GP premises – sale and leaseback

We are increasingly hearing that premises ownership is an obstacle to attracting new GP partners. The increasing size and value of GP surgeries has meant that for some practices property ownership is seen as a burden, not least because the scale of borrowing required to buy into practice premises.

This why sale and leaseback is being seen as a recognised method for retiring or other property-owning partners to obtain a capital receipt from a previous investment and can be a solution for partnerships to resolve issues such as succession planning and recruitment.

So, what is sale and leaseback?

Sale and leaseback is where a GP premises is sold to a third party (often an investment company which specialises in the sector) and then leased back to the practice. The GP contractors will continue to occupy the building and provide contracted medical services.  The occupation of the building will need to be supported by a lease between the tenant (the GP contractors) and the landlord (the new owner of the premises).

The new lease will need to be approved as representing value for money (VFM), in line with Direction 32 of the National Health Service (General Medical Services – Premises Cost) Directions 2024 (PCDs). This assessment will be undertaken by the District Valuation Service and will consider the location, age, construction and specification of the surgery premises. A modern purpose-built surgery located in an area which fits with the commissioning intentions of the integrated care board (ICB), and which has benefited from a programme of continued and planned premises improvement / maintenance, would be supported for a relatively long lease without the need for regular break clauses. However, a premises which has dated fixtures and fittings, that has not benefitted from investment, does not meet statutory compliance or minimum standards would only be supported with a shorter lease term or a lease with regular break clauses.

Sale and leaseback arrangements of GP premises and offer several benefits for the NHS and GP contractors:

• Reduces risk and responsibility of property ownership.
• Some of the repair and maintenance of the property can be transferred to the landlord (depending on the type of lease).
• Releases the equity tied up in the premises.
• Helps resolve succession planning and recruitment issues by attracting new GP partners who won’t have to find funds to ‘buy into’ the practice.
• GP contractors can remain in their current premises without the need to relocate, maintain continuity of care for patients.

There are several key considerations that a GP practice should be aware of before starting a sale and leaseback arrangement:

• Talk to your ICB about any plans with your practice premises (this applies to all premises matters, not just sale and lease back). Under the PCDs (direction 7(2)) ICBs are instructed not to fund any premises costs where a contract has been entered into or work has started.
• Seek independent professional advice to discuss your specific circumstances in detail. There may be tax, VAT and other legal implications that you need to consider.

Helen Simmonds, adviser, PCC

PCC provides hands on support for commissioners and practices regarding GP premises matters.  Contact enquiries@pcc-cic.org.uk to find out more.