Valuation of medical centres and surgery premises 2010 · Produced by the Valuation Professional...

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RICS Practice Standards, UK

2nd edition, guidance note

Valuation of medical centreand surgery premises2nd edition, guidance note

This guidance note provides valuation advice on surgery premises,including medical centres and surgeries occupied by doctors and othersimilar practitioners for medical or health services within the NHS.

The valuer will need to have an understanding of the NHS framework,the applicable Regulations and BMA guidance.

The guidance note aims the assist the valuer by dealing with thefollowing topics:

• The NHS framework• BMA guidance• The approach to valuation for various purposes;• Inspection and measurement• Design and specification• Floor plan example showing NIA calculation.

This guidance is applicable only to the United Kingdom.

Valuation of medical centreand surgery premises

GN 60/2010Part of the RICS Valuation Standards

Valuation of medical centre and surgerypremises

RICS guidance note

2nd edition (GN 60/2010)

Published by the Royal Institution of Chartered Surveyors (RICS)

Surveyor Court

Westwood Business Park

Coventry CV4 8JE

UK

www.ricsbooks.com

No responsibility for loss or damage caused to any person acting or refraining from action as a result of the material included in this publication canbe accepted by the authors or RICS.

Produced by the Valuation Professional Group of the Royal Institution of Chartered Surveyors.

1st edition published 2003 as Valuation Information Paper No. 4: Valuation of surgery premises used for medical or health services.

ISBN 978 1 84219 599 4

Royal Institution of Chartered Surveyors (RICS) September 2010. Copyright in all or part of this publication rests with RICS, and save by priorconsent of RICS, no part or parts shall be reproduced by any means electronic, mechanical, photocopying or otherwise, now known or to bedevised.

Cover image photo Medicx Ltd 2010

Typeset in Great Britain by Columns Design Ltd, Reading, Berks

Printed in Great Britain by Annodata Print Services, Dunstable, Beds

Contents

RICS Valuation standards (the ‘Red Book’) iv

RICS guidance notes 1

1 Introduction 2

2 The NHS framework 3

3 British Medical Association (BMA) guidance 7

4 Basis of valuation, general assumptions and considerations 8

5 Valuation for partnership purposes 10

6 Valuation for loan security purposes 11

7 Valuation of investment properties 12

8 Valuation of LIFT schemes 13

9 Inspection and measurement 14

10 Design and specification – the impact of legislation and NHS policy 15

11 Pharmacies within healthcare developments 17

Appendices

1 Floor plan examples showing NIA calculation 18

2 Provision of general medical services in Wales 21

3 Provision of general medical services in Scotland 23

4 Glossary of terms 25

VALUATION OF MEDICAL CENTRE AND SURGERY PREMISES | iii

RICS Valuation Standards (the ‘Red Book’)RICS (Royal Institution of Chartered Surveyors) isthe leading organisation of its kind in the world forprofessionals in property, land, construction andrelated environmental issues. As part of our role wehelp to set, maintain and regulate standards – aswell as providing impartial advice to governmentsand policymakers.

To ensure that our members are able to provide thequality of advice and level of integrity required bythe market, RICS qualifications are only awarded toindividuals who meet the most rigorousrequirements for both education and experienceand who are prepared to maintain high standards inthe public interest.

Members who qualify as valuers are entitled to usethe designation ‘Chartered Valuation Surveyor’ and,in addition to compliance with the general Rules ofConduct applicable to all members, must alsocomply with the RICS Valuation Standards,generally referred to as the ‘Red Book’.

This guidance note describes the standard of workthat is expected of a reasonable, competent valuerexperienced in the subject to which this noterelates.

RICS has in place a regulatory framework. Where avaluer undertakes work that has to comply with theRed Book that valuer is also required to registerwith RICS. Registration enables RICS to monitorcompliance with the valuation standards and takeappropriate action where breaches of thosestandards have been identified.

Acknowledgments

This guidance was produced by the Surgery andPrimary Care Premises working party within theValuation Professional Group. RICS would like toexpress thanks to the chair of the working group,John Hearle, FRICS, MCIArb, Aitchison Raffety andthe group members:

Andy Baxendale FRICS, Valuation Office Agency

David Ogilvie Bsc (Hons) MRICS, DacresCommercial

David Godsmark, Bsc FRICS, Aviva CommercialFinance Limited

Richard Dawson BSc MRICS, Charles FraserFleming Ltd

Mallory Armstrong, Welsh Health Estates

Neil Dryburgh, BSc MRICS, Montagu Evans

iv | VALUATION OF MEDICAL CENTRE AND SURGERY PREMISES EFFECTIVE FROM 1 OCTOBER 2010

RICS guidance notes

This is a guidance note. It provides advice toRICS members on aspects of their practice.Where procedures are recommended forspecific professional tasks, these are intendedto embody ‘best practice’, i.e. procedures whichin the opinion of RICS meet a high standard ofprofessional competence

Members are not required to follow the advice andrecommendations contained in the note. Theyshould, however, note the following points.

When an allegation of professional negligence ismade against a surveyor, the court is likely to takeaccount of the contents of any relevant guidancenotes published by RICS in deciding whether or notthe surveyor had acted with reasonablecompetence.

In the opinion of RICS, a member conforming tothe practices recommended in this note shouldhave at least a partial defence to an allegation ofnegligence by virtue of having followed thosepractices. However, members have theresponsibility of deciding when it is inappropriate tofollow the guidance.

On the other hand, it does not follow that memberswill be adjudged negligent if they have not followedthe practices recommended in this note. It is foreach surveyor to decide on the appropriateprocedure to follow in any professional task.However, where members depart from the practicerecommended in this note, they should do so onlyfor a good reason. In the event of litigation, thecourt may require them to explain why theydecided not to adopt the recommended practice.Also, if you have not followed this guidance, andyour actions are called into question in a RICSdisciplinary case, you will be asked to justify thesteps you did take and this may be taken intoaccount.

In addition, guidance notes are relevant toprofessional competence in that each surveyorshould be up-to-date and should have informedhim- or herself of guidance notes within areasonable time of their promulgation.

EFFECTIVE FROM 1 OCTOBER 2010 VALUATION OF MEDICAL CENTRE AND SURGERY PREMISES | 1

1 Introduction

1.1 This guidance note is concerned with thevaluation of surgery premises, including all medicalcentres and surgeries occupied by doctors andother similar practitioners for medical or healthservices. It does not apply to valuations carried outunder statutory provisions, or to private healthcareproperties such as nursing or residential carehomes. However, some of the considerationscovered may be relevant to such properties.

1.2 This guidance note has been writtenspecifically with regard to the position in England.The valuation approach is essentially the same inWales, and Scotland, but where there aredifferences they are noted where they occur.

1.3 The National Health Service (NHS) in Walesand Scotland have their own framework with regardto the provision of general medical services and the

relevant details are summarised in Appendices 2and 3 respectively. Although the details vary inNorthern Ireland, the principles are similar andshould be capable of adaptation to localcircumstances.

