GP contractors are eligible for rental reimbursements – but the type of reimbursement depends on who owns the building
The BMA splits rental reimbursements into three areas – all of which are differentiated by the ownership of the building.
1 Notional rent reimbursements
Contractors who own their premises may be eligible for notional rent reimbursement. The amount of notional rent to be paid to the contractor is based upon the current market rental (CMR) value of the property, as determined by a surveyor. The CMR is assessed based on notional lease terms, which assume a 15-year term tenant with internal repairing obligations, with the landlord responsible for external and structural repairs and insurance.
Contractors who currently receive borrowing cost reimbursement (see 3, below) can switch to notional rent payments, but the area team must grant the application if the contractor chooses to switch. However, once the switch has been made, it is not possible to move back to borrowing cost reimbursement.
The level of CMR, and the amount of notional rent paid, must be reviewed every three years. The review will be brought forward if:
- there is a change to the purpose for which the premises are used;
- there is further capital investment in the premises which will be reflected in the payments the contractor is receiving under its contract.
2 Leasehold rent reimbursements
Contractors who rent their premises can receive reimbursement for their rental costs. The level of leasehold rent that may be granted is determined by the CMR value of the premises, or the actual lease rent, whichever is lower. The CMR value of the premises is as assessed by independent valuation conducted by the district valuer, who must determine what might be reasonably expected to be paid for the premises.
The level of leasehold rent reimbursement paid to the contractor must be reviewed when the landlord undertakes a rent review provided for in the respective lease – this is unless the review does not result in any change to the level of rent being charged.
Under the 2013 premises cost directions, when the CMR is to be reviewed, practices are required to provide the area team with a rent review memorandum. This is a signed agreement between the tenant and the landlord stating any changes made to the level of rent being charged.
3 Borrowing cost reimbursements
GPs who own their premises and have incurred costs, such as a mortgage or loan for repairs, may be eligible to have their borrowing costs reimbursed by the area team. The conditions attached to borrowing cost reimbursements are found in part 5 of the premises cost directions.
Changes to the loan
It is the responsibility of the contractor to notify the area team of any changes to the terms and conditions of the loan. Failure to notify the area team may result in them clawing back any overpayments received by the practice.
For how long can you borrow?
- Borrowing cost reimbursements should only be in place for a finite period of time.
- Once the mortgage has been repaid the practice is no longer eligible for borrowing cost reimbursements and should notify the area team, and switch to notional rent.
- When servicing their loan, practices are expected to pay down both the capital and interest of the loan.
- Practices found to be making payments on the interest only may face NHS England sanctions.