As a result of these changes, a significant a number of GP practices have found that the amount of reimbursement rent they receive has reduced significantly at review.
The changes that have probably had most impact on the level of rent reimbursement received by GP practices are as follows:
1. The assumption that the practice premises are to be used for practice purposes only.
The District Valuer appears to interpret this as an instruction to disregard the value of alternative uses of the practice premises. Many practices in areas of high residential values have been adversely affected by this change. The problem with this change to the rent reimbursement is that it does not reflect the fact that a GP practice is effectively competing with other prospective occupiers when they are looking for new surgery premises. Where residential values are notably high, it will be virtually impossible to successfully bid for property when other bidders are reflecting in their bid the higher residenital values. This will lead to a dearth of GP Surgeries in these areas in the longer term.
In terms of existing surgeries in this type of location, this amendment is equally problematic as it presumes that the property owner (i.e. typically the GP partner) will be content to receive a lower level of rent from his property investment than could be achieved by a change of use. This is entirely at odds with one of the underlying principles of property investment which is that an investor will generally seek to maximise the return on his investment. In truth, most such as owners (who are practising GPs) will begrudgingly accept a lower level of rent as they have no choice if they are to keep practising. There may, however, be a small number for whom such a drop in income is the final straw during what is generally acknoweldged as an extremely difficult time for GP partners. GP’s in this position could close down their practice and convert their property to a higher value use.
The interpretation of this amendment by the District Valuer is a matter which can be contested when practices appeal against the District Valuer assessment; practices should be aware of this and speak to their surveyor about the merits of pursuing this course of action.
2. Review of reimbursable areas.
The changes introduced by NHS England to the triennial review of the notional rent reimbursement now require GP practices to provide detailed information about the accommodation they occupy to NHS England. This information is collected by NHS England on forms CMR1, CMR1a and CMR2. One of the purposes of requesting this information is to identify accommodation within a surgery which is no longer used for the delivery of the GP contract. To be fair to NHS England, it is reasonable for them to want to make sure that rent reimbursement is provided appropriately.
When completing the CMR forms referred to above, my advice to my GP clients is to be careful to make sure that they include all the accommodation that they use for practice purposes. This is particularly important as the District Valuer will invariably use the information provided on these forms when assessing the notional rent reimbursement; if a practice forgets to include a couple of rooms, or parking spaces for example when completing the CMR forms, it is likely that their rent reimbursement will be reduced accordingly. Such an oversight can be addressed directly with NHS England, but frequently this will take time and effort and there is no guarantee of a satisfactory resolution.
There are other changes to rent reimbursement which have affected rent reimbursement to GP practices but the two discussed above have had a significant impact on GP practices since 2013.
Copyright 2019 - Wootten Dean
Wootten Dean is an established property consultancy led by Bryan Wootten who has over 15 years of experience as a valuer and general practice surveyor. Bryan is an RICS Registered Valuer who deals with a range of property types and has a special interest and focus on the NHS primary care environment.