1.4 Valuers are reminded that the RICS ValuationStandards (the ‘Red Book’) apply to valuations forthis purpose.

1.5 The terms used in this guidance are defined inAppendix 4.

1.6 In July 2010 the government issued a WhitePaper ‘Equity and Excellence Liberating the NHS’.This announced the intention to abolish PrimaryCare Trusts and Strategic Health Authorities, inEngland, from 2013. This guidance note will berevised when the detailed proposals are published.

2 | VALUATION OF MEDICAL CENTRE AND SURGERY PREMISES EFFECTIVE FROM 1 OCTOBER 2010

2 The NHS framework

2.1 The following paragraphs, 2.3 to 2.6 outline theNHS structure in England. Appendices 2 and 3outline the NHS framework in Wales and Scotlandrespectively.

2.2 To appreciate the role of the (General (Medical)Practitioner (GP)) it is necessary to understand theframework of the NHS. The elements of mostrelevance are:

+ The NHS framework;

+ NHS Local Improvement Finance Trusts (LIFTs)in England;

+ NHS (GMS-Premises Cost) Directions 2004;

+ Controls over NHS Reimbursement.

2.3 The NHS framework

The following information has been provided by theDepartment of Health in England.

Primary Medical Care Contractors (PMCC)Services

2.3.1 Family Health Services are in the mainprovided by GPs through either GMS or PersonalMedical Services (PMS) Contracts (GMS only inWales). The former is a nationally agreed contractbetween Department of Health (DH) and theGeneral Practitioners Committee of the BMA; thelatter is a contract agreed locally between PCOsand GP practices. Which contract is entered into isa matter of choice for the GP practice. Bothcontracts refer to service providers as PMCCs. InEngland, a third contract exists – APMS which isone agreed between a PCO and an AlternativeProvider which may be private company or acoalition of GPs who provide services not coveredby a GMS or PMS Contract.

Non-PMCC services

2.3.2 PCOs also commission community servicessuch as midwifery and physiotherapy provided incommunity settings. In addition PCOs commissionservices from NHS and Foundation Trust Hospitalssuch as surgical or medical treatments provided inacute settings. It is increasingly DH policy to move

appropriate services from acute settings to primarycare settings. (For the purposes of this paper,Primary Care is defined as PMCC, Community andany other non-acute based services.)

PMCC premises

2.3.3 Delivery of PMCC services should ideally befrom modern safe and secure buildings ofappropriate design that allows good access to thebuilding. Design standards for such buildings areconsidered further in section 10.

The design elements of the Primary and SocialCare Premises – Planning and Design Guidancehave been replaced in England in 2009 by a newHealth Building Note for Primary Care andCommunity Hospital premises known as HBN11.

New, extended or refurbished premises

2.3.4 Guidance on planning and funding of new,extended or refurbished premises, includingBusiness Case arrangements, can be found atwww.pcc.nhs.uk/planning-and-design-guidance.php.

Under the Premises Directions, the DV (or thePCO’s Appointed Valuer) provides advice on valuefor money to PCOs for new, extended orrefurbished premises. The DV is a recognisedsource of expertise on value for money andvaluation matters for PMCC premises.

Guidance on DH Primary Care Policy

2.3.5 The underlying principle of DH Primary CarePolicy is to provide safe and secure services in safeand secure premises that provide good localaccess for patients and users. Initiatives to achievethis include the NHS Next Stage Review (DarziReports), World Class Commissioning, PracticeBased Commissioning and TransformingCommunity Services (TCS). Details of these andother initiatives can be found on the DH web site(www.dh.gov.uk).


2.3.6 The NHS framework allows for differentmethods of procurement including doctor ledschemes for owner occupation, third partydevelopments (3PD) leased to GPs or Primary careTrusts (PCOs), LIFT (England only) and privatefinance initiative (PFI) schemes.

2.4 NHS LIFT

2.4.1 LIFT, as detailed below, is one of the routeswhereby new Primary Healthcare Premises areprocured.

2.4.2 LIFT is the established name for theDepartment of Health’s Local Improvement FinanceTrust initiative. It is a major Government PublicPrivate Partnership (PPP) initiative designed tostimulate investment in primary and social carefacilities. The joint venture company (LIFTCo) isestablished with the following shareholding; 60%private sector partner, 20% PCO and 20%Community Health Partnerships. The formation of alocal PPP and the establishment of a long termpartnering agreement between it and a range oflocal public sector organisations is expected tofacilitate the delivery of the service strategy laiddown in the PCO’s Strategic Service DevelopmentPlan. The LIFT concept is to promote partnerships,enabling community care models to be developed,such as incorporating diagnostic, social services,sure start, mental health services, pharmacy andvoluntary agencies, within one building.

2.4.3 The Strategic Partnering Agreement (SPA) isa 20 year agreement for the LIFTCo to developproposals for new projects to meet local needs andfor the private sector to provide services thatcomplement those of the public sector in thelocality. The Shareholders Agreement prescribesprocedures and processes for the management andoperation of the LIFTCo to meet the requirementsof all the shareholders. Normally public sectoroccupiers (including PCOs and GPs) within a LIFTbuilding will enter into a Lease Plus Agreement(LPA), based on a commercial lease with additionalprovisions to benefit the public sector (or GP)tenant. These include a duty to provide premisessuitable for specified use(s), building maintenanceand facilities management for the term of the lease,a guaranteed right to buy at the end of the termand a facility for making rent reductions for non-availability of specified facilities. The rental payment

under the LPA is retail price index (RPI) linked.Other private sector occupiers normally enter into astandard commercial lease.

2.4.4 There have been four separate waves of LIFTprojects (46 now operational) generating £1500m ininvestment to develop more than 210 newintegrated community facilities mostly acrossdeprived urban areas.

2.4.5 In the Autumn of 2008 the governmentlaunched Express LIFT to assist those PCOswithout access to a LIFT company. The idea behindExpress LIFT is to speed up the procurement ofnew primary care facilities. The framework is to bebased on LIFT. The Express LIFT model willgenerate a list of approved private sector partners,each of whom will have demonstrated a trackrecord of delivering the services required of asuccessful LIFT company. Under the initiative,between six and ten companies will join a nationalpartnering framework. PCOs that are not currentlyin a LIFT Co will be invited to select joint venturepartners from a pre-approved panel to set up theirown LIFT Co. The Express LIFT process will beheavily centralised with standard financial andtechnical details arranged through the frameworksleaving PCOs to concentrate on their servicerequirements.

2.4.6 In Scotland, an initiative known as HUBwhich is similar to LIFT is being introduced.However, this is not a PPP but rather uses publicfunding via the Scottish Futures Trust.

