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Surgery loans

We are a three-GP practice and built our surgery in 1993 under the cost rent scheme. We financed this by each taking out fixed interest loans and we receive fixed rate cost rent reimbursement. One partner is due to retire and wants to sell his premises share to two incoming partners who will buy into the building. The new partners can take out loans at much lower interest rates than in 1993. Will the cost rent be reduced?

Under the NHS (GMS Premises Costs) Directions 2004, paragraph 39, the primary care organisation (PCO) must continue paying borrowing costs, as cost rent is now called, until the GP contractor makes alternative arrangements.

These, for example, include the contractor changing lender or renegotiating loan costs.

In these circumstances, the PCO can recalculate the reimbursement using the appropriate 'prescribed percentage' for borrowing costs in force at the time. Also the new reimbursement rate will be variable, so it can be changed to reflect fluctuations in lenders' variable interest lending rates.

It appears that the PCO could certainly look at renegotiating your reimbursement. The two existing partners would have the right to continue as before (as they each have separate loans), but I believe that the incoming partners would have to arrange new borrowing costs reimbursement for their share of the premises based lenders' pre-vailing variable interest rates.

However, I am aware of a lot of confusion over this with practices telling me that PCOs' policies vary.

My impression is that some PCOs will just carry on reimbursing at the old level, whereas others will try to use a change in lending arrangements to completely renegotiate the practice's premises reimbursement.

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