The NHS Premises Costs Directions Explained

Where a practice owns its premises, it is generally reimbursed through notional rent, calculated as though the practice held a lease of the premises on standard assumed terms (typically a 15-year term with rent reviews every three years). Where a practice leases its premises, it is reimbursed based on the current market rent, determined by a district valuer or, since 2024, by an “appointed valuer”: a RICS-registered professional appointed by NHS England to carry out valuations, alongside or instead of the district valuer. This change was intended to speed up a process that had been badly affected by capacity constraints within District Valuer Services.

A significant procedural change in 2024 affects both routes. NHS England cannot pay a revised current market rent or notional rent until the contractor has notified NHS England in writing that it accepts (or disputes) the determination. Contractors have 12 weeks from the date of the notice to do this, unless a longer period is agreed. If a contractor neither accepts nor disputes the assessment within that window, and the new figure is lower than the amount currently being paid, NHS England may still move to the lower figure. This makes prompt engagement with any rent determination notice essential, since inaction carries a real financial consequence.

Improvement Grants: What Changed in 2024

The 2024 Directions substantially increased the funding available for premises improvement, and eased some of the conditions attached to it.

Improvement grants can now also fund land acquisition for a practice extension and tenant fit-out works on new-build premises, both new categories under the 2024 Directions. The Directions also introduced a new mechanism specifically to protect contractors who receive a grant but wish to retire before the guaranteed period of use has expired, allowing repayment to be suspended, waived, or transferred to an incoming practice in defined circumstances, rather than falling due immediately in full.

Service Charges, VAT, and Other Recurring Costs

The Directions also govern how much of a practice’s recurring premises costs NHS England will reimburse. Leaseholders are now expected to use reasonable endeavours to secure landlord agreement that no VAT will be charged on rent during the lease term, but where VAT is unavoidably charged, NHS England will reimburse it. Where the landlord is NHS Property Services Limited or Community Health Partnerships Limited specifically, NHS England will continue to reimburse at least the rent initially payable under the arrangement.

On service charges, the 2024 Directions simplified the reimbursement process, allowing NHS England to reimburse based on a service charge estimate at the start of the service charge year, followed by an end-of-year reconciliation, rather than only in arrears. This is a useful practical improvement, but it does not resolve the separate and much more contentious question of whether the underlying service charge itself is fair and properly evidenced, an issue we cover in detail in our post on disputed NHS Property Services service charges. The Directions also confirm that certain items must always be discounted from a reimbursable service charge, and give NHS England greater flexibility to estimate reimbursable costs where a lease has been in place for less than 12 months.

Where Disputes Most Often Arise

In our experience advising GP practices on premises matters, disputes under the Directions tend to cluster around a handful of recurring issues:

• Notional rent following partner retirement. Where all of a practice’s owner-occupier partners have retired, the 2024 Directions require NHS England to move the contractor onto current market rent reimbursement instead of notional rent, though NHS England retains discretion to continue notional rent on an interim basis, for example while a new lease is being arranged. Practices sometimes discover this transition has been triggered without realising the implications for their income.
• Missed 12-week response windows. Given that failing to respond to a rent determination within 12 weeks can result in a lower figure being applied by default, this deadline needs to sit with someone who will actually act on it, not simply file the correspondence.
• Grant repayment on early retirement or contract termination. Where a practice has received an improvement grant and a partner wishes to retire, or the GMS contract ends, before the guaranteed period of use has expired, the repayment position under the new Direction 13 mechanisms needs careful analysis specific to the practice’s structure (owner-occupier or leaseholder).
• Disagreement over current market rent or notional rent valuations. The introduction of appointed valuers alongside the district valuer is intended to speed up valuations, but a lower or higher figure than a practice was expecting still needs professional scrutiny before it is accepted.

These premises funding issues connect closely to the practical realities of occupying and running from GP premises, which we cover in our post on GP surgery leases, and to the specific risk of clawback on notional rent, covered in our post on notional rent clawback. Because premises funding sits alongside, but separately from, the core NHS GP contract, our post on the Statement of Financial Entitlements is also worth reading for the wider funding picture.

What This Means for Your Practice

The 2024 Premises Costs Directions offer more generous grant funding and some genuinely helpful process changes, but they also introduce firm deadlines, most notably the 12-week response window on rent determinations, that can work against a practice that does not respond promptly. We advise GP practices across London and the South East on premises funding applications, rent reviews, and disputes with NHS England and ICBs under the Directions. If your practice needs advice on a premises funding issue, get in touch with our commercial property team or call us on +44 207 566 1188. You can also reach us by email at info@gurvelegal.com.