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Practice notional rent could be halved by change to 'alternative use' guidance

Hundreds of GP practices in high-value retail, business or residential areas are at risk of losing as much as half of their notional rent payments because of a change to how some premises values are calculated, it has emerged.

Chartered surveyors specialising in GP premises have told Pulse that some of their GP clients ‘may be not be financially viable’ after upcoming rent reviews.

Practices that have historically been valued on an ‘alternative use’ basis, typically in expensive districts of major cities, can now only be classed as a ‘GP surgery’ meaning they will be valued in line with other surgeries rather than local market prices.

Although the change to rules came through with the 2013 premises cost directions many GPs have yet to learn of the hit to their practice because they have not had a rent review in the interim period. Meanwhile, GP practices that have since gone through their rent review, typically carried out every three years, are now having to lodge legal appeals to address the cuts to their notional rent, the surveyors said.

GP Surveyors, a chartered surveyors firm specialising in doctors’ surgeries, warned that the issue ‘has the potential to affect hundreds of GP practices’.

Director Andrew O’Dowd, said: ‘We have a number of GP clients whose triennial notional rent reviews are looming and we are extremely concerned that their reimbursement will be reduced so dramatically that it will be impracticable for their surgeries to remain open.

‘In situations like this, the GP premises [in high-value areas] would be correctly valued by looking at comparable office, residential or retail rents rather than comparable GP surgery rents.’

It comes as Pulse has previously reported that the GPC is in a stand-off with the Government over the premises cost directions.

GPC premises lead Dr Peter Holden accused the Government of being ‘incompetent’ and not understanding the consequences for GP practices when scrapping the alternative use clause.

He said: ‘It’s no good NHS England turning round and saying we think these properties are worth sixpence, when you’ve had to buy the property and the land on the open market and pay £100,000.

‘If you have specialist premises, however old, and however defective to date, they are nevertheless specialist premises. You have to reflect the fact that the land they’re standing on may be worth more than the premises themselves, and that’s what alternative use valuation is there to reflect.’

Dr Holden said GP practices, as small businesses, should be paid the market value or else could ‘flog it off for a block of flats’.

He added: ‘I would argue anyone who’s done this is incompetent. Incompetent because they don’t know the rules, incompetent because they don’t understand the market and incompetent because they don’t understand the consequences of their diktat.’

A spokesperson for NHS England told Pulse: ‘NHS England is aware of the issue and is considering the implications for GP practices and the delivery of primary care medical services in some areas. It would not, however, be appropriate to comment further in advance of negotiations with the GPC regarding further revision of the Premises cost directions.’

Readers' comments (12)

  • Far from incompetent - it's all part of the plan.

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  • I told my partners I wouldn't buy into the practice couple of years ago because this would happen. They all questioned my sanity and disapproved my lack of commitment.

    I'm actually sad to be right though. This is another ball in the coffin.

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  • Surely this is one battle the GPC can win? This could prove to be the line in the sand. Unity is strength.

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  • The Government are trying to drive us into bankruptcy. If this isn't grounds for an all out strike, I don't know what is.

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  • I'm in my early 50's. I and many of my contemporaries have spent our whole working lives paying for business premises. None of us are looking to incoming partners to buy in and maintain business continuity when we retire. We are all looking to see how much a developer will pay for the land. That is how much goodwill the country has lost in GPs over the last generation.

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  • This is a bit of a scare story.

    It won't happen largely because you'll have to take on the developers of new build surgeries who have costed in notional rent to build purpose built premises.

    Legally NHS England would not have a leg to stand on.

    NHS England is obsessed with federations, it is using ever tactic to try and get practices to merge into 'manageable units'; allowing for more easy central control.

    All you'd need is for a handful of practices to convert to residential property and you'd be left with the collapse of primary care in those areas.

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  • T Roscoe

    I have just had our premises valued as I am retiring in 10 weeks. They have fallen in value in the last 10 years since the last valuation, despite a rise in notional rent and I am going to get 20% less than I was expecting.

    Lines in the sand and all out strikes, don't make me laugh!

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  • I think any lines in the sand need to be at a local level, but that would be enough to make things change. Just think in your town how many properties are owned by local GPs, if they all withdrew those properties, then the system would collapse, even if that happens in 1 or 2 medium size towns, that would be enough to create a storm.

    My property is owned by a third party though, so not sure how that will work.

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  • Why , O Why do we stay in this mess of MPIG withdrawal, box ticking, 7 day 8-8, pension discriminatory, bullying Contract with a reduction in pay per consultation of 50% over 10 years, premises cuts, depressive, burnt out NHS. Why ?

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  • I have always heard from my colleagues that GPs are business people and entrepreneurs
    I have never seen a business which depends so much on state hand-outs-for a start any business has to provide the infrastructure building and staff after borrowing money from the bank-then they have to be competitive and prove their outcomes -but in GP land they get cost rent and then notional rent and at the end the profits goes to the senior partner and the NHS does not get any money back-if my colleagues are business like they will be more savvy and not depend on state hand out--I know some practices in my neck of woods with a list size of over 6000.00patients and only one partner who mostly does the private work with the help of some retired GPS-that is not giving a good continuity of care-perhaps the DOH should go back to the red book or blue book claims system where they are paid for the work that has been done -bring in the outcome based remuneration

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