Your GP property questions answered by a GP Surveyors primary care property expert.

When should a GP Practice have a lease?

A: Paul Conlan explains…

A GP practice should have a lease in place whenever the owners of the building are not the same as the doctors within the partnership or where all GPs practicing are owners (100%/100%).

Scenarios:

Dr A and B own the building but have retired. The practice is run by a different partnership (gentleman’s/informal agreement) – a lease is required.

Dr’s A and B set up practice and own the building. Over time the practice has grown and now Dr’s A, B, C and D are the practising partners. However, Dr’s C and D never bought a share of the building – a lease is required.

Dr’s A and B own the building and are the only GP partners – no lease required.

Dr’s A and B set up practice and own the building. Dr A is retiring and leaving Dr B to run partnership with new Dr C. Dr A does not wish to sell his share and/or Dr C does not wish to buy Dr A’s share in the building – a lease is required.

Note 1: Locum and salaried doctors are regarded as employees as opposed to partners.

Note 2: It is essential that a robust partnership agreement is put in place to regulate changes, including property. A condition of the agreement should state that any new partner signs the lease to accept all associated benefits and obligations (salaries, pensions, profit shares and rent reimbursement/commitment to maintain property in accordance with the lease and pay rent to landlord).

Note 3: When putting a lease in place always consult a specialist healthcare surveyor and solicitor – such as Capsticks or Hill Dickinson

I’ve been told by NHS England that I only have 3 months in which to challenge my Notional Rent. Is this true?

A: Paul Conlan explains…

When NHS England issues a GP practice with a new Notional Rent figure following a review, they will often state that the practice must notify NHS England within 3 months if they wish to appeal. However, contractually, you have 3 years to submit a challenge.

We have experienced cases where GP practices have tried to challenge their Notional Rent more than 3 months after a review and have been told by NHS England that they are unable to do so because the deadline has passed. If you find yourself in this situation, you must seek advice. Your specialist surveyor will be able to take on your case and, if necessary, refer it to the NHS Litigation Authority on your behalf.

GP Surveyors has dealt with a number of cases like this recently – all with a positive outcome. As a result of our discussions, NHS England has been instructed to appoint someone to discuss and negotiate the cases with us within 30 days. They have also been told that they cannot impose time restrictions such as this on appeals because it is inconsistent with the regulations.

In our opinion, the process of appealing your Notional Rent can be much more straight-forward if it is done within a few months of a review. However, if this isn’t possible, don’t panic. We can still take on your case and negotiate your rent with NHS England – it just may take a little longer to reach an agreement. This won’t mean any extra work or cost for you. GP Surveyors will take care of everything and will keep you updated on progress – leaving you to concentrate on your day job!

I want to sell and leaseback my GP premises but I’m worried that the lease will be too long. Can I get a short lease and, if so, how will this affect the arrangement?

A: Dave Simpson explains…

Leases for GP practices are usually 15-25 years, however we have known them to be longer or shorter than this.

Understandably, you may initially be advised by a Solicitor to opt for a shorter lease, so that you can reassess your premises needs sooner rather than later. However, this may not be the best approach.

There are a number of things that you should consider when negotiating lease length as part of a Sale and Leaseback agreement:

  • What are the long term plans of the practice & current partners;
  • Is the building in a suitable condition or capable of being improved to provide an appropriate level of accommodation now and over the term of the lease;
  • A shorter lease term (say 10 years) provides less security for the potential purchaser, as such they may lower the sale price or require you to pay a higher rent to realise your expected price. Conversely a longer lease term is likely to be preferred by the market investors and could enhance the sale price and reduce the rent;
  • If you get to the end of your 10 year lease and decide that you want to renew it for another 10 years, you will potentially have paid a higher rent for 20 years than what you would have paid if you had originally signed up to a 20 year lease;
  • If you want to leave the GP practice before the end of the lease, you can transfer it to someone else. In fact, most GP practice leases can now be drafted to allow automatic partnership changes and can state that the leaseholders are the people who currently signed up to the partnership agreement.

These are general comments and your specialist surveyor will be able to advise you on the best approach for you based upon your specific circumstances.

