Leasehold dilapidations – how to prepare and protect yourself
Leasehold Dilapidations – how to prepare and protect yourself
Many GPs are apprehensive about becoming a named tenant on a leasehold surgery. There are of course a number of liabilities that could be imposed on a tenant under a lease, and you may have read our previous blogs on the subject of last man standing and the importance of agreeing a break-clause. Another issue to consider is the obligation to maintain and repair the premises both during and at the end of the lease term. Almost all surgery leases will impose an obligation on the tenant to repair the premises to some degree or another. ‘Dilapidations’ is the terminology used when a landlord seeks to enforce the repairing lease obligations.
When might the dilapidation liability occur?
In practice, most leases allow the landlord to serve a schedule of dilapidations on a tenant at any time during the lease term. This is because the tenant’s obligation to repair the premises is an ongoing obligation. If the premises are starting to fall into disrepair and the tenant is not complying with their lease terms to maintain them, the landlord needs the ability to force the process during the lease term. Whilst this right exists in most leases, unless there are significant ongoing problems relating to the tenant’s lack of maintenance in practice it is not often used by a landlord. It is far more common for a landlord to be concerned about repairing obligations when the lease is coming to an end. At this point, the landlord’s mind will be on future tenants and the rent they might achieve: the better the condition of the premises, the more valuable they are and the easier it will be for the landlord to charge a higher rent. They will therefore look at whatever rights they have available to them to improve the condition of the premises.
How much is it likely to cost?
The extent of your liability as tenant will depend on how your lease is drawn-up. For example, some leases may limit the tenant’s repairing obligation to keeping it in no better a state of condition than it was at the start of the lease term. Other leases may be what we call a ‘full repairing lease’, in which case the obligation is to repair all parts of the premises whether or not you caused that disrepair in the first place. Before you enter into a lease, it is very important to assess at the outset what your likely dilapidation liability may be at the end of the lease. You should seek legal and surveyor’s advice, so you understand the condition of the premises and what the language in the lease will mean in terms of your obligation to repair.
Be aware that dilapidation settlements are inevitably a horse trade between the landlord and the tenant. In our experience, a landlord will often seek to recover more in the first instance than they are entitled to and use this as a negotiating position to work down from. There are also important protections at law for tenants that can in some instances cap the amount they are required to pay. If you do receive a dilapidations demand from your landlord, you should consider taking surveyor’s advice as to whether the amount is appropriate and legal advice to establish whether the sum has been lawfully demanded.
How to manage the risk
Understanding your leasehold obligations will allow you to plan as a business how to avoid large and unwelcome bills from the landlord. It is good advice to accrue an amount year on year towards the costs of these liabilities. You may do this by setting up a sinking fund, into which each Partner contributes an agreed amount towards future dilapidations. You will need to set out how the sinking fund is created and managed in your Partnership Deed, so do make sure you have an up to date Partnership Deed that allows you to do this. A sinking fund also helps mitigate the risk of partners seeking to avoid a large dilapidations bill by retiring just before the end of the lease term.
In some circumstances, some of the dilapidations liability may be reimbursed through your CCG. This may be paid by way of a top-up element to your monthly rent reimbursement , in which case it is prudent to pay such sums straight into a sinking fund so it is available when you might need it. Funding may also be available at the end of a lease term, particularly where you are relocating to alternative premises with the support of the CCG.
Summary
Be prepared – adopting some relatively simple financial management during a lease term can pay dividends at the end. Make sure your partnership deed is up to date and documents how dilapidations costs will be shared and financed. Finally, if you do receive a dilapidations demand from your landlord: don’t panic; don’t just agree it at face value; and always seek professional advice.
If you have any questions on dilapidations or any other NHS premises related queries, please contact Daphne Robertson on 01483 511555 email info@drsolicitors.com
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How to support improvements to primary care premises
The surgery premises are generally the biggest asset and the largest liability within a GP partnership. Suitable premises are a critical part of delivering high quality care, but they are widely considered to be in crisis. There has been a longstanding lack of government capital funding, and GPs are increasingly unwilling to shoulder the burden of long term leases or to invest in developing their own freehold surgeries. This is a key driver of the ‘last man standing’ problem.
Recognising the issue, NHSE have asked for solution proposals in their General Practice premises policy review. It is important that any ‘solutions’ are achievable, affordable, and address the differing issues for freeholds and leaseholds. We have set out below some of our ideas which we have formally submitted in response to the policy review.
