Practices often accept a notional rent valuation without question, but could gain up to a five-figure sum if they dispute it, says Andrew O’Dowd
Since the 1960s, all doctors who own and operate their own surgery have received rent from the NHS. This comes either as ‘cost rent’ or ‘notional rent’ and acts as reimbursement for allowing their private building to be used for NHS purposes.
Many practices are often still paid under the cost-rent scheme for historical reasons, but may be unaware that they could get more for their rent reimbursement by switching to notional rent. Others may receive notional rent, but could better off if they dispute the valuation they have received.
The NHS body charged with resolving disputes has recently changed its guidance and this article will explain what has changed and how practices can make sure they are getting the best deal.
Cost rent was introduced in 1966, but is no longer provided for new practices.
Many practices remain on this scheme as it is how they have been reimbursed historically. Most receive a higher level of reimbursement than if they were on the notional rent scheme – but only for the first few years.
After this, it is worth practices being savvy. Rent reimbursement reviews are meant to be conducted every three years – although this is not always the case and I’d advise practices to be proactive and request them from their PCT – and this is a good time for a practice on cost rent to see if they would be better off on notional rent.
You have nothing to lose by requesting this. GPs can stay on cost rent as long as they wish – even if they have a notional rent valuation. But once you elect to move to notional rent you cannot change back.
If you decide to stay on cost rent, a rent review is also a good time to have your funding arrangements reviewed. It is often the case that the cost of the existing funding can be reduced or the fluctuations in mortgage payments caused by interest rates can be removed.
How notional rent is calculated
Notional rent remuneration is based on the current rentable value of your premises. The district valuer works out what the surgery premises would let for on the open market – the current market rental value, or CMR – and is meant to reassess this every three years.
The district valuer takes the measurements of the property and looks at the car parking space and other features of the property and makes a valuation based on the rateable value of similar properties in the area. Generally, the reimbursable area is multiplied by the rate per square foot or per square metre, plus any car parking at a rate per space.
In my experience, the district valuer’s valuations are often conservative and may not always fully reflect all the appropriate evidence. Therefore, we recommend that GPs do not simply accept this valuation and always consult with a specialist.
Disputing your valuation
GPs have the right under their contract to check that they are receiving a fair rental, and there is often scope for challenging the valuation they have received from the district valuer.
An experienced firm of surveyors can look at the evidence used and challenge the district valuer’s figures. Often legislation is misinterpreted or simple factual errors are made, such as underestimating the number of car parking spaces.
The process for challenging rental figures should require very little work for the practice. Once the information has been given to the GP contractor they will take up negotiations on behalf of the doctor and, in most cases, a new increased figure will be agreed within a few months.
Typically, in cases where the surgery is being underfunded, the average increase in the notional rent achieved is around 15% – although it can be much higher, in some cases up to five-figure sums.
Taking it further
When agreement cannot be reached between the GP contractor and the district valuer, the case can be taken to the NHS Litigation Authority, and this process has become clearer recently.
New guidance from the NHSLA, which came into effect from February 2010, requires all parties to make ‘reasonable effort’ to resolve disputes locally before accepting and processing a referral under the national dispute resolution procedure.
The NHSLA says this new guidance will help reduce the number of cases coming to them and will enable them to be dealt with in a more timely and cost-effective manner. Practically, it means negotiations have to follow a set procedure, starting with both parties aiming to agree facts and producing valuation reports with references to the comparable evidence used.
The reports should be exchanged and valuers should meet to agree the level of CMR or narrow the issues of dispute. If an agreement cannot be reached, a ‘schedule of comparables’ should be produced.
Following this, the new process requires each party to provide an open letter stating the level of CMR they contend and suggest further attempts to resolve the dispute. If there are still objections to these proposals the dispute must then be referred to the NHSLA and the referring party must certify that all of the local dispute resolution options have been exhausted, or if this has not been possible, the reason for this.
Andrew O’Dowd is a director at GP Surveyors, a Sheffield-based firm of chartered surveyors that works for doctors across the UK
Save thousands by disputing your practice rent valuation Case study
The Aintree Park Group Practice in Liverpool was on cost rent and had never been given a notional rent figure.
The practice sought professional advice from GP Surveyors, who explained that the notional rent figure was likely to exceed cost rent. The company then wrote a letter to the PCT requesting a notional rent figure for the practice.
The local PCT instructed the district valuer to provide a notional rent figure, which the practice subsequently decided to reject. The PCT instructed the district valuer to discuss and negotiate with the surveyors, who were able to attain several thousand pounds more than the PCT’s offer.
NHS Litigation Authority. Protocol for local dispute resolution for the determination of current market rent under the NHS (GMS premises costs) Directions 2004.