Are you overpaying your landlord?

The issue of NHS premises funding is a complex area which is often misunderstood by GP practices. This confusion sometimes results in practices inadvertently overpaying their landlord.If you don’t own your own surgery then you must be occupying it on some form of tenancy basis, – whether that agreement is in writing or not – and you should be receiving rent reimbursement.  Here we take a closer look at what rent reimbursement is supposed to pay for, and how you should be managing it.

Understanding rent reimbursement

Rent reimbursement comprises two parts:

• the rent
• a contribution to the repairing and insuring of the building – commonly referred to as the ‘uplift’

The rent element is normally the same as the rent agreed in your lease, and practices will often pay this straight to their landlord. The uplift element will vary, but is usually between 5% and 7.5% of the rent, with the amount being determined by the terms set out in the lease.

The uplift may be paid to the landlord or retained by the tenant, dependant on what is stated in the terms of the lease. This is the element which most commonly gives rise to confusion

The uplift

The uplift is a contribution towards the repair of the exterior and structure of the building, along with the cost to insure it. To determine who should receive the uplift monies, you need to be clear about who is responsible for which aspects of the building.

Some common situations are:

1 – The practice occupies the entire building

If you occupy the whole building, you are likely to have a full repairing and insuring lease. In this situation, you will be responsible for dealing with all the repairs, so the practice should keep the uplift.

If your lease only requires you to repair the internal parts of the building, then the landlord should probably receive the uplift element as part of their rent. They will have responsibility for repairing and insuring the exterior and structure of the building, without any additional costs being passed on to you as tenant. Practices often assume that this is the case when the occupation is undocumented, but be aware that your landlord may see their responsibilities vey differently!

2 – The practice occupies part of a shared occupation building

If you share occupation of a building with other tenants (known as a ‘lease of part’) it is likely that your landlord will be responsible for managing all repairs to the building and will then pass on the cost of these to you through a service charge.  In this scenario, you should keep the uplift but regard it as a contribution towards your service charge.  Since the uplift is a fixed amount, you may also want to talk to your landlord about capping the level of service charge that can be demanded.

3 – No formal agreement in place

A third scenario, which is relatively common for GP surgeries, is for there to be no written agreement in place but for the landlord to historically have repaired the building.  In this case, there is a good argument that the uplift monies should be paid to the landlord. However, in the absence of a lease or other contractual agreement, there is scope for an expensive dispute to develop.  A starting point would be to see what you have historically paid over. 

4 – Occupying a surgery owned by former partners

Some practices may be occupying a surgery which is owned by former partners. Sometimes the current partners in such practices will receive notional rent and pay that money across to the owners. However, that is a mistake. The correct course of action would be to notify NHS England and move to a formal lease and rent reimbursement.  By not doing so you could be putting your premises funding at risk and in extremis NHS England could demand the return of monies paid incorrectly in the past. You are also likely to be paying the wrong amounts of money to the owners and former partners.

Disagreements and disputes surrounding funding can typically come to the fore when a lease is being prepared for the first time and it has historically been unclear who paid for the structural and external repairs to the building. To help you navigate such issues, it is always best to seek the advice of an experienced legal professional.  

If you are in any doubt about your practice’s position or responsibilities in regards to funding, repairs and service charges, then please speak to us for some initial advice. Contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com