Leasehold surgeries
The biggest concern on leasehold surgeries is whether a GP can walk away from the lease when they want to retire, or if for some reason the practice has to close. The lease is a bit like riding a bicycle: so long as you keep pedalling the bicycle will stay up. From the perspective of the NHS a long lease is only a small risk: the NHS has an obligation to provide services to all patients so premises will always be needed and someone has to keep pedalling. From the perspective of an individual GP or GP practice the risk is much larger: at some point they will want to retire and if they cannot find a person to take over their lease obligations they will have to keep pedalling themselves. The NHS, rather than retired GPs, are more likely to have legs strong enough to keep the wheels of the bicycle turning and as such, an obvious opportunity is to transfer this risk from the individual GPs onto the NHS. There are no significant financial implications for the NHS in doing so, because one way or another the NHS would have to fund the premises in order to ensure continuity of patient care. From a legal perspective there are a couple of ways this could be achieved:
We believe a decrease in the risk associated with commercial leases should encourage more GPs to sign up to them, or to join partnerships which operate out of premises leased in this way. In turn, this should improve recruitment and retention of GP partners, and also drive up investment and innovation in primary care premises from third party investors due to an increase in demand for the space.
From the public body’s point of view, any small increase in risk can be managed by a proper estates strategy: the proposed guarantee would only be extended to surgeries which were consistent with the estates strategy, thereby speeding up the closure of those buildings which are no longer fit for purpose. The policy might even have the effect of reducing rental costs by improving the ‘covenant strength’.
Freehold Surgeries
Whilst one obvious ‘solution’ on freeholds is for the NHS to offer to buy them, we have assumed that this is unaffordable. An alternative is therefore to reduce the risk of them ever standing empty with no funding stream.
One way to do this would be for the NHS to agree a ‘put-option’ whereby the freehold owner can require a short-term lease to be entered into with a public body in the event of a core contract coming to an end. This would not only give owners the comfort of an income stream if the contract comes to an end, but again provide the public body with certainty of premises to provide continuity of patient care in the event that a practice folds. This is what usually happens anyway, but by providing certainty in advance to all parties GPs would be more inclined to invest in their surgeries. If the worst happened, freehold owners would have the time to plan what to do with their investment rather than be forced into a ‘fire-sale’
Once again, the expected result of our proposal is that it should drive up investment in primary care premises by reducing risk for GP practices. There would be an incentive on the NHS to develop premises strategies to determine which buildings should benefit from the put option, and the approach should be cost neutral for the NHS since this is generally anyway what happens in practice.
Conclusion
If the ‘last man standing’ risk can be reduced in the ways proposed, buying into a freehold premises and taking on long leases will be a more attractive option for GP Partners. This will lead to more stable partnerships and more investment in the development and construction of new, fit for purpose, medical centres. We also believe this can be done in a way which is at little or no cost to the NHS. With practices under so much pressure, now is the time to act.
If you would like to discuss any particular concerns you may have relating to surgery premises, then please contact Daphne Robertson, info@drsolicitors.com
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Disaster strikes the surgery! Are you sufficiently protected?
In normal times, GP surgeries happily practice out of their premises with no major issues. But what happens if a disaster strikes – maybe in the form of flood, fire or storm damage to your premises? This blog aims to highlight some important matters you should consider to make sure you protect your business from unexpected interruptions.
Understand the risksâ
It is important to ensure that you have adequate insurance and contingency planning in place to deal with the unexpected. If, for example, your premises flood or are damaged by fire, you could be obliged to:
- find and pay for new premises to operate from on a temporary basis;
- repair the structure of the building;
- repair & redecorate the interior of the building;
- replace all damaged contents, including medical supplies, refrigeration units and IT equipment;
- pay for clear up costs.
If you are a tenant of leased premises, you may think that the landlord’s building insurance covers you for some, or all, of the above, but that is rarely the case. Typically, the landlord is only obliged to insure the structure of the building and not your contents. Nor are they under any obligation to provide you with alternative temporary premises. It is, however, likely that the rent you pay to the landlord (for your damaged building) will be temporarily suspended if you cannot occupy the premises.
Perhaps the biggest risk â
It’s not only the immediate costs you incur as a result of a disaster, but a longer term risk to your business. If, for example, you are left unable to carry on providing some or all of your services and find yourself having to cancel certain clinics, you may be at risk of beaching your NHS contract. Under your contract you are obliged to be able to provide services from agreed premises at agreed times. Whilst the commissioner may be sympathetic to your plight, ultimately they will want to understand how you will continue to see patients. If you are unable to satisfactorily explain this, you risk receiving a Breach Notice.
