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At the heart of general practice since 1960

Premises - who bears the cost?

Maintaining your practice premises can be expensive, and these days responsibility for bearing these costs is not always clear, says accountant Bob Senior

Maintaining your practice premises can be expensive, and these days responsibility for bearing these costs is not always clear, says accountant Bob Senior

General practice was so much simpler in the past.

GPs generally occupied premises in one of two ways.

The most common was for the partners to own the building, with all of them having the same interest in the property, just as with the day to day profits.

The usual alternative was that the practice occupied a rented surgery, owned either by the NHS or a third party.

As a rule these simple arrangements meant that everyone understood who paid for repairs and maintenance.

Unfortunately, as general practice has become more complicated, these arrangements have changed.

Now it is quite usual to have a GP owned surgery where not all the partners are involved in the property ownership.

This results in any cost or notional rent that is received being shared by the property owning partners only.

This is invariably understood by all the partners.

But a degree of friction can occur when it comes to property maintenance.

Can you agree on who pays the costs as they arrive? Of course you can -until the £70,000 bill for roof repairs arrives three months before a partner is due to retire!

While routine maintenance such as a coat of paint on the internal walls is generally recognised as being a cost that should be shared by all partners, what about a new boiler, roof repairs, replacement windows and general external maintenance?

Is it reasonable for such costs to be shared by all the partners or should these often substantial costs be borne by the property owning partners alone?

Really it should be the latter, since the cost or notional rent that the property owning partners are receiving includes an element to cover maintenance.

However it is best that there is a formal understanding by all partners as to who pays for what.

This should be written into the partnership agreement. It should be clearly stipulated who bears certain specified costs.

Rented surgeries

GPs occupying rented surgeries can find themselves in an even more complex situation.

While many practices think that occupying a rented surgery is "less risky" than owning the surgery, this is not necessarily the case. The risk merely changes.

The key issue is to understand what type of lease the practice has signed up for.

Typically there are two main types. The first is generally known as a "full repairing and insuring lease". The second is an "internal repairing" lease.

The difference is this. In the former case the practice should receive rather more rent reimbursement from the PCT that it actually pays over to the landlord, the excess being used to insure the building and cover maintenance costs.

That happens because a full repairing and insuring lease passes all liability for repairs, and defects - even major structural ones - over to the tenant.

This means that if the practice is a number of years into a lease and a major issue arises with the building, then the practice has to bear all the costs.

Where a practice has such a lease, the excess of rent reimbursement received over rent and insurance paid out should be held back in the practice to pay for future maintenance, not drawn by the partners as profit.

While the reserve may not be needed in the first five or ten years, it may well be needed as the lease comes to a close and the partners at that time face significant bills.

In reality practices should avoid such leases if they can, and go for the second type of lease, the internal repairing type lease.

This type of lease passes all structural and external issues over to the landlord and merely requires the practice to keep the interior in a good state of repair.

Bob Senior is vice-chair of the Association of Independent Specialist Medical Accountants and director of medical services at Tenon, the UK's third largest medical accountant

Who bears the responsibility for the cost of GP premises is not always clear

Any excess rent should be held back to pay for future costs, not drawn by partners as profit.

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