I’ve been approached by a company who’d like to use a room in our practice. This would broaden our services but I’m worried that it may impact upon our Notional Rent. What should I do?

A: Paul Hardman explains…

In first instance, you should always consult your specialist surveyor before entering into any agreement to offer space in your practice to a third party (including other NHS bodies).

Your surveyor should seek to obtain additional information clarifying the finer points of the proposed arrangement and then should be able to provide reasoned advice as to the likely impact upon your Notional Rent.

Practices should be aware that space that is exclusively provided to a third party should be wholly excluded from their Notional Rent. However, things are less clear where space is partly used for a proportion of the week by the practice and partly used for the other portion by a third party. In such circumstances, NHS England may seek to reclaim some or all of the income received from the third party and may also seek to reduce your Notional Rent.

However, don’t let this put you off, as third party occupations can provide a valuable additional income stream to GP practices. Approaching a surveyor and adopting the right approach from the outset should help you avoid any surprises and ensure that the venture is in the best interests of the practice.

We have a Pharmacy at our Medical Centre. Is it too late to increase their rent if I have forgotten to instigate the last rent review?

A: Paul Conlan explains…

Don’t worry, most leases allow the rent to be reviewed retrospectively. Therefore, you can usually go back and instigate the missed review.

In fact, depending upon the terms of your Lease, you could instigate all outstanding reviews from the beginning of the Pharmacy Lease, if appropriate to do so.

We would always recommend that you seek a suitably experienced and specialist healthcare surveyor to act as your advisor and negotiator to agree the best possible rent for you. Initially, your surveyor should review your Pharmacy Lease (free of charge) and provide up front advice as to the next and best course of action, what work they will do and the associated fee.

It is often useful to agree a success related element to your fee agreement to suitably incentivise your agent to get the best possible result for you. In 2012-2014, GP Surveyors negotiated average increases of 49%, which amounts to a boost of £7,990 per annum in rental income. This increase in annual income is even more significant for equity owning partners, as it will also increase the capital value of your Property significantly and this will be realised at Partnership Change and Retirement.

I have been approach by a company offering to reduce my business rates. NHS England currently pay our rates bill so is there any benefit to me agreeing to this?

A: Andrew O’Dowd explains…

Absolutely not. In fact, by signing up to this you could be left out of pocket!

Your business rates bill is simply handed over to NHS England to pay (or reimburse) so, whatever your business rates bill, it’s cash neutral to you. Therefore, reducing your rates bill will not be of any benefit.

It will however benefit NHS England which is why we have recently heard reports of NHS England approaching GP surgeries offering to challenge their rates bill on their behalf. However, it isn’t in your best interests to agree to this either!

If NHS England (or a private company) are successful in reducing your business rates, this could have a detrimental effect on your Notional Rent reimbursement.

Both business rates and rental reimbursement are governed by the Valuation Office Agency/District Valuer. If your business rates are reduced, this could cause them to also look to see whether your Notional Rent should also be reduced.

Therefore, letting NHS England or a private company challenge your business rates can cause you to be left out of pocket. Moreover, a private company would charge you a fee if they are successful.

I’m struggling to recruit new GP partners. Is there anything that I can do to inspire more interest?

A: Nikki Keeley explains…

You’re not alone. There are many GP surgeries that are struggling to recruit new GP partners. This is partly due to the large financial commitment that comes with buying into a partnership.

Many younger GPs do not have the cash available and are reluctant to borrow such a large amount. They are also less willing to commit to working at one practice for the long term as it reduces their flexibility.

This, combined with an increasing number of older GPs seeking early retirement, means that there is a limited pool of GPs looking to be property-owning partners. Therefore, your practice has to be offering a highly competitive package in order to generate interest.

One solution to the issue of recruitment is Sale and Leaseback. This is where you sell your surgery to a healthcare investor and then lease it back from them on terms to suit you.

You need 2 GP partners who are willing to sign onto the lease. Then other GPs can join the practice without having to buy into a partnership and they can leave without the hassle of selling their share.

Therefore, Sale and Leaseback can not only simplify recruitment issues, it can make retirement more straightforward and it can also ease the responsibility associated with property ownership.

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