Ask The Experts - Improvement Grant

Published:25/11/2011

Question

I am one of six GP partners, two of whom own the premises. We are considering applying for an improvement grant that we would mainly use for internal alterations to create more ground floor consulting rooms and move administrative offices upstairs.

We are hoping for a grant of 30 to 60% of the cost. Does the residual cost usually fall on the owners of the building, or is it shared among the partners? Will there usually be an adjustment to notional rent following the improvments?

Answer

Where you have a difference in the partners that own the property and the partners that are the Practice, you need to clearly define the two. Some Practices go as far as actually creating tenancies, but this is not essential as long as the principle is built into your Partnership Agreement. Here you should view the two owning doctors as the landlords, and the six doctor Practice (including the owner doctors) as the tenant. Looking at your situation like this, you have a choice of two ways of proceeding.

Firstly, you could look at the Practice (i.e. the six doctors) getting a grant which could be up to 66%. The Practice then put in the rest of the funding, but then the Practice should receive the additional Notional Rent. In such circumstances, where you get a 66% loan, the Notional Rent of course will only be circa 33% of the full amount for the extended area (details of how to calculate this is shown in the NHS Directions). In short, you are regarding the improvements as a tenant’s improvement with all the cost and benefit going to the tenant.

The second possibility is that the two landlord GPs fund the 33% balance, but then receive the additional Notional Rent in full (the landlords are getting 33% of the rent on the improvements but the 66% funded by the PCT is regarded as a tenant’s improvement so no rent goes on this element to the landlords).

For simplicity above, I have looked at a Notional Rent being reduced proportionate to the grant so that, where a 66% grant is received, you only get 33% of the Notional Rent. This is not exact and you should look to get about 10% more than a simple 33% apportionment. The addition is to cover the repair and insuring liability.