2.5 NHS (GMS-Premises Costs)Directions 2004

2.5.1 GMS contractor premises costs arereimbursed by PCOs in addition to the servicecontract price. The arrangements for thesepayments are set out in the NHS (GMS – PremisesCosts) (England) Directions 2004. The Directionsmay be found on the DH web site at:www.dh.gov.uk/en/Publicationsandstatistics/Publications/PublicationsLegislation/DH_4078585.

Payments are made from PCOs’ financialallocations and the purpose of the Directions is toprovide the means to recognise reasonable cost,value for money to the public purse and parity oftreatment for General Medical services (GMS)contractors. For PMS/Alternative Provider Medical


services (APMS) contractors, whilst not obligatory,PCOs may agree to use the Directions in respect oftheir premises costs.

2.5.2 The Directions allow PCOs to make paymentto GPs for premises development or improvementsplus related professional fees and relocation costsplus recurring premises costs (although all suchpayments are tempered in that they must be in linewith the budgetary targets of the PCOs). TheDirections came into force on 1 April 2004.

2.5.3 In exceptional circumstances the PCO canallow the rent reimbursement to be increased overand above the market rent where the market rent isdeemed insufficient:

+ to support new capital investment in practicepremises

+ to support existing premises being brought upto minimum standards.

The level of any increase must be approved by theDV in accordance with the Directions. In Englandand Wales such additions are reserved for areas ofdeprivation and in Wales increases are furtherlimited to 20% of the market rent. The situation ismore common in certain areas of Scotland wherethe rental agreed prior to construction of new GMSpremises is actually an economic or augmentedrent that has been agreed with the DV utilising anappraisal based approach and representing asignificant premium to current market rental levelsin the locality. For leasehold premise such abovemarket rents will affect the ability to increase rentsat review and in owner occupied premises upliftsmay be personal to the GPs. Such deprivation uplifts or augmented rents do not reflect currentmarket rental levels. In such circumstances thevaluer needs to ascertain full details of to whomand for how long any above market rent applies.

2.5.4 The forms of financial assistance the PCOsmay offer are unlimited in the case of anemergency, but generally revolve around proposalswithin the PCOs’ Estates Strategy that can beshown as representing value for money, normally ofthe following format:

+ Premises Improvements Grants between 33%and 66%. Valuers should note that where suchgrants are used, the PCO may reserve the right

to claim a proportion back should the premisescease to be used for GP purposes within a fiveto ten year period.

+ Payments of professional fees in respect ofoccupying new or refurbished premises.

+ Recurring premises costs. For owner occupiedpremises, the level will be the Current MarketRent (CMR) assessed by the District Valuerhaving regard to specified assumed leaseterms. For leased premises, reimbursement willbe the lower of the CMR or lease rent (subjectto specified adjustments). For new owneroccupied premises the PCOs can alsoreimburse the borrowing costs (similar to thehistoric Cost Rent Scheme) where a prescribedpercentage is applied to the site purchase,building works, professional fees, rolled-upinterest, statutory costs, fit-out costs, ValueAdded Tax (VAT) and Stamp Duty Land Tax(SDLT).

2.5.5 Valuers are advised that PCOs will abate thelevel of CMR reimbursed where a capital grant(under the Improvement Grant provisions in Wales)has been provided towards the costs of building orrefurbishment. This highlights the need to fullyinvestigate tenants’ improvements and how theywere funded. An abatement also applies wheremore than 10% of the Practice income relates toprivate patients.

2.5.6 Where a GP is to relocate to new/refurbishedleasehold premises and the existing premises arenot suitable, the PCO can assist GPs in respect ofdisposing of those existing premises by:

+ Paying mortgage deficit or mortgageredemption fees;

+ Guaranteeing the minimum sale price;

+ Paying the cost of reconverting formerresidential property;

+ Paying the cost of surrendering or assigningleasehold premises; and

+ Paying SDLT on new premises.

Minimum standards

2.5.7 To all premises where payments are made assummarised above, the PCO will apply minimum


standards which, if breached, can lead to theabatement of rent reimbursement.

2.6 Other NHS Controls over RentReimbursement

The Darzi Report

2.6.1 The report by Lord Darzi, ‘High Quality CareFor All – NHS Next Stage Review Final Report’redefines the NHS and looks at the future ofhealthcare services which it seeks to bring into thecommunity. As a guide to PCOs, it will affect theStrategic Estate Plans that every PCO should hold.For valuers, such information will assist inassessing the demand for medical premises in anyparticular location.

Premises costs disputes

2.6.2 The NHS (GMS Contracts) Regulations 2004attends to the matter of dispute resolution whereGPs have a disagreement on any point of theircontract. The regulations encourage local mediationand require that the PCOs make every reasonableeffort to settle any matters including disputes overthe level of CMR at a local level. In this respect,many PCOs have put in place individualprocedures. If local resolution fails then GPcontractors can, under the NHS Dispute ResolutionProcedure, put their case in writing to the Secretaryof State. The regulations give the Secretary of Statethe right to appoint an adjudicator which, for CMRcases in England, will be Family Health ServicesAppeals Unit (FHSAU) within NHSLA. In turn, theFHSAU have the ability to appoint an independentexpert advisor and there is a scheme runningwhereby the RICS Dispute Resolution Serviceadministers such appointments. Adjudication inScotland and Wales currently remains with the NHSalthough it may in the future follow the above.Procedures for dispute resolution in Scotland andWales vary from the above although the principlesare the same.


3 British Medical Association (BMA)guidance

3.1 The General Practitioners Committee (GPC) ofthe BMA consider various matters relating topractice premises that could affect the valuation ofGP premises and issue guidance to GPs on a fairlyregular basis. Valuers undertaking assessments ofsurgery premises occupied by GPs should keepabreast of BMA practice premises guidance.

The current key relevant BMA document is ‘Thefuture of GP practice premises – Guidance forGPs’. This was issued in December 2001 (revisedJanuary 2007). A further revision is planned. Thisguidance examines the current state and future ofthe various primary care premises developmentoptions, covers ownership and leasing, anddescribes the premises provisions of the new GMScontract. It incorporates GPC guidance on thepremises costs directions (which provides a briefoverview of The Directions and on the DisabilityDiscrimination Act). The paper also providescommentary on NHS Lift and PFI schemes. InWales and Scotland this document needs to beread within the context of their policies andprocedures.

3.2 The Health Policy & Economic Research Unit ofthe BMA produced a ‘Survey of GP practicepremises’ in May 2006. This was commissioned bythe GPC to find out what issues practices arefacing with respect to their premises and

discovering future problems they anticipate in theirability to deliver and develop further, high quality,general practice care to patients. Other guidanceissued in 2006 included an update of ‘PartnershipAgreements’. This relates to practices in Englandand Wales and Northern Ireland and includesadvice on the basic elements of a partnership,implications of the new GMS contract, contractualobligations, and types of partnership and relatedentities. An associated paper ‘Valuing surgerypremises’ (revised November 2007) is aimed atowner occupiers to update them on the currentprinciples applied to the valuation of surgerypremises with particular regard to the drafting ofrelevant clauses within a partnership agreement.

