Technical considerations in GP leases: key issues for practices and landlords

The legal framework governing GP occupied premises is uniquely shaped by legislation, notably, the NHS (General Medical Services — Premises Costs) Directions (“the Directions”) together with market practice in primary care development, and the regulatory environment in which general practice operates.  

As a result, GP leases require a more technical and bespoke approach than standard commercial occupational arrangements. This article highlights the principal legal complexities that practices and landlords must navigate. 

Rent reimbursement and alignment with the Directions 

A fundamental requirement is ensuring that the lease terms align with eligibility criteria for NHS England rent reimbursement. The District Valuer (DV) assesses the Current Market Rent (CMR), which forms the reimbursable figure. If the lease contains provisions inconsistent with standard market assumptions, such as alienation restrictions beyond the norm, unusual rent review indices, or onerous repair obligations, the DV may adjust the rental value downwards. 

This creates a technical risk: the reimbursable rent may not match the contractual rent, leaving the practice liable for the differential. To mitigate this, leases should ensure: 

• rent review provisions are clear; 

• any premium, capital contribution or fit‑out payment is expressly separated from rent; and 

• the term length, assignment rights and user clause reflect normal commercial comparables. 

For third‑party developer schemes, NHS England often requires sight of draft leases before sign‑off, making pre‑approval processes critical to avoiding reimbursement disputes. Prior approval must also be factored into the negotiation process, often elongating timescales. 

Service charge structuring and recoverability 

Service charge provisions in health centres and mixed‑use schemes can be complex. Under the Directions, only “reasonable and necessary” service charge costs are reimbursable. However, standard commercial service charge schedules frequently include costs that may be partially or wholly non‑recoverable, such as: 

• sinking or reserve funds 

• asset replacement programmes that go beyond maintenance 

• security, landscaping or amenities serving non‑NHS occupiers 

• developer profit embedded within management fees. 

A technical review of the service charge matrix is therefore essential. Ideally: 

• schedules should itemise services at granular level 

• contributions should be proportionate, transparent and linked to floor area 

• any non‑reimbursable premium elements should be identified and negotiated out. 

For multi‑let medical centres, it is increasingly common to include a service charge cap, with index‑linked annual uplifts, to create fiscal certainty for practices. 

This then becomes problematic for landlords looking to achieve a fully repairing and insuring, clean lease, where all costs incurred in managing the asset is recharged to the occupying tenant. 

Repairing liability and dilapidations risk 

The suitability of a full repairing and insuring (FRI) lease must be evaluated against the age and construction of the premises. Many GP surgeries (particularly converted residential buildings) are not designed for institutional FRI occupation. Excessive repairing liability may be disallowed in rent reimbursement calculations and exposes partners to significant dilapidations liabilities at lease expiry. 

Key protective mechanisms include: 

• incorporation of a schedule of condition 

• limiting obligations to “no worse state of repair than at the start” 

• excluding inherent defects, capital works and structural elements. 

These must be drafted with precision, as NHS England will examine repairing obligations closely when determining reimbursable costs. 

Flexibility for Primary Care Networks (PCNs) and integrated teams 

Modern care delivery models require leases to accommodate shared occupation by PCN staff, community providers, or NHS‑commissioned services. Strict alienation controls or prohibitions on sharing occupation (which landlords favour) can render a practice in breach.  

Contemporary GP leases therefore typically include: 

• express rights to share with NHS bodies, PCN employees and contracted providers; 

• ability to licence space for enhanced services; and 

• assurance that such sharing does not trigger landlord consent or constitute an assignment. 

Without these provisions, practices may find themselves operating unlawfully in practical terms. 

Partnership changes and covenant exposure 

As most GP leases require personal covenants, technical drafting around novation, reconstitution and partner retirement is vital. Each partnership change must be documented through a deed of variation, authorised guarantee agreement (AGA) or release. Failure to do so risks: 

• retired partners remaining liable for rent and dilapidations; 

• incoming partners operating without legal status; and 

• breaches of both the lease and the partnership agreement. 

Given the frequency of GP partnership turnover, this area demands ongoing administration and review and can be overlooked when in practice the Partnership Agreement is negotiated and agreed.