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GP premises value

Q: We are husband and wife GP partners and we are hoping to sell our branch surgery to another practice. The surgery has just been valued as medical premises at £201,000 (the open market value is £78,000). We get £16,000 a year in notional rent funding. In 2007, we put the building into our self-invested pension plan (SIPP) at £215,000: the amount it was valued at that year. The other practice is offering us more than £100,000 less than the latest valuation figure on the grounds that, in five years time or sooner, notional rent may not be available or the building may not be approved for it. If we accept this offer we would lose a massive amount of our SIPP's value. What is a fair argument to get a price fairly close to the surgery's current value as a going concern? It is mortgage-free and the next rent review is due in two or three months. Should we seek another buyer?

A:  The market valuation of a surgery depends on its current and potential use. So long as the surgery is deemed suitable for its purpose, it will continue to retain a value based on its medical use.

However, if continued use becomes less certain - either because small practices are amalgamating or it does not comply with buildings legislation - then its value can rapidly fall away.

In such a situation, it is standard practice to consider the alternate use value. I would guess that this is behind the very large difference in the value of your property as a doctors'

surgery and the 'bricks and mortar' or alternate use value at £78,000 - a sum which may take account of conversion costs.

From the additional information you sent me, I understand that the surgery had a fairly extensive refurbishment about 18 years ago and a further update two years ago - and that, in your view, it is suitable for ongoing use as a doctors'

surgery. But, having regard to the various uncertainties for the NHS, the potential purchaser is taking a different view.

My initial inclination is for you to contact your primary care organisation as it should have an estates plan (or strategic services delivery plan). If this plan includes ongoing use of the building as a surgery, I see no reason why its value should relate to, or be close to, the alternate use value.

Another option is to remain as landlords of the property and lease the building to the other practice. To maintain the value of your investment, it is advisable for the lease to be for as long as possible - 15 years would be ideal.

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