3.3 The GPC’s publications are very much papersof guidance and set out the opinion of the GPC.However, as the considered opinion of such aprominent association, valuers should be fullyaware of these publications, as their content willinfluence GPs which, in turn, could ultimatelyimpact on surgery values. The BMA websiteaddress is www.bma.org.uk. A limited number ofdocuments on the website is available to non BMAmembers, but a number relating to practicepremises is currently only available to BMAmembers. The BMA is considering allowing wideraccess to these documents.


4 Basis of value, general assumptions andconsiderations

4.1 The purpose of the valuation will determine thebasis of value. The majority of valuations to whichthis guidance note applies will be undertaken forthe determination of Market Value and/or MarketRent, for partnership or transaction purposes, forinvestment or development, and/or in connectionwith loan security.

4.2 The appropriate basis of value is usuallyMarket Value (see Red Book PS 3.2). No accountshould be taken of any Cost Rent or, without dueconsideration, CMR reimbursements from thePCOs, as these are individual contractualarrangements that might be terminated in the eventof a sale.

4.3 There may be circumstances where the valueris asked to provide a valuation subject to specialassumptions, in which case the Red Book PS 2.2,will apply.

4.4 An increasing number of medical centres areoccupied by doctors and PCOs as tenants ratherthan as owner occupiers. This has become arecognised investment sector. Surgery investmentsshould be valued on the basis of Market Value.

Compliance with design guidance

4.5 Valuers need to be aware of and understandthe DH design guidance, which differs betweenEngland, Scotland and Wales (see Section 10below). The impact on value of the changes indesign guidance, as it has been developed over theyears to ensure premises meet the requirements ofthe time, needs to be recognised. Compliance aswell as non-compliance with current and previousDH design guidance has a strong influence on themedical premises ‘valuation hierarchy’.

4.6 Obsolescence

Obsolescence is an important issue in the sector.Valuers are expected to comment upon the design

of buildings, flexibility, potential for expansion,impact of population change and planning andcompetition from other surgeries in the locality. Thevaluer is advised to establish how the premises fitwith the estates strategy of the PCO.

In considering obsolescence, the valuer should beaware of the minimum standards set out within theDirections and how these are interpreted by thelocal PCO (see section 10).

4.7 Comparable rental evidence

4.7.1 In England the majority of lease rents onnewly developed NHS medical centres for GPoccupation are agreed by the landlord and tenant inthe knowledge of an advance estimate of the CMR,which is provided by the DV after discussion withthe parties. In the case of PCO leases, the rent willbe agreed by landlord and tenant followingrecommendations by the DV (or the PCO’sappointed valuer). In both cases rents are agreedbefore construction, and are intended to reflectMarket Rents. Where possible, a developmentappraisal is used by DVs to test for value formoney.

In Wales for all newly developed NHS medicalcentres the DV enters into negotiations with thelandlord to agree the rent to be paid andreimbursed by the LHB. Any agreement is subjectto funding approval by the Minister of Health withinWelsh Assembly Government (WAG).

4.7.2 CMRs for existing premises are also agreedwith the DV. Care should be taken to establish thebasis of value for reasons established in 4.1 to 4.4above. Furthermore, CMRs can be subject toAbatement if there has been a contribution of NHScapital (Direction 43) – see 2.5.5 above – orSupplement (Direction 44) if there have beenimprovements which would otherwise not bereflected in the reimbursement.


In Wales these provisions are detailed in Schedule3 of the Welsh Premises Directions (see appendix2).

4.7.3 In searching for and analysing comparableevidence, the valuer is recommended to obtain anumber of comparables so that the Market Rent inthe locality can be ascertained. Some lease rentsand rent reimbursements can be above or belowthe general level of Market Rent particularly if theyhave resulted from a development appraisal wherethere were significantly abnormal costs or subsidies

associated with the development, or where rentallevels have been influenced by the alternative useof the site or property. The circumstances of newdevelopments need to be fully investigated.

4.7.4 The devaluation of income streams from LIFTand PFI schemes are not direct comparables forvaluing conventional medical centres given theincome is derived from a financial model (see 2.4and VIP 8 The analysis of commercial leasetransactions)


5 Valuation for Partnership Purposes

5.1 These paragraphs apply primarily to surgeriesoccupied by GPs. However, many of the commentsmay also be of assistance in valuing, forpartnership purposes, surgeries occupied by othersin providing medical/health services.

5.2 It is common for valuers to be asked to valuesurgery premises in order to quantify the value ofthe property assets when a GP is leaving or joiningthe partnership. It should be clearly agreed whetherthe partnership or an individual partner (orprospective partner) is the client.

5.3 In respect of owner occupied premises, it isrecommended that vacant possession should beassumed for those areas under GPs’ occupation.

5.4 It is unlawful for GPs to sell the goodwill, orany part thereof, of their medical practice (section54 of and Schedule 10 to the National HealthService Act 1977) and it is recommended that thevaluer confirms that the goodwill of the practice isnot included in the valuation of GP premises.

5.5 If there is any doubt as to whether a sale of aninterest in GP practice premises might constitute abreach of the above provisions, the GP can (but isnot obliged to) apply to the GPC for a certificateconfirming that there has been no breach of section54 and Schedule 10.

5.6 It is open to partners of a medical practice toagree within their partnership documentation thebasis of valuation to be adopted on partnershipchange. The current GPC recommendations(Valuing Surgery Premises (last revised November2007)) suggest the following clause as beingsuitable for partnership agreements:

‘The freehold/leasehold assets of the practiceshall be valued by a Chartered Surveyorappointed by the partners (in default of suchnomination to be appointed by the President forthe time being of the Royal Institution ofChartered Surveyors) having regard to the(open) market value as defined by the RoyalInstitution of Chartered Surveyors of thepremises having regard to both the existing useof the premises and the benefits of any incomeor rent reimbursement (whether real or notional)

paid in respect of the premises but disregardingany element of personal goodwill which mayattach to them as a result of the occupation ofthem by the partners or any of them or by anydeceased or retiring partner immediately prior tothe death or retirement of that partner’.

There are many variations. These have to betreated as special assumptions and have to beaddressed by the valuer, for example:

+ Market Value qualified to have regard to therent reimbursement in the form of CMR or CostRent. In cases where the parties wish to reflectthe level of rent reimbursement, the valuershould have regard to the amount by whichsuch reimbursement differs from the marketrental value of the premises, the potential forfuture income growth and the period for whichsuch reimbursement will continue. Neither CMRnor Cost Rent is transferable to anotherproperty. Should the premises be vacated anyrent reimbursement will cease.

+ Market Value of the premises as a doctor’ssurgery (or other similar wording), excluding anyvalue attributable to alternative use.

