on practice premises
(BMA document) January
Read the Focus on practice premises
online or download as a pdf
This guidance note has been produced by the General Practitioners
Committee to help GPs and Local Medical Committees with the
premises aspects of the new GMS contract
This section summarises the flexibilities and gives the relevant
new SFA paragraphs. It should not be treated as a definitive
guide to the flexibilities. More detail is given in the SFA
amendments and background notes to those amendments which
are available at http://www.nhsestates.gov.uk/primary_care/index.asp.
The costs for GMS GPs will initially be
met from exising GMS non-cash limited funds.
These flexibilities are discretionary.
1. New premises flexibilities
1.1 Mortgage deficits and/or redemption penalties
Many practices, particularly those that
bought properties in the property boom of the 1980s and in decaying
inner-city areas, still have mortgage deficit costs (i.e. are in
'negative equity'). Practices may also be faced with high mortgage
redemption penalties for early repayment of their loans.
Both circumstances can make it financially
unfeasible for the practice to move premises.
Practices with such "mortgage deficits"
may now apply to the PCO for a grant to help cover these costs.
The practice must
- agree to move to modern, PCO-approved
- apply for the grant in writing providing all reasonable
information that the PCO might need
- provide details of the amount of the outstanding mortgage used
to build and improve the property
The District Valuer will also be approached
to provide advice on the extent to which all other solutions have
been exhausted (such as loan re-negotiation and alternative use
of the property) and on the process and timing of the move.
The full conditions are set out in SFA 53.1.
1.2 Revised arrangements for payment of notional rent
1.2.1 Enhanced notional rent factor for
practices receiving cost rent
GPs receiving cost rent may make capital
investments in their premises (in the form of modernisations or
extensions) which are not reflected in higher cost rent payments.
New SFA 51.22 allows these practices to
receive a notional rent in addition to the cost rent. This enhanced
notional rent factor will be proportionate to the enhancements to the property value that
these improvements create provided they result in a notional rent
that is still lower than the cost rent. The payments will continue
until the GP opts to move to a notional rent for the entire property.
The enhanced notional rent factor is calculated as
I x (A+10)%,
where I is the current market rental value of the improvement
(calculated as the difference between the current market rent before
and after the improvement)
and A the capital provided by the practitioner
as a proportion of the whole cost of the improvement (I) expressed as a percentage.
The 10% is added to cover normal landlord
1.2.2 Abatement of full notional rent to reflect NHS capital contributed
GPs receiving full notional rent (i.e. notional
rent on the full value of their premises) may make improvements
to their premises with capital contributions from the PCO. This
will increase the value of the premises, and thus increase the notional
rent which the GP continues to receive as income.
The notional rent will be abated (i.e. reduced)
to reflect the level of NHS contribution to the capital cost of
the enhancement. The formula used to calculate the abated notional
rent is as follows.
I (A+10)% + P
where P is the current market
rent, as assessed by the District Valuer, of the property prior
to the improvement, and I and A are as above.
A worked example is given in new schedule
5 to SFA 51.
1.3 Reimbursement of legal and other professional fees
GPs who want to develop new premises, improve
existing premises, or move into new leasehold premises can face
prohibitive legal and other professional fees.
Under new SFA 51.13 vii, GPs in these circumstances
may be reimbursed the following costs, (provided they will be receiving
notional rent on completion of developments);
Notional rented premises
- reasonable fees and legal costs arising
from the purchase of the site upon which new premises are to be
- professional fees associated with the
construction of the building
- project manager costs to oversee the interests
of and give advice to the practitioners who will occupy the premises
- reasonable legal costs and where applicable,
VAT incurred by practitioners in agreeing the lease.
These are subject to the maxima set out
in the SFA amendment.
1.4 Guaranteed minimum sale price for redundant GP-owned premises
A GP may want to move to new, modern premises,
but is put off by the lack of certainty about the sale price of
the old premises he owns.
Under new arrangements (SFA 51.13 viii),
the GP may apply to the PCO for a written, guaranteed minimum sale
price for the premises. The PCO will take the District Valuer's
advice on a suitable sale price. The DV will take into account alternative
uses for the property in its market value assessment.
- The PCO must be convinced that the new
premises will result in an improvement in the range and quality
- The premises must be placed on the open
market with active marketing to sell it at the maximum price achievable
on a date to coincide with the practitioner's move to new premises.
- The property cannot be sold to a relative
of the GP or to the GP's employer or to a relative of the GP's employer.
1.5 Uplifts to current market rents
In some deprived areas, current market rent levels may be too low
to make it financially worthwhile for a GP to invest capital in
The prevailing current market rent may be
increased by applying an uplift factor held by the PCO as supplied
by the District Valuer.
The development must satisfy the existing
The Scottish enhanced cost rent scheme for leasehold premises already
allows enhanced reimbursement to be made in deprived areas, or in
other areas such as rural ones where the property market is otherwise
not supportive of such developments.
1.6 Reconversion of former residential property
GPs working from owner-occupied former residential properties
that are no longer considered suitable for the delivery of primary
care may be unable to move to new properties because of difficulties
renting out their existing property.
Under new SFA 46.6.1 such doctors may receive assistance towards
the costs of reconverting the property back to residential use.
This assistance is conditional on the GP
moving to more modern alternative premises. He must also rent out
the converted premises either privately or through a registered
social landlord, who may not be a relative of the doctor, nor the
employer of the doctor, nor the employer of a relative of the doctor.
1.7 Allowing PCOs to review cost rent payment
when GPs remortgage to lower interest rates
GPs receiving a fixed rate cost rent reimbursement may
find they can renegotiate lower borrowing costs. From now on, they
will need to notify the PCO of any such change. The cost rent reimbursement
will then be recalculated to reflect the appropriate prescribed
percentage prevailing on the date of the change.
