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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.’