Paul Conlan (GP Surveyors, Operations Director) explains the options practices have to fund GP premises improvement works and highlights the pitfalls to avoid.
It has been widely reported that many GP practices are currently struggling in inadequate premises that require improvement or expansion. According to respondents of the 2018 BMA GP Premises Survey, only half of the practices consider their premises to be fit for present needs. With the majority of practices highlighting their need for more space.
Whether a practice is considering extending their premises, improving access for disabled patients or simply fitting rolled vinyl, the most cost-effective way to fund the works can be complex and confusing.
There are two options available to owner-occupied surgeries looking to fund premises improvement works, NHS funded and self-funded (including borrowing capital). Often, works are funded by a combination of these two options.
When undertaking any improvement works one fundamental principle applies. In order that works qualify for NHS rent reimbursement, written approval from the NHS must be obtained, including confirmation works will be eligible for rent reimbursement.
To what degree will the NHS fund improvement work?
As part of the 2018/19 GP contract negotiations, 100% NHS funded premises improvement grants are now available, lifting the 66% cap stated in the Premises Cost Directions (PCD).
The level of funding surgeries are eligible for will depend upon a multitude of factors and respective contributions will need to be discussed with the NHS during the approvals process.
Notional rent abatements
If a practice opts to receive NHS funds towards the cost of building or refurbishment work, the surgeries notional rent will be subject to an abatement. The surgeries notional rent figure will be abated proportionally to the percentage of funding the NHS have contributed toward the works. No matter the percentage of NHS contribution, the abatement section of the PCD should be followed.
How long will the notional rent abatement apply for?
As the works will be completed after 1st April 2013, the 2013 Premises Cost Directions will apply. The 2013 PCD stipulate a proportionate time scale for the abatement, dependent upon the total costs of the improvements:
• Works costing up to £100,000 – are abated for 5 years
• Works costing between £100,000 – £250,000 – are abated for 10 years
• Works costing more than £250,000 – are abated for 15 years
For further information on notional rent abatements please read our abatement guide.
Can a practice still challenge an abated notional rent figure?
Providing the practice haven’t signed up to an alternative agreement (waiving the rights to receive rental uplift on works), the practices abated rent is still eligible for checking and challenge. Ask a specialist primary care surveyor to check the figures to ensure the surgery isn’t underfunded.
Self-funding GP premises works
If the surgery has or can borrow the capital to fully fund an extension or refurbishment works, it is still imperative that NHS approval is obtained before undertaking any works. Gaining the NHS’s approval will ensure any works to the practice will be eligible for notional rent reimbursements.
Is third party input required?
Working out the most cost-effective way to fund GP premises improvement works, over the lifetime of a notional rent abatement or a loan can be complex. Calculating the increase that improvement works will have on notional rent and the capital value of the surgery is a specialist area. If a practice is planning improvements it is advisable to seek valuation advice from a specialist primary care surveyor.