NHS Property Services: Health Centre Lease issues

With the changes to the NHS and with PCTs ceasing to exist, we are about to see a major shake up of NHS property across the country.

From 1st April 2013, the majority of property owned by PCTs will be transferred to a new management company NHS Property Services. NHS PS has been set up purely for this purpose and has no funding after 1st April, so it will be required to ensure that it recovers all the rent and service charge it can.

Essentially NHS PS will be a commercial landlord –  a massive change from the current situation where the PCT sits more in the role of a benevolent uncle.

In order to try to ease the process, the PCTs have been asked by the NHS to formalise the occupations of the ‘tenants’ of these buildings. So where a GP practice has been occupying a PCT owned health centre, the practice is now required to enter a lease before 1st April. Unsurprisingly, this is raising a number of issues and concerns with the doctors involved.

The main sticking points are the usual issues of rent and service charge as well as the current state of repair/CQC compliance of the premises. The service charge issue is magnified in this instance as the NHS has issued a directive to all PCTs to prepare a full schedule of costs associated with each property to pass to NHS PS. The inference is that NHS PS will be looking to re-charge all costs associated with the building to the occupiers.

In my conversations with doctors, it appears that the service charges they have been paying over the past few years have included items that directly relate to them but other indirect costs such as risk assessments have not been passed on.  The end result is that the service charge costs will dramatically increase under the new arrangements unless there is an express provision to limit these charges.

I believe that if the practices across the country who faced with this don’t take the correct advice both in terms of legal and surveying advice, there will be a number of practices who will not be able to afford these payments further down the line.

What a number of doctors perhaps don’t realise is that NHS PS will, in a couple of years, be required to generate some capital receipts and will be looking to sell off sites both as developments and investments. If a 3rd party landlord takes on a health centre as an investment, it is certain that they will have no issue with recharging everything they are allowed to under the terms of the lease.

That, I think, is the major point of all of this. Gone are the days of a benevolent NHS that can afford to subsidise costs to associated occupiers. In its place will come an organisation that, out of necessity, will have to account for every penny and recharge where necessary.

About Tom

Tom advises a range of clients on a day-to-day basis both in the commercial and healthcare property sectors. He specialises in rent reviews, dispute resolution and surgery valuations, with a particular specialism in pharmacy rental values. He's currently advising Local Medical Committees on how NHS changes will affect practices occupying NHS owned premises. When he's not at work, he's kept very busy by his three small boys!

, , ,

Comments are closed.