After years in the making, the new NHS Premises Costs Directions 2024 came into force on May 10th and replaced the previous Premises Directions with immediate effect. The Directions themselves can be fairly impenetrable, so read on if you want to understand why you should be interested, and how they might affect your practice.

At one level the changes are relatively minor: it is definitely evolution not revolution. However the tweaks which have been made will likely be helpful if you are looking to upgrade your premises or are concerned about the ‘last man standing’ problem. The changes should also simplify the process of lease negotiations, and they aim to better enable the provision of additional NHS services from primary care premises.

Upgrading Premises under the Premises Costs Directions 2024

The Commissioner now has discretion to fund premises improvement grants for 100% of the project value, whereas grants were previously capped at 66%. Helpfully, the scope of such improvement grants has been extended to include: the purchase of land specifically to build a premises extension; tenant fit out works of leasehold new builds; lease premiums; improvements which are necessary due to regulatory changes including environment impact improvements.

The potential sting in the tail relates to the modified repayment terms. The minimum ‘guaranteed period of use’ and abatement period for the smallest grants has been extended from 5 years to 6 years, and the maximum period for the largest grants (£1.2m or more) has been extended from 15 years to 18 years. The terms for more modest grants of between £144k and £660k have however been reduced to 9 or 12 years. Importantly, the grant will likely be subject to a grant agreement where the Commissioner must impose a variety of terms to protect their ‘investment’, including immediate repayment of outstanding amounts in the event the minimum period of use has not been achieved. In addition to the prescriber terms, the Commissioner may also impose ‘any other conditions they consider necessary to ensure value for money’.

Last Man Standing

The NHS has clearly listened to the long standing concerns that onerous property obligations have put some GPs off becoming partners, and encouraged others to close their practices when partner numbers decline. The underlying problem is that, particularly on new builds, landlords want long leases to recover their investment, but GPs are understandably concerned about making personal commitments for 25 years (or more) in an uncertain environment.

The new Directions anticipate leases being assignable to a nominee of NHS England in the event retirees are unable to find a successor to take over the practice and need to hand back their General Medical Services contract, but a new protocol will need to be developed to support this change and many leases may also need changing.

The Directions also permit the Commissioner to waive outstanding grant monies where a practice has sought to find a successor but has been unable to do so, but practices should be aware that neither assignment nor grant debt relief is guaranteed.

Lease negotiation

In a significant retreat from the 2013 Directions, there will no longer be a requirement for a signed rent review memorandum before engaging with the DV, and tenants will not be required to obtain their own valuation. They will still have to evidence that they have negotiated with the landlord (the Commissioner is not allowed to do this directly), but hopefully this streamlined process will reduce costs and speed up the process.

Another change worth noting is that there is a new obligation on leaseholder to attempt to ensure that landlords do not add VAT to rent. Where it is added the Commissioner will still reimburse, but it will be interesting to see how this new obligation plays out in practice. Certainly VAT on rent is no longer something which practices can entirely ignore.

Using GMS reimbursed space for non primary care services

There is a new general duty on the Commissioner to consider, with the contractor, whether any opportunities exist for additional, multi-functional use of GMS premises. This is not, however, opening the door for non NHS healthcare services, and restrictions are still in place requiring a pound for pound reduction in premises funding if a practice receives any third party contributions to recurring premises costs. The idea seems to be that other NHS healthcare services could be provided from within GMS space, probably without the other provider contributing to recurring premises costs.

Whilst this new flexibility is undoubtedly welcome, practices should always check to ensure that their lease permits co-occupation, and it will always be a good idea to get any such arrangement documented even if it is ‘rent free’. Fortunately, there is a new power for the Commissioner to reimburse the legal costs of documenting such arrangements.

One glaring omission from the new Directions is any mention of PCNs. This means that, regrettably, the difficulties associated with PCNs taking shared GMS space have not been resolved.

Clawback of overpayments

Another potentially significant change is the ability for the Commissioner to claw back overpayments. This right has of course always existed, but it appears that the purpose of the change is to override any date limitations on reclaims. The onus is now on the practice to self-report any overpayment, and not doing so will presumably be a contractual breach. NHS England will be required to consider repayment plans and does have the power to waive, but the risk is that reclaims could go back many years and of course include former partners. Given that most retirement accounts are regarded as final, practices may want to look at the partnership deeds to see whether additional consideration needs to be given to this eventuality.

Conclusion on the new NHS Premises Costs Directions 2024

Given that the 2004 and 2013 Directions have been almost entirely withdrawn, the new directions will apply to all practices, including existing funding arrangement. We therefore strongly recommend that practices familiarise themselves with the new rules, and take professional advice in particular before making changes to their current practice arrangements as the new rules will necessarily impact both property documentation and partnership documentation.

Contact us for more information on the new NHS Premises Costs Directions 2024 or any other legal issue, or call us for an initial free of charge consultation on 01483 511555.