5.7 The actual wording of the partnership deedshould be scrutinised in case it affects theappropriate basis of value to be determined.Difficulties can arise in interpreting clauses inpartnership deeds, or there may be a completeabsence of any reference to the basis of value tobe adopted. In such cases, the matter should bediscussed with the client before the valuation isprepared (see Red Book PS 2.1(f)).

5.8 In the absence of any specific instruction,agreement between the parties or reference in thepartnership deed as to the basis of value, it willusually be appropriate for the valuer to recommendthe basis of Market Value in accordance with theGPC recommendations.

5.9 Where the valuation has regard to a specialassumption this should be specifically referred inthe Report (See Red Book PS 6.4)


6 Valuation for Loan Security Purposes

6.1 The Red Book, Appendix 4.4, contains generalguidance on valuations for commercial securedlending.

6.2 The valuer is advised to clarify to the lenderthat Market Value does not take into account anyCost Rent or, without due consideration, adoptCMR reimbursements (see 4.2) For owner occupiedpremises, a valuation assuming vacant possessionis therefore recommended. Income from third partylettings (including for example, pharmacies ordentists) should be valued having regard to theterms of their occupancy.

6.3 The valuer is recommended to establishthrough direct contact with the PCO or byconsulting the practice the basis (if any) of rentreimbursement currently applicable to the premisesand, in the case of Borrowing Cost or Cost Rent,whether the reimbursement is on a fixed or variablerate. This should be compared with the valuer’sown assessment of CMR. The lender should beadvised of any significant discrepancy between thecurrent rent reimbursement and the valuer’s opinionof the appropriate level of CMR. The majority ofsurgeries will be subject to CMR rather thanBorrowing Cost or Cost Rent.

6.4 Any areas shared with a GP practice that mightnot otherwise be classified as provided for GMS orPMS should be identified as these areas may notbenefit from rent reimbursement. This is becomingincreasingly common where the PCOs involve theprivate sector in the provision of some services, orwhere another NHS Trust such as communityservices or mental health occupy accommodationunder a separate lease.

6.5 Some lenders may require a number ofdifferent valuation scenarios. For owner-occupiedpremises, the valuer may be asked to provide aseparate valuation having regard to the BorrowingCost, Cost Rent or CMR reimbursement. In relationto investment properties, many lenders may requirea Market Value and an exit value (the latter beingsubject to special assumptions that may includethe continuation of surgery use or on the basis ofthe alternative use value) and for LIFT premises, theexit (or reversionary) value may be more relevant forloan consideration. Each of these valuationscenarios would reflect a special assumption. Tocomply with PS 2.2 such a special assumptionmust be included in the terms of engagement andreferred to in the report (see PS 6.4).


7 Valuation of Investment Properties

7.1 The appropriate basis of value will be MarketValue having regard to the leases. The valuer isrecommended to establish through contact with thePCO or the occupier the amount of any rentreimbursement currently applicable to any GPsurgery element. It does not always follow that therent included in the lease will be the level ofreimbursement.

7.2 The lease terms for areas occupied by GPsand PCOs may vary but are usually influenced byprior involvement of the DV (or the PCO’sappointed valuer). Whilst some leases are moretraditional in nature committing the tenant to fullrepairing and insuring liabilities, it is not uncommonfor leases to limit tenant’s repairing obligations tothe interior only. In modern leases, the internalrepairing liability may exclude the replacement ofmajor plant. In addition, a landlord may beresponsible for bearing the cost of the buildingsinsurance. Appropriate deductions should be madefrom the gross rents to reflect the FRI equivalent.This should be clearly identified in the valuationreport.

7.3 Rent review clauses will also vary and shouldbe carefully considered. Where there are GPpractices in occupation, their rent reviews mayintend the rent to be influenced by the DVsassessment of the CMR for reimbursementpurposes. There may be provisions for rents to be

reviewed downwards as well as upwards. Inconnection with alienation provisions, the valuershould carefully check these where there are GPsin occupation. The leases will normally allow fordoctors to leave and retire from a practice withoutany ongoing obligations so long as there is aminimum number of GPs as signatories to thelease. Some alienation provisions may require thepractice to maintain rent reimbursement. Authorisedguarantee agreements are not normally required onan assignment to another GP practice or NHSbody. Lease definitions should be checkedcarefully.

7.4 User clauses should be checked carefully. It isvery common with medical centres for the userclauses to be specific to medical services beingprovided within the NHS. While the potential ofthese strict user clauses to adversely affect rentalvalue has to be considered, the prime reason forthem is to protect the rent reimbursement that isbeing received by the GP practice in occupation. Italso prevents the assignment of the lease to aweaker covenant that may adversely affect theinvestment value.

7.5 It cannot be assumed that occupation by theprimary care tenant will continue at the end of thelease. This needs to be considered together withthe potential reversionary use/value especially inrespect of short term leases.


8 Valuation of LIFT schemes

8.1 Valuers should study the Lease Plus Agreement(LPA) in detail and fully understand the landlord’sobligations under the terms of the Agreement. Theywill also need to obtain details of the financialmodel and detailed breakdown of the Lease PlusPayment as this will include landlord’s costsincluding building maintenance, life cycle costs,facilities management and payment reductions tonon-availability of facilities.

8.2 The signatory to the LPA will often have a pre-emption right during the term of the Agreementand/or an option to purchase at the end of theterm. Valuers should familiarise themselves with thisand the effects of any supplementary underleases.

8.3 As LIFT has some similarities to PFI, valuersshould obtain clear instructions from any lender asto the method of valuation required. It is possiblethat some lenders may require a discounted cashflow method to be used.

8.4 The LPA Payments are subject to annual RPIincreases. The gross internal floor area of thebuilding rather than the net internal floor area isused for calculating the Lease Plus Payment. Thereis often third party income (from pharmacies andother occupiers) and the terms of their occupationneed to be checked. Many of these occupiers aresubject to conventional leases.


9 Inspection and measurement

9.1 Although it contains no specific reference tosurgery premises, it is recommended that valuershave regard to the RICS Code of measuringpractice when undertaking the measurement ofproperty for valuation purposes. The coredefinitions provided in the code include:

Gross Internal Area (GIA). GIA is the usual methodof measurement for calculating building costs (forexample, with reference to BCIS data), but is oftenused by PCOs in England in determining the sizethat may be eligible for rent reimbursement as aguideline to the acceptability of premises and in theanalysis of NHS LIFT payments;

Net Internal Area (NIA). NIA is the usual basis ofmeasurement for the valuation and marketing of themajority of non-industrial business premises. (Seeapplication 9 in the core definitions: Net InternalArea of the Code of Measuring Practice.)

9.2 In contrast to office premises and many othertypes of commercial property, surgeries containspecialist facilities and generally have differentrequirements in terms of space utilisation. Theseinclude, amongst other matters, the provision ofadditional WC accommodation (in order to provideseparate facilities for patients and staff), additionalcorridor/circulation space (necessary to enhanceconfidentiality for clinical rooms and receptionareas) and additional cleaning accommodation toallow for infection control.

