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Rent Review Memorandum Solution

The 2013 Premises Costs Directions require practices in leasehold premises to agree a ‘rent review memorandum’ with their landlord before NHS England will consider changing the level of rent reimbursement.

This was a major change to the previous practice whereby many landlords effectively negotiated rent reviews and the associated reimbursement directly with the DV. The memorandum generates additional cost for the practice, and creates the very real risk that any increases in rent will not be reimbursed.

The problem is compounded by the wording of many existing surgery leases. These frequently set the new rent equal to the new rent reimbursement and require tenants to appeal this at the direction (and cost) of the landlord. Such lease clauses will no longer work as anticipated.

A practice can best protect itself through specialist assistance. Rent Review Memorandums should be negotiated using surveyors who can negotiate with the landlord AND anticipate and later negotiate with the DV. It is critical to use someone who has great familiarity with primary care and the DV processes to minimise the risk of a shortfall emerging. Where the lease rent review process is frustrated by the 2013 directions, tenants should seek legal advice before agreeing to a new process which may expose them to greater risks.

We have now successfully drafted and agreed many new surgery leases with rent review clauses which eliminate the risk of the reimbursement shortfall, whilst remaining compliant with the 2013 directions. These clauses are much more complicated than previously, but they have been approved by NHS England. Where necessary, existing leases could also be modified to accommodate this rent review revised process.

To add to the problems, we understand that the 2013 directions are being reassessed and the rent review provisions may change again. This area is extremely complex and practices should ensure that all their professional advisers are familiar with it. If you have any concerns about an upcoming rent review or you are negotiating a new lease, please contact us for a ‘no obligation’ discussion of the issues.

Posted on November 18th 2014 in News and Publications, Newsletters

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