these can be addressed with careful consideration, planning, and the engagement of a specialist primary care solicitor and surveyor.

GP property and planning for partners retirement

GP Property and Retirement

Why GPs considering retirement and their practices should plan in advance.

When a property-owning GP partner is planning retirement, you may be surprised to hear that they should ideally start the process years before their planned retirement date. Taking the time to plan early can make retirement a less stressful and more straightforward process for the individual and the practice.

When planning retirement, it is important to consider the following areas from a property perspective:

Market Valuation

Whenever a partner decides is the right time to sell their share in the premises, the practice will need to ensure that an accurate Market Valuation from a surveyor who specialises in valuing GP surgeries.

This is important because the valuation of a GP surgery is different from the valuation of other commercial premises. The firm of surveyors must have access to a significant number of comparable GP premises valuations in order to arrive at a fair price.

Sale and Leaseback

There are many GP practices currently exploring Sale and Leaseback as an option for easing retirement and recruitment issues.

By selling the surgery premises to an investor and then leasing it back from them, a partner can retire immediately or at a later date without the complications of selling their share. Moreover, recruiting new partners becomes easier as they no longer need to raise significant funds to buy into the practice.

A standard GP practice lease would normally be 15 years, providing a partner with the option of seeing out the full duration of the lease or taking retirement a number of years beforehand. Leaving a shorter time on the lease for new partners to commit to, thus making it easier to find a replacement.

There is also more flexibility when the lease comes to an end. The current partners have the option to sign up to a new lease for the existing premises or consider a move to a more suitable building.

Partnership Agreements

If a partner is selling their share to another GP who will become a property-owning partner, a solicitor should be consulted and preferably a primary care specialist. The practice should discuss amending the partnership agreement, updating the title deeds for the premises, the land registry information and the ‘Declaration of Trust’, etc. Moreover, it is important for the departing partner to speak to their mortgage company about releasing them from the mortgage.

If a practice is entering into a Sale and Leaseback agreement, their solicitor should add a clause to the lease which automatically amends the partnership agreement depending on current lease signatories.

Other Things to Consider for retiring partners

  • accountant from the outset – due to the potential tax implications of selling the premises
  • pension provider who may take some time to enable your payments.
  • the CQC (your Local Area Team)
  • NHS England (so they can update the GMS/PMS contract)
  • your bank, insurance company and HMRC among others.

This is by no means meant as an exhaustive guide. We recommend that as a GP considering retirement you should speak to all of the aforementioned professionals to create your retirement plan.

To navigate through the variety of property options and to discover further solutions and benefits, please download – Your Guide to GP Property & Retirement by filling in the form at the bottom of the page.

GP Property and Retirement Guide

Your Guide to GP Property & Retirement

Please fill in a few details and your guide will download.

    * Property is held by one person in their sole name, but it has been bought for two people as their joint property to live in and both pay the mortgage jointly. The ‘Declaration of Trust’ will then ensure that the property proceeds would be divided equally between the parties upon sale.

    What are the key differences between leased and GP owned premises?

    differences between leased and GP owned premises

    GP Surveyors explore the key differences between leased and GP owned premises. The majority of GP practices in the UK are owned by general practitioners and are classed as owner-occupiers. However, the number of leased surgeries has seen a large rise in recent years. These surgeries are largely owned by former GP partners, private landlords or a company.

     

    Owner Occupier (Freehold)

    In situations where a GP practice owns its surgery and operates from it, the purchase of the surgery may be funded by a mortgage or loan agreement. The practice receives a Notional Rent reimbursement, based on the Current Market Rental value (CMR) for space used for NHS purposes, such as General Medical Services (GMS) space. Additionally, there are some practices receiving Cost Rent reimbursement calculated based on mortgage or loan borrowing costs.

    The practice has control over their buildings and land and can make extensions or alterations, subject to appropriate consents such as planning and or building regulations. Any changes resulting in an expansion of the surgery for GMS purposes would require NHS approval to ensure the practice continues to be reimbursed rent. The practice is also fully responsible for the repairs and maintenance of the buildings.

     

    Notional and Cost Rent Reimbursements

    If the property is occupied by the owner, it is either owned outright by the GP partnership or subject to a mortgage or loan agreement. When the premises are owned outright, the practice receives notional rent reimbursements from the NHS. If the property is subject to a mortgage or loan, the practice receives either the notional rent or a cost rent reimbursement.

     

    Leasehold

    GP practices that rent any part of their premises should have an NHS approved lease in place for this use. The lease specifies the areas permitted to be occupied and outlines the responsibilities of the practice as a tenant, including repairs and maintenance. As tenants, GP practices do not have the same level of control over the premises as property owners, meaning they require the landlord’s permission to make improvements, changes, or extensions to the building.

     

    Types of Leases

    FRI (Full Repairing & Insuring): An FRI lease requires the tenant to repair, maintain and insure the entire property, including external areas and structural parts.

    TIR (Tenant’s Internal Repairing): A TIR lease requires the tenant to repair and maintain internal aspects only, and the landlord is required to repair and maintain external and structural elements.

     

    Leased Rent Reimbursement

    The lease rent (actual rent) paid under the lease to the Landlord should not be higher than the NHS rental reimbursement the practice receives.

    Lease rent is adjusted to reflect the terms of the lease if they differ from the standard hypothetical lease terms of Notional Rent. The adjustment can relate to lease length, repairing, insuring or maintenance obligations.

    When a GP practice leases a building on FRI terms, their NHS reimbursement must be adjusted from CMR to reflect the additional obligations of the practice. The difference between a practice’s actual rent and CMR is usually referred to as the tenant retention.

    The standard tenant retention for purpose-built surgeries is usually 5%. In real terms, this means the actual rent paid to the landlord by the GP tenant under an FRI lease should be 5% lower than their NHS reimbursement. The GP tenant retains this 5% for their additional obligations. The standard tenant retention for converted surgeries is usually 7.5%.

     

    If you need further assistance having read our article about the differences between leased and GP owned premises please contact our team today.