GP Surgery Lease: Why It Differs from Standard

A GP surgery lease is not a standard commercial lease, even though it looks like one on the surface. It operates inside the framework set by the National Health Service (General Medical Services – Premises Costs) Directions 2024, which came into force on 10 May 2024 and replaced the 2013 Directions of the same name. That framework controls how much rent NHS England will actually reimburse, dictates terms that a landlord and tenant would otherwise negotiate freely, and creates consequences on retirement or contract termination that a shop or office lease simply does not have.

We act for GP partnerships and for landlords of primary care premises across London and the South East on both commercial property and partnership matters, and the same question comes up on almost every instruction: why can’t we just use a normal commercial lease template? The answer is that a normal template does not account for NHS rent reimbursement rules, does not deal properly with a partnership as tenant, and rarely anticipates what happens when a partner retires or the GMS contract ends. This is the pillar piece for our GP property series. Below we set out the areas where a surgery lease needs to depart from standard commercial terms, and link through to more detailed posts on retirement, partnership ownership and the “last man standing” problem.

Why NHS Premises Rules Drive the Lease Terms

Under a GMS contract, a practice does not simply pay rent and absorb the cost. It applies to NHS England for financial assistance towards its premises costs under the Premises Costs Directions 2024, and the level of that assistance depends on the type of occupation:

• Leasehold rental costs (Direction 32-33): where the practice rents from a third-party landlord, NHS England pays the lower of the current market rent or the actual rent under the lease, plus properly chargeable VAT.
• Notional rent (Direction 42-43): where the practice owns its premises outright, NHS England pays a notional rent based on the current market rental value, reassessed every three years.
• Cost rent or borrowing costs (Direction 37-41): where the practice has borrowed to buy or build its premises, NHS England contributes towards loan interest instead of rent, subject to conditions on how the loan was procured and secured.

The practical consequence for a lease is this: if the rent agreed with a landlord is higher than the current market rent NHS England is prepared to recognise, the practice absorbs the shortfall itself, every month, for the life of the lease. A solicitor negotiating the lease needs to understand this reimbursement mechanism before agreeing rent, rent review provisions or service charge terms, not after signature.

Rent Reimbursement Routes Compared

Where a practice is a partnership and every partner who owns the premises has retired without the ownership passing to a current partner, Direction 33(10)-(12) is important and often missed: the practice stops being entitled to notional rent altogether, and NHS England instead reassesses it as if it had applied for leasehold rental costs, paying the current market rent under Direction 34. This shift, from notional rent to an actual landlord-and-tenant relationship, is exactly the point at which many of the disputes we see arise, and we cover it in more detail in our post on retaining your property share after GP retirement.

Security of Tenure and Contracting Out

Most business tenancies in England and Wales attract security of tenure under Part II of the Landlord and Tenant Act 1954, meaning the tenant has a statutory right to a new lease when the current one ends, unless the landlord successfully opposes renewal on one of the limited statutory grounds. Many GP surgery leases are instead “contracted out” of sections 24 to 28 of the 1954 Act using the procedure in section 38A, which requires the landlord to serve a warning notice and the tenant to make a statutory declaration before the lease is completed.

Whether contracting out is appropriate depends on who is negotiating. A landlord who has built or refurbished premises specifically for a GP practice, sometimes with the benefit of an NHS premises improvement grant, will usually want the certainty of contracting out. A practice, on the other hand, may prefer to retain security of tenure, particularly where relocation would be disruptive to patients and difficult to justify to NHS England within the Directions’ minimum standards requirements. This is a negotiating point that needs to be settled early, not left until heads of terms are agreed.

Who Should the Tenant Be?

A standard commercial lease is granted to a company or an individual. A GP surgery lease is far more often granted to a partnership, and partnerships are not separate legal persons, they are the individual partners trading together. This creates two practical problems that a generic lease template does not solve:

1. Joint and several liability. Every partner named as tenant is individually liable for the whole of the rent and every other covenant, not just their partnership share. A partner who has already retired but was never formally released from the lease can still be pursued by the landlord for arrears run up by their former colleagues.
2. Keeping the tenant list current. As partners join and retire, the lease needs to be varied or a deed of assignment and release put in place so that incoming partners take on liability and outgoing partners are properly released. Leases that are not kept up to date are one of the most common sources of the “last man standing” problem we cover separately in this post.

Getting the identity of the tenant and the mechanism for updating it right at the outset is one of the most valuable things a solicitor familiar with GP practices can do for a partnership, precisely because it is so easy to get wrong and so expensive to unpick later. The underlying partnership agreement should also cross-refer to the lease and the property arrangements; our partnership agreements team and our post on what every GP partner should know about their partnership agreement cover this in more depth.

Repairing Obligations and Minimum Standards

Schedule 1 to the Premises Costs Directions 2024 sets out minimum standards that practice premises must meet, split into statutory standards (health and safety, fire safety, gas safety and related compliance obligations that apply regardless of the lease) and contractual standards (heating, lighting, waiting area provision, confidentiality arrangements, secure storage and infection control, among others). NHS England can arrange a survey visit and, in cases of non-compliance, serve a remedial notice with a period of no more than three months to put things right, unless a longer period is genuinely needed.

This matters directly to the repairing covenants in a lease. If a lease puts internal repairing obligations on the tenant practice but the building’s underlying condition (structure, services, fire compartmentation) falls to the landlord, the practice needs certainty about who is responsible for fixing shortfalls against the Schedule 1 standards, and how quickly. Ambiguity here does not just create a landlord and tenant dispute, it creates a risk to the GMS contract itself.

Break Clauses, Assignment and Contract Termination

Because a GP surgery lease exists to support the delivery of a GMS contract, what happens if that contract ends matters far more than it would in an ordinary retail or office letting. Practices often try to negotiate a break clause tied to termination of the GMS or PMS contract, though the enforceability of such clauses depends heavily on how they are drafted, and a break right that looks straightforward on paper can be difficult to exercise in practice.

Direction 54 of the 2024 Premises Costs Directions addresses the scenario where a retiring contractor cannot find a successor to take on the GMS contract or the lease. In those circumstances, NHS England must operate a published protocol for deciding whether to recommend that the lease be assigned to an NHS England nominee. This is a genuinely useful backstop, but it is not automatic, and a practice should not assume it will apply without engaging with its Integrated Care Board well before the position becomes urgent. We go into this scenario, and the practical steps to reduce the risk of reaching it, in The ‘Last Man Standing’ Problem in GP Surgery Ownership.

What This Means for Your Practice

A GP surgery lease has to work on two levels at once: as a conventional property document between landlord and tenant, and as a document that fits inside the NHS premises reimbursement system without leaving the practice exposed to unfunded rent, unclear repairing liability or an outdated tenant list. Getting specialist advice before heads of terms are agreed, not after, is what makes the difference. For related reading, see our posts on the NHS Premises Costs Directions explained, whether your surgery building should be held as a partnership asset, and GP partnership agreements.

If your practice is negotiating a new surgery lease, renewing an existing one, or dealing with a premises issue tied to a partner’s retirement, get in touch with our healthcare team or call us on +44 207 566 1188. You can also reach us by email at info@gurvelegal.com.