GP practices in leased surgeries must ensure to follow the procedures for rent reviews laid down in the lease. If not, they may find that their premises reimbursement is not high enough to cover the rent.
The 2004 Premises Cost Directions enable GP tenants to be reimbursed for their lease rent plus an appropriate uplift for external repairs and buildings insurance provided the rent has been properly assessed. If the district valuer (DV) accepts the landlord’s figure, the practice’s premises reimbursement will be an adjusted figure based on the lease rent.
Check the lease
GP tenants should check their lease and compile a schedule of all future rent reviews, making note of notices and counter notices required. Most commercial leases allow a landlord to serve notice of a rent review either before or at any time after the review due date. If the latter, the new rent will be backdated.
In many leases, the landlord’s notice requires the tenant to serve a counter notice accepting or rejecting the landlord’s figure.
In some leases there is a strict, limited period in which counter notice must be served. If the practice fails to do so it will be deemed to have accepted the figure the landlord specified.
If the new rent is backdated, many leases allow the landlord to charge interest, which is not reimbursable, on the rent arrears. The assumption is that a prudent tenant will put the additional estimated rent in an interest-bearing account. In one case a review stretched back nine years and the eventual interest liability was £5,690. Luckily for the GPs, the landlord was at fault. He agreed to waive the interest although he was not obliged to under the lease.
Some primary care organisations (PCOs) advise GP tenants to appoint their own valuer — a chartered valuation surveyor, while others ask the DV to consider the landlord’s proposed rent. It is risky to rely on advice from the PCO and the DV’s role is limited to looking at the rent level for reimbursement. The GPs should check that the valuer that they appoint is expert not just on landlord and tenant matters, but also on the GP premises reimbursement system.
Some leases on recently built primary care premises have a special clause within the rent review section noting that the lease rent will not exceed the level of rent the DV assesses for reimbursement purposes.
There will inevitably be provisos such as requiring the GP tenants to put the proposed rent to the PCO/DV and, if stipulated by the landlord, to use the formal NHS appeal system if unhappy with the DV’s valuation. If appealing formally, it may not be necessary for the practice to have its own valuer. GPs should check the lease details and discuss the situation with their PCO before going it alone. Some PCOs require GP tenants to challenge the rent before they are prepared to involve the DV.
John Hearle is a chartered surveyor and chairman of Aitchison Raffety, www.argroup.co.uk
From lease rent to reimbursement level
The district valuer (DV) will subtract amounts if:
Furniture or equipment, services or non-practice accommodation is included in the rent.
The Landlord is responsible for making internal repairs.
The DV will add amounts if:
The tenant is responsible for external repairs and insurance
The tenant has paid premium a on the lease
For VAT if this has been correctly charged by the landlord.
Checklist for GP tenants
Prepare timetable of future lease rent reviews and notice dates.
Check if the practice will be liable to pay interest on rent paid late.
If required by the lease, be sure to send the landlord a counter-notice to the proposed rent within the time limit specified to avoid being deemed to have accepted it
Do not rely on the PCO or DV for advice but do liaise with them.
Follow the PCO’s procedures as well as those in the lease.