9.3 Therefore, in applying the RICS Code ofmeasuring practice, certain areas additional to thefacilities referred to in items 2.1 to 2.10 of the coredefinition should be included within the calculationof NIA. These would include:

+ internal pram stores, baby changing facilitiesand other ancillary accommodation providedspecifically for the benefit of patients;

+ additional protected areas provided as a resultof the more stringent means of escape and fireregulations as applied to surgery premises.

+ additional WC accommodation providedexclusively for the use of patients;

+ In determining what constitutes additional WCprovision, the valuer will need to have regard tothe number of WCs required under currentlegislation for the number of staff employed atthe property including wheelchair accessibleWCs required for staff under the DisabilityDiscrimination Act (DDA); and only includewithin the NIA the additional WCs provided forpatients;

+ necessary additional circulation space;

+ facilities for the secure storage of clinical waste;

+ additional cleaners’ rooms required for infectioncontrol; and

+ shower rooms.

Examples of floor plans showing the above areincluded as Appendix 1.

9.4 It is for the valuer, when attributing value tosuch areas, to judge in each case whether thesefacilities have been over or under-provided and therelative value to be attributed to them.

9.5 During the course of inspection, opportunitymay be taken to record the fixtures and fittingsintended to be included in the valuation andreferred to in the Report. Where appropriate, thesemust be checked against those detailed in thelease.


10 Design and specification – the impact oflegislation and NHS Policy

The existing legislation together with NHSDirections, historic and current Guidance in respectof design and specification, are important factors indetermining the quality of a surgery.

10.1 Guidance in England

Historic Guidance

10.1.1 Historically, the Statement of Fees andAllowances Paragraph 51, Medical PracticePremises – The Commentary 1999 and 2002 andPrimary & Social Premises Planning & DesignGuidance 2004, applied.

The Disability Discrimination Act 1995 and2005 (DDA)

10.1.2 Due to the nature of the use, disabilitylegislation probably has a greater impact onmedical premises than other types of property andgreater impact on upper or lower flooraccommodation than that provided at ground floorlevel. The Act requires that service providers takereasonable steps to remove, alter or providereasonable means of avoiding physical features thatmake it impossible or unreasonably difficult fordisabled people to use the service. Much of theexisting stock of surgery premises fails to complywith NHS disability standards and, in consideringthe value of individual surgery premises, the valuerwill need to exercise judgment as to:

+ The adaptability of the premises to meet NHSexpectations;

+ Whether such adaptation is reasonable in thecontext of service provision within that locality;

+ The order of priority in which any necessaryadaptations may need to be carried out.

DH Health Building Note 11 (HBN11)

10.1.3 This document provides best practice onthe design and layout for primary and communitycare premises and community hospitals. Thedocument is part of the already published suite ofHealth Building Notes to which the NHS has

access. HBN11 has been written with the provisionof new-build facilities in mind. The principlesdescribed apply equally to the refurbishment andextension of existing buildings. The HBN11 showsthe valuer what is required by the NHS forcompliance and thus forms a guide to quality.

The Directions

10.1.4 Within Schedule 1, the Directions attend tothe minimum standards required for primary carepremises in relation to:

+ Compliance under the Disability DiscriminationAct;

+ Facilities for the elderly and young includingWC facilities, baby changing/feeding facilitiesand infection control;

+ Properly equipped and sized treatment roomsand adequate arrangements for instrumentdecontamination;

+ Properly equipped consulting rooms;

+ Convenient access and proper arrangementsfor storage of clinical waste;

+ Wash hand basins with hot and cold water;

+ Adequately sized waiting rooms withconfidentiality provisions; and

+ Adequate lighting, heating and ventilationtogether with fire and security provisions.

Energy sustainability requirements

10.1.5 The NHS has made a commitment toenergy sustainability and the valuer needs to beaware of their requirements, notably in respect of:

Building Research Establishment and EnvironmentalAssessment Method (BREEAM). This is anenvironmental assessment tool that was introducedon 1 July 2008 where the NHS in England requiresan ‘excellent’ rating for new buildings and a ‘verygood’ rating for refurbishments.

Display Energy Certificate (DEC). From 1 October2008 DECs are required for all primary healthcarebuildings in excess of 1,000m GIA (due to be


reviewed in 2010). In line with other commercialproperty, Energy Performance Certificates (EPCs)are required for all new premises or those that arethe subject of a sale or lease.

10.2 Guidance in Wales

The following guidance is available to assist inensuring that primary care premises are fit forpurpose:

+ Welsh Health Estates (WHE) Primary CareDevelopment: Design Guide;

+ Welsh Health Circular (WHC) (2007) 64 PrimaryCare Estate Development and Bid Processes;

+ WHC (2008) 55 Guidance on AccommodationSchedules for GMS Space in newbuild facilities;

+ WHC (2008) 56 Attached Staff Funding of CostsAssociated with Staff attached to Primary CareTeams;

+ DVs Performance Specification for Building,Engineering Works for Primary careDevelopments.

Future guidance will be made available on the WHEprimary care website.

10.3 Guidance in Scotland

10.3.1 Design guidance for Primary Care Premisesin Scotland is currently provided within ‘ScottishHealth Planning Note 36 Part 1: General MedicalPractice Premises in Scotland’. This document isfree to download from the Health Facilities Scotlandwebsite at:

www.hfs.scot.nhs.uk/online-services/publications/property/scottish health planning notes

10.3.2 This document provides advice on thedesign and specification requirements for PrimaryHealthcare Premises in Scotland and is the first ofin a series of three Health Planning Notes. Theother two being Part 2: NHS Dental Premises inScotland and Part 3: Community PharmacyPremises in Scotland.

10.3.3 Health Planning Note 36 draws from, andreplaces, the GP Premises Directions – GuidanceNote 2 publication ‘GP Practice Premises inScotland – A Commentary (June 2002)’. The newdocument provides updated guidance, as thesource for spatial and dimensional standards, on

the nature of premises in respect of which HealthBoards may consider financial support to beappropriate. The guidance is primarily aimed atGeneral Practitioners considering a new buildoption however it also provides design teams witha set of minimum standards and can be used byNHS Bodies and Boards commissioning newpremises for General Medical Practices. Althoughaimed at new build premises, the document willalso provide useful guidance for the refurbishmentof existing buildings. The Health Planning Noteshows the valuer what is required by the NHS forcompliance and thus forms a guide to quality.


11 Pharmacies within healthcaredevelopments

11.1 In England

11.1.1 Pharmacies are increasingly incorporatedinto new healthcare developments and the impacton value they have on the whole needs to beconsidered. The success of the pharmacy may welldepend on the ultimate success of the healthcentre. Some GPs would be reluctant to commit toa new health centre unless it had the potential tohave an integrated pharmacy.

11.1.2 In addition to pharmacy design and size,there are a number of other important factors thatwill determine the value of the premises.

