NHS Premises Costs Directions 2024

NHS England has published a new set of Premises Costs Directions which came into force on 10 May 2024. It is more than 11 years since the Directions were last updated during which time the outlook for NHS commissioned primary care has changed significantly. 

Particular highlights that have caught our eyes include:

1. A duty on NHS England to consider, with the contractor, whether the premises could be multi-functional i.e. whether the premises could accommodate other services or providers. The Directions go on to make provision for taking account of income derived from that occupation (including provision for disregarding it) and to take account of the contractor losing that income when the occupier vacates;

2. Changes to grant funding including an increase in the value of grant which may be paid (from 66% of the value of works to 100%), the provision of different parameters for the guaranteed period of use based on the value of the grant and inclusion of land purchase as  a proposal which may be funded by way of a grant payment;

3. A requirement that the contractor, when applying for grant funding, provides a Project Initiation Document in accordance with NHS England’s Standard Operating Procedures;

4. Much more detail on the circumstances in which capital grants are to be repaid or the requirement for repayment is to be deferred;

5. The ability for a contractor to agree a lease premium with a landlord and for that premium to be reimbursed by NHS England, if the premium has the effect of reducing the amount of rent payable over the lease term;

6. Enabling NHS Property Services Limited and Community Health Partnerships Limited to benefit from upwards only rent reviews;

7. Obliging the contractor to use reasonable endeavours, when agreeing a new lease, to ensure that the Landlord does not exercise the option to tax (i.e. to charge VAT) during the lease term. Failure to agree a landlord covenant in these terms on a sale and leaseback arrangement will leave NHS England with a discretion as to whether or not to reimburse VAT;

8. A direction to NHS England to make an assessment and switch to paying rent reimbursement, from notional rent payments, when the last owner-occupier partner in a practice has retired from the partnership whether or not the practice has made an application for rent reimbursement unless it is appropriate not to do so;

9. A requirement for the contractor to confirm that it does or does not accept the amount of CMR determined by the valuer within 12 weeks of the determination, failing which NHS England must not pay the reimbursement (or the notional rent as the case may be);

10. The addition of Business Improvement District levies to the list of reimbursable recurring premises costs;

11. Giving NHS England power to survey premises where it is satisfied that the required minimum standards are not being met or information about compliance with the standards is not made available to NHS England or is inadequate;

12. Dealing with the “last person standing” issue by requiring NHS England to produce a protocol setting out the criteria for determining whether a lease held by the last person should be assigned to an NHS England nominee in circumstances where the contractor wishes to retire and is unable to find a successor to take over the practice and the lease;

13. A more detailed process for determining rent reviews together with a statement prohibiting NHS England or the ICB from negotiating directly with landlords or their representatives during the rent review process.

There is a great deal of change and many new provisions within the 2024 Directions which will take stakeholders some time to digest and analyse. If you would like to discuss anything related to primary care premises, please contact one of our team.

We have prepared a comparison document between the 2013 Directions and the 2024 Directions – if you would like a copy, please contact a member of our team.