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Vital Signs – A Primary Healthcare Blog: GP Property Costs Threaten Public Health Standards

Date: 24/05/2017 | Healthcare, Blogs

Property millstone is contributing to the problem of low GP recruitment.

Helen McArdle’s recent article in The Herald (Record number of GP practices taken over by health boards amid doctor shortage) highlighted how an escalating crisis in the recruitment and retention of Scottish-based doctors has resulted in an increasing number of GP practices now having to be run by health boards. While only one in 20 surgeries in Scotland currently fall under this criteria, this number is on the rise, up by 25 per cent in the past two years.

This development is all part of a worrying trend where the NHS is struggling to cope with a fall in the number of junior doctors wanting to specialise in general practice, not only across rural communities but now, increasingly, in urban areas of Scotland.

There are a number of factors contributing to this decline, one of which is the financial burden imposed on many GP surgeries through their property lease agreements. This issue stems back to the mid-1980s when the Conservative government wanted to bring more private money into building new doctor’s surgeries. Instead of lending GPs money to build their own they handed the responsibility for developing new premises to the private sector which would finance the new building then lease it back to GPs, a model which acted as a precursor to the Private Finance Initiative (PFI).

Many of the 30-year leases signed at that time are now coming to an end, with the GP practices facing restoration bills which can be as high as £500,000. Most of the doctors who signed these leases are now retired, leaving the younger partners having to pick up these significant dilapidation costs.

It’s therefore unsurprising that we are seeing an increasing decline in newly qualified doctors who want to be GPs. In a small surgery, one partner can potentially be left as the “last man standing” as part of the lease agreements, required to repair the premises out of their own pocket. Very few surgeries are run as limited companies or limited liability partnerships, so not only is their medical practice exposed but their houses and their pensions are also on the line.

Of the circa 200 GP practices that our firm represents in Scotland, most are facing a challenge over recruitment and property is usually one of the issues behind this. Given what is at stake in having to take on such commitment which comes with the real prospect of an almighty and rather costly legal argument further down the road, who could blame a newly qualified doctor about to begin their career for deciding to give the GP option a wide berth?

In 2002 the General Practice Finance Corporation, which presided over GP leasing arrangements, was privatised and sold to Norwich Union. As a result, numerous surgeries are now owned by a handful of private property investors. While many of these companies have been very accommodating to find solutions for GP tenants, they’re not about to write off bills totalling hundreds of thousands of pounds.

The Scottish Government is finally waking up to this issue but several practices have leases coming to an end now, meaning immediate action is needed to prevent more GPs from going out of business. One solution is for the Scottish Government to simply take responsibility for all of these leases and effectively release doctors from their financial obligations. That would certainly deal with the problem but whether it would be deemed as a fair use of public money is for the politicians to decide. What is clear is that doing nothing is not an option if we want to sustain our current level of healthcare services.

While it may be tempting to blame the GPs for entering into an agreement with such significant financial implications without proper scrutiny, it’s important to recognise that these are people trained to help make others better. They are not businesspeople or property experts.

This is also an issue which impacts on quality of life in communities across Scotland and will certainly require a clear and decisive government response if we are to avoid a serious crisis. Communities that don’t have access to GP services are unlikely to be sustainable in the longer term.

As Helen McArdle’s article highlighted, health boards are facing increasing pressures in having to provide GP services in Scotland. Property lease obligations are one of the key issues behind this problem which will only escalate unless we see a change in existing government policies. 

This article first appeared in The Herald on 24th May 2017

The matter in this publication is based on our current understanding of the law.  The information provides only an overview of the law in force at the date hereof and has been produced for general information purposes only. Professional advice should always be sought before taking any action in reliance of the information. Accordingly, Davidson Chalmers LLP does not take any responsibility for losses incurred by any person through acting or failing to act on the basis of anything contained in this publication.

Written by

Andy Drane | Davidson Chalmers Stewart
Andy Drane

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