GP premises – to lease or not to lease?
25th May 2017
GP Premises Leases
Many GP practices are not aware of when a lease is required or how the presence or absence of a lease can impact upon NHS rental reimbursement.
Where all the owners of the property are still practicing General Practitioners (GP) in occupation of the property, the GP Partners are owner occupiers and should receive “Notional Rent” Reimbursement from NHS England.
When is a lease required?
Generally, you should have a lease where there are ‘uncommon parties’. An uncommon party would include;
- a retired or departed GP who has retained an ownership share in the property;
- any individual who is not a current GP Partner who owns a share of the property;
- any non-property owning GP Partner.
Non-property owning GP Partners generally have a degree of protection and security from the partnership agreement and a lease may not be essential in these circumstances but would probably still be best practice. In addition, the partnership agreement should be robust, up to date and clearly identify the mechanisms for succession (seek advice from a specialist Solicitor). Especially as succession and future planning would seem to be becoming an increasingly complex issue.
What is a lease?
A lease is a legal document defining the rights, responsibilities and obligations for occupation of property between the owners (Landlord) and the occupiers (Tenant) of the property.
A lease will contain many details including responsibilities for insuring, repairing, maintaining, decorating and will provide clarity around these issues that will help avoid costly property disputes. A lease must, as a minimum, include details on the following;
- Property (Building)
- Parties (at least one uncommon party)
- Period of Time (Lease Term usually in years)
- Price (Rent)
GP Contractors are required to secure a property from which to operate from and provide contracted medical services. The best way of securing premises, if not purchasing a property, is under a lease.
GP Contractors occupying a property under a NHS approved lease should receive “Actual Rent” Reimbursement from NHS England.
New and varied leases
It is essential that a new or varied lease should be passed to NHS England by the GP Contractors (tenant) for approval to determine that it meets NHS England’s ‘value for money’ criteria. This process must be satisfied before signing any lease and can act as a check mechanism to ensure the proposed agreed terms are fair, reasonable and consistent with leases on other GP premises.
NHS England’s approval of the lease is a commitment from the NHS to reimburse the GP Contractors under the terms of that approved lease for the duration of that lease.
Leases on GP premises should not be or be seen as onerous, as once NHS approval has been secured the lease will attract NHS Recurring Premises Costs Reimbursements to cover the financial liabilities under the lease.
Securing the rights to the building also enables partners to draw salaries, pension contributions and profit shares and to qualify for Improvement Grants including Estates Technology and Transformation Funds (ETTF).
Improvement Grants and ETTF monies will be subject to the abatement regulations within the Premises Cost Directions 2013 and thus the property should be secured for 5, 10 or 15 years for the NHS to be satisfied that it will receive the appropriate return on their financial investment for the level of funds being allocated. If you only have a 5 year lease then it is unlikely that you will qualify for more large scale NHS investment, as this will require to be recouped over a 10 or 15 year period.
If you have any questions or concerns you should discuss your individual needs and circumstances with a specialist healthcare Surveyor, Solicitor and Accountant.