New Premises Costs Directions 2024: what does this mean for development and improvement of GP premises

NHS England’s new Premises Costs Directions (PCDs) came into force on 10 May 2024 replacing the 2013 Directions and following the General Practice Premises Policy Review in 2019 which called for simplification of PCDs recognising issues around general practice premises and wider primary care estate.

In a series of blogs on the new PCDs, we spotlight a few of the key changes which will be of interest to those working in primary care. In our first blog, we consider the 2024 PCDs in respect of premises improvement and development.

So, what can be included?

The cost of the land acquisition can now be included in the application for financial assistance for development. If it is the contractor acquiring the land they may also be able to recover the cost of Stamp Duty Land Tax (SDLT) as tenant contractors have in the past for SDLT incurred on the grant of a lease.

If a contractor is taking a lease of a new site, it is now also able to apply for a lease premium to be reimbursed provided that this is taken into account in valuing the rental. This does mean the landowner/developer can recover the land acquisition costs at an earlier stage than simply over the course of the lease in rental payments and could make a development more cost effective.

The new PCDs acknowledge that the cost of reducing a building’s environmental impact could be recovered in the reimbursement. This has been a stumbling block in the past where the high cost of these measures in the development are not then taken into account in the Diminished Valuation of the rent. However, the new PCDs require that the measures must show a ‘net financial benefit to the health service’ before they can be considered. Whilst this is not unreasonable in itself,  it does not take into account the benefits of meeting other key NHS aims such as net zero commitments and it is likely to be difficult to prove the net financial gain in all cases.

What can be clawed back and when?

A key addition in the new PCDs is clarity around ‘repayability’ which is set out at the new Direction 13: Repayability of premises development or improvement grants. This applies to premises improvement and development grants. In short, the amount reimbursed could be clawed back in the event that the premises are not being used for primary medical services and the ‘guaranteed use period’ has not expired. This guaranteed use period depends on the amount of the grant and the sums and time periods have been updated in these Directions. There are provisions allowing payment to be made from any sale proceeds to give GP property owners some comfort, but it will be vital to consider the impact of this Direction (and any grant agreement) when considering future use of GP premises.  Clawback also applies if a contractor does not ultimately take occupation of a building in breach of their lease or agreement for lease and so is a concern for tenants as well as owner/occupiers.

What is required for a successful application?

The new PCDs also recognise the need for involvement of the Local Medical Committee giving them a right to be kept in the loop for proposals for new builds or significant redevelopments. This does mean one practice cannot progress significant proposals without at least notifying and hearing representations from others in the area.  

One of the main discussion points of the PCDs has been the new requirement for a project initiation document as part of the application. It has been our experience that this has been a requirement of Integrated Care Boards notwithstanding the lack of mention in the 2013 Directions. In addition to this requirement, there are also more stringent requirements in respect of the legal documentation requiring a lease or agreement for lease and warranties that do not prohibit assignment to NHS England or its nominee and some minimum required terms.

It is worth noting that the ‘catch all’ Direction 6 remains allowing NHS England to fund in circumstances not envisaged by these Directions. Given the Directions now cover more scenarios than they did perhaps this catch all may become less useful, but it is always an option for an Integrated Care Board trying to resolve an unusual situation.