How to switch from Cost Rent to Notional Rent

All GP Practices in the UK who provide NHS medical services, are eligible for rent reimbursement with different terms depending on whether they own the premises or not. If the Partners own the building outright, it is ‘notional rent’ or ‘current market rent’. If there is a mortgage, then practices may receive a ‘cost rent’ instead.

What is Cost Rent

Cost Rent is simply a reimbursement of actual borrowing costs incurred as part of developing a GP Surgery. For example, a Cost Rent would usually cover mortgage repayments, or actual borrowing costs, for an approved development project. Cost Rents were very popular in the 1980s/1990s but there are far less of them around nowadays as they aren’t generally approved for new schemes anymore, and most practices who were on Cost Rent have now switched to Notional Rent. However, there are some still in existence!

How/When to switch from Notional Rent to Cost Rent

Strictly speaking, a Cost Rent must come to an end when the borrowing costs themselves, e.g. the mortgage, has been paid off (at which time the system of reimbursement switches to Notional Rent, regardless of the levels of value). Under the Premises Cost Directions 2013, it is a fundamental requirement that practices who receive a ‘Cost Rent’ keep NHS England fully informed as to existing loan arrangements, especially when they expire. Failure to update NHSE could result in large sums of money being clawed back from GP Practices once their situation is uncovered.

The GP Practice is also entitled to switch to Notional Rent at any time, if they choose. Although, once they make an ‘election’ to switch, that election cannot be undone, i.e. they cannot switch back to Cost Rent.

Process in switching from Cost Rent to Notional Rent

The switch to Notional Rent will take place from the date of election. Reimbursement will therefore be whatever the Notional Rent is agreed or determined at. This could, in theory, be lower than the Cost Rent so it is crucial that practices seek professional advice from a specialist surveyor before making the decision to switch.

How can we help

We can help by:

surveying surgeries that are in receipt of Cost Rent
assessing the appropriate Notional Rent
advising GP Practices whether we consider it would be worth switching to Notional Rent

Should you have any questions or queries regards any of the above please don’t hesitate to get in touch with one of our expert advisors on 0114 4420098 or info@bwhsurveyors.co.uk and we would be more than happy to help.

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