GP premises, notional rent and NHS reimbursement

What notional rent is

When a GP partnership owns the premises it works from, the NHS does not pay it rent in the ordinary sense. Instead it pays a notional rent: a reimbursement set by the district valuer to reflect the current market rent the premises would command if they were let. The practice receives this through its premises cost reimbursements, governed by the Premises Costs Directions, and it is intended to cover the cost of providing and maintaining suitable premises for NHS primary care.

Notional rent reimbursement is one of three main routes for GP premises costs. The other two are leasehold rent reimbursement, where the NHS reimburses the rent a practice pays under a lease, and borrowing cost reimbursement, the older cost rent basis that some practices still hold. Notional rent applies where the partnership owns the freehold and occupies it itself, so the reimbursement stands in for the open market rent the partners are forgoing by trading from their own building rather than letting it.

How notional rent is set and reviewed

The level is assessed by the district valuer against the current market rent for the premises, taking account of the building, its condition and comparable local evidence. It is then reviewed periodically rather than rising automatically each year, so the figure your practice receives today may have been set some time ago. In practice notional rent is reviewed roughly every three years, though timing varies, and the reviewed figure can move up or down with the market.

Because rent reviews are not annual, a long gap between reviews can leave a practice on a figure that no longer reflects local rents. Practices can request a review, and where the latest assessment looks low against comparable evidence it is possible to challenge it, usually with professional advice from a surveyor who knows the medical property market. A successful challenge can lift the figure, while changes in the wider rental market can move it either way at the next review. Understanding the current and likely future level matters, because for a GP-owned surgery that reimbursement is, in effect, the income that services the building.

The figure assessed at review is sometimes referred to as the current market rent, or CMR, and the district valuer's view of that market rent CMR is what sets the reimbursement. Where premises are managed through bodies such as NHS Property Services, the position can be more involved, and practices in that situation often take advice before a review. Reviewed every few years rather than each year, the notional rent should still track market rent over time even if it lags between reviews.

Why lenders care about notional rent

For an owner-occupier surgery, lenders look closely at premises reimbursement because it underpins the affordability of the loan. A practice with a well-evidenced notional rent and a stable patient list presents a more predictable picture than one relying purely on partners' drawings. That reliability is part of why GP premises can attract competitive terms compared with many other commercial assets, and why NHS England reimbursement is treated as durable, contract-backed income.

We arrange finance that recognises this dynamic. Rather than treating the surgery as a generic commercial building, the right lenders assess it as a primary care asset backed by NHS reimbursement, which can support longer terms and a sensible loan-to-value. Where a recent rent review has lifted the notional rent, that improved income can also support a refinance or the funding of premises improvements.

Notional rent, cost rent and leasehold reimbursement compared

It helps to be clear how the three premises cost reimbursement routes differ, because they lead to different financing conversations. Notional rent applies to a freehold the partnership owns and occupies, and reimburses the current market rent the building would let for. Leasehold rent reimbursement applies where the practice rents from a third-party landlord, and reimburses the actual rent under the lease. The borrowing cost basis, often called cost rent, is an older route that reimbursed the financing cost of building or improving a surgery, and some practices still hold it from past schemes.

For a practice weighing whether to stay on a notional rent basis or move, the choice interacts with how the building is financed. Where notional rent has been reviewed up to reflect rising local rents, it can support more borrowing against the freehold; where it has lagged, a review may be worth pursuing first. The professional advice of a surveyor who knows general practice and the NHS England reimbursement rules is the safe way to compare the options before committing to a loan structured around the reimbursement.

Points to get right before you borrow

Before financing a surgery, it helps to have an up to date notional rent assessment, clarity on any cost rent or improvement grant history, and a clear partnership agreement covering how the property is owned and how incoming and outgoing partners are dealt with. Lenders will want to see how the premises sit within the partnership, and a clean structure makes the application straightforward.

It also helps to know who is responsible for external repairs and ongoing maintenance, as those obligations sit behind the reimbursement and affect the true cost of holding the building. Keep the latest district valuer assessment, your premises costs correspondence and your accounts to hand, and take professional advice on any review before you commit to borrowing against the reimbursement.

Commercial finance of this kind is not regulated by the Financial Conduct Authority. Any rates or terms are indicative and subject to status, valuation and full lender approval. This is general information, not financial advice; take independent professional advice before borrowing.