6/11/20 – Advice for GP Surgery Tenants: Responding to Rent Review Notices

Receiving a Notice to review the rent can be daunting and raise a number of questions. The main concern for GP Tenants is usually around securing rent reimbursement to cover any new level of rent.  The most important thing, is to be reactive on receipt of the Notice and above all don’t ignore it!

The process for rent review is determined by the provisions set out in your Lease.  On receipt of a Rent Review Notice from your landlord instigating the rent review, it is imperative that the Lease is checked for any time of the essence requirements in respect of serving a Counter Notice, or any procedures that may need to be followed to ensure compliance with the Lease terms and to protect the Practice from inadvertently accepting the proposed level of rent due to lack of or delayed response.

The rent review process may differ between Leases however in a standard Lease it generally allows the rent to be agreed between the landlord and tenant, either directly with the landlord or by employing a specialist healthcare surveyor to act on your behalf.  If the parties cannot reach agreement, the Lease may then allow the rent to be determined by a third party such as an Independent Expert or Arbitrator.  Once the new rent has been agreed between the parties or determined at third party, a Rent Review Memorandum is signed by both parties recording the new Lease rent and completing the rent review.

However where NHS services are provided it is important to remember that any agreement will require approval from the CCG for rent reimbursement purposes. It is this aspect that often causes significant concerns and the process for this will depend on a number of factors including the provision within the lease and the age of the property as to whether the review can be processed under the 2004 NHS Premises Cost Directions or the 2013 Directions.

Before a GP surgery can receive an increased level of rent reimbursement, the Current Market Rent (CMR) has to be approved by the CCG and will be assessed on their behalf by the District Valuer having regard to the revised level of rent agreed.  The NHS Premises Cost Directions 2013 changed the process for obtaining rent reimbursement for surgeries constructed after this time, by requiring a Rent Review Memorandum to be signed by both parties before the District Valuer can be instructed to assess whether they consider the level of rent agreed to be appropriate for reimbursement.  For properties constructed before this time, the agreed level of rent can usually be put forward for approval without signed Memoranda unless the lease specifies otherwise. Clearly this is the preferred route for Tenants.  The Directions are due to be further updated although this is not yet available.

Following the assessment of the rent reimbursement, there is generally the ability within the Lease to appeal this figure, if it does not adequately cover the newly agreed lease rent and any repairing and insuring liabilities under the lease. It is therefore vital and we would always recommend that you seek advice from a specialist healthcare surveyor to ensure that the rent is fair and in line with the market and your position is protected in respect of obtaining full rent reimbursement of the Lease rent.

If you would like to discuss any of the above, please contact Paula Mace on 01727 844 555 or via email to paula.mace@argroup.co.uk.