11.1.3 The provision of pharmacy licences is tightlycontrolled by the NHS under the National HealthService (Pharmaceutical Services) Regulations2005, the National Health Service Act 2006 and theNational Health Service Act 2009. In relation to the2005 Regulations, the DH provides guidance toPCOs in the form of a document titled ’Informationfor Primary Care Trusts’ – revised September 2009.Each PCO is now required to assess needs forpharmaceutical services within its area and publisha statement concerning such assessment.

11.1.4 Prospective pharmacy operators may applyto the local PCO for a new pharmacy licence whichmust be granted where necessary to meet anidentified need or where the PCO is satisfied thatthe grant of a licence would secure improvementsor better access to pharmaceutical services in itsarea. It is, however, more common for an existingpharmacy to relocate to a new development.

11.1.5 Typically, pharmacies are let to local ornational pharmacy chains on commercialinvestment terms. The degree of competition forpremises (and therefore the level of rent) isdetermined by a number of factors, including:

+ the size and configuration of the pharmacy –whether possessing a consulting room orhaving appropriate storage.

+ whether a new licence or a ‘minor relocation’ ofan existing contract is required and, if a newlicence, whether this is a ‘100 hours’ contract

where operating costs are likely to besubstantially higher than the average

+ the likely number of ‘scripts’ (prescriptions) tobe issued by the associated GP practice(s). Inpart, this is determined by the patient list sizeof the GPs and by the demographics of thepractice list;

+ the spatial relationship between the surgery andthe pharmacy: to what extent does thepharmacy benefit from the surgery’s ‘pedestrianflow’?

+ the extent to which electronic prescribing bythe associated GP practice(s) is possible;

+ the proposed lease terms and covenantstrength of the operator;

+ the nature of the planning consent and theextent to which retail sales are permitted. Theopportunity for general retail sales may addvalue;

+ whether an additional premium is paid at theoutset of the lease. The impact of this at review(if any) will depend upon the terms of the lease.

11.2 In Wales

Those persons who wish to provide pharmaceuticalservices need to apply to the Local Health Boardwho determines the application in accordance withcriteria set out in the NHS (PharmaceuticalServices) Regulations 1992/662); the NHS(Pharmaceutical Services) (Amendment) Regulations2009/1491; and the NHS (Pharmaceutical Services)(Amendment) Regulations 2005/1013.

11.3 In Scotland

Those persons who wish to provide pharmaceuticalservices need to apply to the appropriate NHSBoard who determine the application in accordancewith criteria set out in the NHS (PharmaceuticalServices) (Scotland) Regulations 2009.


Appendix 1

Floor plan examples showing NIA calculation

Figure 1: Ground floor plan of a purpose built surgery


Figure 2: First floor plan of a purpose built surgery


Figure 3: Ground floor plan of a two storey surgery converted from a residentialdwelling, with purpose-built additions


Appendix 2

Provision of general medical services inWales1 General Medical Services

1.1 Family health services are in the main providedby GPs through GMS Contracts. The GMS contractis a nationally agreed contract between the WelshAssembly Government and the GeneralPractitioners Committee of the BMA with individualcontracts agreed locally between Local HealthBoards (LHBs) and GP practices.

2 Non-GMS Services

2.1 LHBs also provide community services such ashealth visiting, district nursing midwifery andphysiotherapy in community settings andsometimes these services are co-located in primarycare centres specifically designed and developedfor GMS services. There are many benefits tomoving appropriate services from acute settings toprimary care settings and where possible thecollocation of various health and social careservices is encouraged.

3 Primary Care Premises

3.1 Delivery of primary care services should befrom modern safe and secure buildings ofappropriate design and which allow good access toand from the building. The Primary CareDevelopment: Design Guide available on the WHEprimary care website provides information on thedesign principles to be followed in new primarycare premises in Wales.

3.2 Guidance on planning and funding of new,extended or refurbished premises, including fundingbid documentation, can be found on WHE’s primarycare website. WHE’s primary care estate advisorsprovide advice and support to LHBs on thedevelopment of all primary care premises.

3.3 The District Valuer (DV) provides advice onvalue for money to LHBs for new, extended or

refurbished premises and provides the Value forMoney report which accompanies the funding bidfor all premises development.

4 Procurement routes

4.1 The NHS framework allows for differentmethods of procurement including doctor ledschemes for owner occupation ( known as DIYschemes) , third party developments (3PD)schemes and NHS capital schemes.

DIY schemes

4.2 GPs can raise capital for the purchase of land,payment of consultants fees and construction costsof a primary care building. GPs are eligible fornotional rental reimbursement or a reimbursementbased on a percentage of the borrowing costs.

3PD schemes

4.3 Specialist commercial development companieswill work at risk to purchase land, provide thenecessary consultant activities relating to theplanning, design and development of a scheme, inagreement with all the stakeholders including theoccupiers and the LHB representatives. Once afunding bid is approved the occupiers will berequired to enter into an agreement for lease withthe 3PD and once handover of the constructedbuilding has been achieved the occupiers will enterinto a formal lease of 20 years in return for a rentprior agreed with the DV.

NHS capital

4.4 On occasion it may be appropriate for NHScapital to provide the funding for primary carebuildings.


5 NHS (GMS-Premises Costs) (Wales)Directions 2004

5.1 GMS contractor premises costs are reimbursedby LHBs in Wales. The Directions may be found onthe WHE intranet web site at:

www.wales.nhs.uk/sites3/Documents/254/401PremisesCostDirections.pdf.

England, Scotland, and Northern Ireland have theirown versions of the Directions and, whilst the bulkof the content is similar, there are somefundamental differences, for example the exclusionof service charge reimbursement in Wales.

5.2 Payments are made from Assembly’s GMSbudget rather than from individually held LHBbudgets although LHBs must submit funding bidson behalf of the GPs and all bids must be LHBBoard approved. The purpose of the Directions isto provide the means to recognise reasonable cost,value for money to the public purse and parity oftreatment for GMS contractors.

5.3 The Directions allow payments to GPs forpremises development or improvements, relatedrelocation costs plus recurring premises costs. Allsuch payments are tempered in that they must bein line with the budgetary targets. The Directionscame into force on 1 April 2004.

5.4 The forms of financial assistance availablegenerally revolve around proposals within the LHBs’estates strategies that can be shown as having ahigh priority and representing value for money

5.5 Examples of funding assistance include thefollowing:

Premises Improvements Grants of between 33%and 66% of the works and fees. Valuers shouldnote that where such grants are used, the LHB/Assembly will reserve the right to claim aproportion back should the premises cease to beused for GMS purposes within a five to ten yearperiod.

Recurring premises costs. Where owner occupiedpremises receive reimbursement on the basis of thenotional rent assessment, DVs will have regard tospecified assumed lease terms. For leasedpremises, reimbursement will be the lower of the

rent assessed by the DV or the actual lease rent(subject to specified adjustments).