GPs who repay their loan in full will have their cost rent reimbursement
recalculated on a variable prescribed percentage basis from that
These changes are made under SFA 51.51.
1.8 Reimbursement of equipment leasing costs in new leasehold premises
New GPs or GPs moving to new leasehold premises
from sub-standard premises may incur start-up costs for equipment,
furniture and furnishings, which may act as a disincentive.
Under new SFA 51.13.ix, these costs may
be reimbursed if they are included in an occupancy agreement through
an appropriate uplift in the level of rent reimbursement.
The nature and level of costs should be
agreed in advance with the PCO, as should the period of time for
which the reimbursement will be made.
1.9 PCOs taking an option to purchase land
In many areas, suitable sites for the development of GP
premises become available infrequently. When a site does become
available, there is usually a need to secure it quickly to ensure
that it is not purchased by a third party for alternative use. PCOs
have the powers to take an interest in land, including an option
to purchase (i.e. a contract that gives one the right, without any
obligation, to purchase a property within a certain period of time,
subject to conditions). In such circumstances PCOs should work and
provide a business case to regional office Heads of Estates &
FM to secure an option-to-purchase on a site that otherwise would
become a lost opportunity for practitioner/primary care premises
Normally, taking an option to purchase will involve making a small
one-off payment to the landowner for the right to acquire the land
at a fixed price to be set against the eventual purchase price.
Once the option has been secured, the PCO should make arrangements,
in consultation with the District Valuer, to obtain outline planning
permission for a change of use, if required. Arrangements should
also be made to advertise for expressions of interest from third
party developers. Once selected, the option to purchase should be
assigned to the approved developer who should then agree with the
District Valuer the plans and costs for the proposed development.
This arrangement is not an SFA flexibility
and PCOs will need to submit a suitable business case to demonstrate
the need for new practitioner/PC premises to improve patient access
to modern facilities and a better range of services to be provided.
2. Premises funding
Under the new contract, there will be a single fund for premises
in each country, which will operate alongisde the global sum and
the quality framework. In England, a lead PCO in each Strategic
Health Authority will hold this fund on behalf of all PCOs within
Existing premises expenditure and additional funds needed
to support agreed new projects (i.e. those ready for occupation,
under construction and others contractually agreed between the practice
and the provider) will be guaranteed to PCOs as a baseline. This
baseline will be uprated annually for property cost inflation. Decisions
on additional growth money needed to support, for example, the new
premises flexibilities and premises developments contractually agreed
after 30 September 2003 will be taken jointly by the PCOs and StHA.
These decisions will be based on local priorities and PCO needs
and capacity as set out in their Strategic Service Development Plans.
The existing SFA paragraphs on premises will be replaced in directions.
Under new funding arrangements, PCOs will have greater flexibility
in funding premises to allow, for example, investment in premises
to allow delivery of an extended range of enhanced primary medical
Practitioners whose premises were approved
for payment at 31 March 2004 need not seek confirmation of that
approval in order to continue receiving payments calculated under
the arrangements that existed to that date.
The contract contains an explicit commitment
to equity of funding and return on investments between GPs and third
party developers to provide stability for GPs as well as reassuring
funders and landlords.
There will be a system of rules which set
out minimum standards for new or refurbished buildings and guidance
which offers support to PCOs on costs by setting benchmark costs
rather than limits.
Subject to appropriate funding agreed between the PCO and the practice,
premises will not be accepted unless the accommodation provided
is deemed by the PCO, following a visit, as satisfying the minimum
standards. These standards include;
- compliance with the Disability Discrimination
Act (there is separate GPC guidance on this, which is available
from the GPC office).
- a properly equipped treatment room, where provided,
and a properly equipped consulting room for use by the practitioners
with adequate arrangements to ensure privacy of consultations and
personal privacy for patients when dressing and undressing.
- adequate lavatory and hand-washing arrangements for
patients and staff, which meet current infection control standards.
- adequate internal waiting areas
- adequate standards of lighting, heating
- adequate arrangements for storage and
disposal of clinical waste
- adequate fire precautions
- adequate security for drugs, records, prescription pads etc
- where minor surgery or treatment of minor
injuries is provided, a suitably equipped room in which to carry
out these procedures.
4. Branch surgeries
Criteria for funding
The Carr-Hill formula cannot adequately
pick up the increased infrastructure costs of split-site/branch
surgeries. For a branch surgery to qualify as a second main/split-site
it should meet the following criteria:
- be open for at least 20 hours a week for provision of
medical services automatically entitling it to proper IT support
- meet the minimum standards set out in
section 3 above
- provide essential and additional services
Branch surgeries that do not meet these criteria will not automatically
be considered eligible for funding as a second main/split-site surgery.
Particular circumstances in parts of Scotland
will require considerable flexibility with regard to opening hours,
for example, and the prime consideration will be the provision of
services to patients.
4.2 Closure of branch surgeries
A branch surgery can be closed subject to agreement between the PCO
and the practice. A practice may give notice that it wishes to close
a branch surgery. If the PCO does not agree, it can issue a counter-notice
to allow for any required consultation, requiring the surgery to
remain open until the issue is resolved. If the counter-notice is
successful following the normal appeal procedures, the PCO is required
to continue to fund it.
The following procedure will be used to
determine whether premises are continuing to meet the relevant standards:
- LMCs will be consulted
- where shortcomings can be rectified, the
practice will agree with PCO within a month how they can be rectified
within a reasonable period of time
- if the shortcoming have not been rectified within six months (or
a longer period if agreed) premises payments will cease or be abated
until the shortcomings are put right
- a practice may appeal against the PCO