Notional rent reimbursement for owner-occupied premises and actual lease rents for tenanted properties generally follow a three-yearly rent review pattern (sometimes five-yearly). We are often asked by landlords and GP partners whether it’s worth triggering a rent review or appealing a notional rent.
Typically, landlords or GP property owners may question whether the time and effort invested in the review process, as well as any associated costs, are worthwhile if an increase in rental income is not significant.
Checking your rental income
We recommend that you should always review the rental income at a property to ensure it is at the correct level. We often find that Landlords/Practices can be pleasantly surprised by the outcome of undertaking these reviews. Furthermore, it should be noted that any upward movement in rent not only increases the level of income received but in the majority of cases the capital value of the property is also likely to increase.
Consider the potential impact
As a guide, an uplift of £1,000 per annum is likely to enhance the capital value of a medical centre to in the region of £15,000, dependent on the quality of the property itself and other factors. Alongside this, the higher and more up to date the rental income, the more attractive a property is likely to become to investors. In a market where interest rates have risen significantly over the last year, having an associated effect on value, maximising any sources of income at the property can be particularly important in safeguarding the level of value, until these external contributing factors settle down or improve again.
Factors affecting potential increases
The potential increase in the value of a property depends on various factors such as:
- rental increases for similar properties in the vicinity,
- any improvements made to the property,
- and the date of the rent review,
- the specific characteristics of a property such as the internal specification, usable floor area and age of the building.
Undertaking these reviews for your practice can have a wider impact by helping other GP premises in the surrounding area. This can ultimately support and increase their practice income as well.
It is also important to remember that the initial rental assessment from the ICB/District Valuer to a practice is only one person’s initial opinion and has not been discussed or reviewed. Therefore, it’s recommended to consult a specialist healthcare surveyor to review this assessment in the case of Notional Rent or the current level of passing rent if there is a lease in place. This will ensure that the rent is agreed or determined at the correct level in line with the market.
Get specialist advice
If you have received an initial Notional Rent assessment, or have a lease which has an outstanding rent review, please feel free to contact our Healthcare team for a discussion and advice FREE OF CHARGE in the first instance.
Email healthcare@argroup.co.uk or call us on 01727 844555.