5.6 It should be noted that the notional rentreimbursed where an Improvement Grant has beenprovided towards the costs of building an extensionor refurbishing the existing premises will attract anabatement subject to a formula detailed inSchedule 3 of the Premises Directions.

5.7 Where a GP is to relocate from unsuitableexisting premises to new/refurbished premises,various forms of assistance can be provided to GPsin respect of disposing of those existing premises,such as:

+ Paying a mortgage deficit grant includingmortgage redemption fees;

+ Guaranteeing a minimum sale price of theexisting premises;

+ Paying the cost of surrendering or assigning thelease of the existing premises;

+ Paying Stamp Duty Land Tax on the lease ofthe new premises.

Minimum standards

5.8 LHBs apply minimum standards to all premiseswhere payments are made as summarised above,which, if breached, can lead to the abatement ofrent reimbursement.

Premises Costs Disputes

5.9 The NHS (GMS Contracts) Regulations 2004attends to the matter of dispute resolution whereGPs have a disagreement on any point of theircontract. The regulations encourage local mediationand require that the LHBs make every reasonableeffort to settle any matters including disputes overthe level of rent at a local level. If local resolutionfails then GP contractors can, under the NHSDispute Resolution Procedure, put their case inwriting to the Assembly which determines theprocess to be followed.


Appendix 3

Provision of general medical services inScotland1 Hub Scotland

1.1 General medical services

In common with England and Wales, family healthservices are in the main provided by GP’s throughGMS contracts. The Scottish GMS contract isagreed between The Scottish Government and theScottish General Practitioners Committee of theBMA. It is locally administered between HealthBoards and GP practices.

1.2 The Hub Programme is a major initiative of theScottish Futures Trust, a Government-ownedcompany established in 2008 with the objective ofimproving public infrastructure investment andprocurement. Details may be found on the ScottishFutures Trust Hub websitewww.scottishfuturestrust.org.uk/a.asp?a=22.

1.3 Hub is a procurement vehicle which is intendedto improve the efficiency of communityinfrastructure delivery – with a particular emphasison supporting the provision of more joint servicesacross local authorities, NHS Health Boards andother community partners.

1.4 Across Scotland five separate Hub regionshave been identified, with the two pilot regionsbeing the North and the South East. For eachregion, a Hub Joint Venture, or Hub Co, will beformed between the public and private sector. Theequity capital of the Hub Co will be split betweenthe private and public participants and a PartneringAgreement will set out the rights and obligations ofthe parties, including the provision of partneringservices by Hub Co and the exclusivity provisionsfrom the public sector partners.

1.5 The focus of the Hub Co will be the planning,development and delivery of new infrastructureprojects within the sphere of health and social care.However, the documentation will allow for thescope to be extended, at public sector discretion,

to include libraries, education facilities, policeservices, fire services and various other council andcommunity facilities. The range of services will alsobe extendable to include estate management,service planning, property development andregeneration activities.

1.6 The ongoing provision of partnering serviceswill be linked to the achievement of improvementsin the way that community facilities are delivered,through improved designs, reductions in the cost ofconstruction and buildings maintenance and fasterdelivery.

1.7 It is anticipated that the Hub Programme willdeliver investment in the order of £300 million inrespect of each of the two pilot regions over a tenyear period. As at November 2009, Hub Northinitiated the procurement process for a privatesector partner, with first phase submissions due inearly 2010. Hub South East, meanwhile, hadinitiated the procurement process in July 2009 andhave selected a short list of three private sectorbidders, from a total of fifteen, and have appointeda private sector partner.

2 Premises Cost Directions

2.1 GMS Contractor premises costs arereimbursed by Health Boards in Scotland inaccordance with directions set out in the PrimaryMedical Services – (Premises Development Grants,Improvement Grants and Premises Costs)Directions 2004. The Directions may be found onthe Scottish Government Health Directorateswebsite at: www.sehd.scot.nhs.uk/gpweb/7/PDFs/PremDir_2004.pdf

2.2 The bulk of the content of the Directions andthe underlying principles mirror that of the Englishequivalent which has been covered in detail withinthe body of the guidance note. However, variousminor differences exist at points throughout the


Directions and there are also two additionalsections plus one additional schedule incorporatedwithin the Scottish Directions that are not coveredin the English version, namely:

+ Part 1, Point 5 – Existing premises developmentand improvement commitments

Provides direction to Health Boards in respectof occasions where they had committedthemselves prior to the current Directionscoming into force, 01 April 2004, to providefinancial assistance for premises developmentand improvement during the financial year2004-05.

+ Part 5, Point 35 – Health Centre Rents

– Schedule 4 – Health Centre Rents

Provides direction to Health Boards in respectof payment(s) due where a contractor is atenant of a Health Centre.

2.3 The section considering residential propertyre-conversion grants and the occasions when thesame will / will not be payable are also significantlydifferent between the two versions, reflectingdifferences in practice and application between thetwo countries.


Appendix 4

Glossary of terms used

3PD Third Party Developer

APMS Alternative Provider Medical Services

BMA British Medical Association

CMR Current Market Rent (as defined in the Directions)

DDA Disability Discrimination Act 1995 and 2005

The Directions The National Health Service (General Medical Services – Premises Costs)(England) Directions 2004

The National Health Service (General Medical Services – Premises Costs) (Wales)Directions 2004The Primary Medical Services (Premises Development Grants, ImprovementGrants and Costs) Directions 2004

DH Department of Health

DV District Valuer

GMS General Medical Services

GP General (Medical) Practitioner

GPC General Practitioners’ Committee

HB Health Board in Scotland

LHB Local Health Board in Wales

LIFT Local Improvement Finance Trust

NHS National Health Service

PCO Primary Care Organisation (PCT, HB or LHB as appropriate)

PMCC Primary Medical Care Contractors

PMS Personal Medical Services

Red Book The RICS Valuation Standards, 6th Edition.

SDLT Stamp Duty Land Tax

WAG Welsh Assembly Government

WHC Welsh Health Circular

WHE Welsh Health Estates


rics.org/standards rics.org/standards

RICS Practice Standards, UK

2nd edition, guidance note

Valuation of medical centreand surgery premises2nd edition, guidance note

This guidance note provides valuation advice on surgery premises,including medical centres and surgeries occupied by doctors and othersimilar practitioners for medical or health services within the NHS.

The valuer will need to have an understanding of the NHS framework,the applicable Regulations and BMA guidance.

The guidance note aims the assist the valuer by dealing with thefollowing topics:

• The NHS framework• BMA guidance• The approach to valuation for various purposes;• Inspection and measurement• Design and specification• Floor plan example showing NIA calculation.

This guidance is applicable only to the United Kingdom.

Valuation of medical centreand surgery premises

GN 60/2010Part of the RICS Valuation Standards

Valuation of medical centres and surgery premises 2010 · Produced by the Valuation Professional...

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