Safeguard your positionâ
Having a disaster recovery plan in place is vital, as it is not easy to think with a clear head during a disaster. Be sure to keep an easily accessible copy of your disaster recovery plan off-site too – it’s no good to you if it’s destroyed by fire – and ensure that all the staff understand what they should do. The disaster recovery plan should cover a variety of different scenarios, but from a premises perspective, you should ideally have an agreed back up location in place, such as temporarily opening in the village hall or sharing a neighbouring surgery.
It may sound obvious, but ensure sufficient insurance is in place. Review the value of your contents cover regularly to ensure it remains adequate, particularly when you purchase a new piece of valuable equipment.
You may want to consider taking out ‘business interruption’ insurance, which could help with the emergency costs and any loss to your business as a result of an unexpected disaster. Speak to your insurance broker to get advice as to what would be appropriate in your particular circumstance. If you don’t have a broker, we would be happy to introduce you to specialist healthcare brokers through our network.
Conclusion
Disasters can be expensive but they don’t have to be catastrophic. Proper planning and protection will help ensure you can continue to deliver services to your patients safely and with minimum disruption.
If the worst happens and your practice does find itself ‘homeless’, then we recommend you take professional advice early on to understand your rights and confirm your responsibilities.
If you would like to discuss anything in this blog, please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com.
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Is the GP Partnership Model past its sell by date?
There is currently much discussion about whether the partnership model for General Practice is still fit for purpose. It is clear that the model is under severe strain, and the Secretary of State has commissioned a review into how it might need to evolve. In this blog we draw on our experience of working with over 1,000 practices to offer our thoughts on the future of the partnership model.
Background & context
In common with other professionals like lawyers and accountants, GPs have traditionally organised their businesses as either sole practitioners or partnerships. The partnership model for General Practice long predates the NHS, and indeed the NHS Act 1948 had surprisingly little impact on the business model as GPs retained their independent contractor status. The GP Partnership model has served the profession well over the years, but it is interesting to compare GP practices with what has happened in the law and accountancy. Most other professionals still organise themselves as partnerships, but they are typically managed very differently to GP partnerships.
Partnerships are simply one of many ways of running a business. Most businesses are actually run as limited liability companies, so why is this much less common in the profession? The answer is that Limited Companies are designed to separate out the ownership from the management, and to provide more flexible options for financing. This is very useful in capital-intensive businesses that require multiple layers of management. The professions, by contrast, sell the skills of highly trained people who are largely able to self manage. Such businesses typically require only low levels of finance, which can be easily secured through mortgages and bank loans. There is therefore no need to separate ownership and capital from management.
Benefits of Partnerships
Partnerships, by their very nature, pool the risks of the business between the partners. This shared risk-taking strongly encourages collaboration. All the professions encourage members to understand their own limitations, and to seek the advice of colleagues when they come across something new or unexpected. This requires the kind of open, trusting relationship which forms naturally in a partnership, but which can be more difficult to forge in a hierarchical employer/employee relationship. This in turn creates an environment where tacit skills are easily transferred. These are the kind of human skills which will never be mastered by Artificial Intelligence, but which form the bedrock of what GPs and other generalist professionals do. Investment in the partnership encourages a long-term commitment, which is of course well aligned to ensuring continuity of patient care. The model is also very flexible: there are very few laws about running partnerships so you are largely free to contract with your partners about how you want to run things, and to change this agreement over time as the needs of the business evolve.
Problems with Partnerships
Unlimited liability is one of the most obvious problems with traditional partnerships. It used to be felt that limiting liability was inappropriate for professionals as it might encourage them to act recklessly. However, this idea evolved as society became more litigious, and limited liability partnerships (LLPs) have been permitted since 2000. Most accountants and solicitors have since become LLPs, but this structure is not currently allowed for NHS GP partnerships. Finance has also become an issue as partnerships take on bigger risks, particularly in the form of long-term leases or larger freeholds. Small partnerships risk becoming unviable when there is concern about becoming ‘the last man standing’ with large financial obligations – particularly when these are unlimited and there are recruitment issues. Lastly, there is a generational question over whether younger professionals actually want to manage themselves anymore, or whether they would rather be ‘managed’ as an employee or locum.
The future
The benefits of the partnership model in a generalist profession are, in our opinion, significant. In many ways they underpin the key cultural values of the professional, but many commentators miss this link and assume an organisation’s values are completely independent of the business vehicle. This is not our view. However, the GP partnership model does need to change. There is no obvious reason why GPs should be prevented from forming LLPs, and larger partnerships would enable practices to better deal with the increased finance and risk in modern general practice. There is undoubtedly a role to play for a variety of business models in primary care, but we believe that an evolved partnership model still has an important role to play. We will be exploring this further in subsequent blogs as we provide our input to the Key Lines of Enquiry of the Partnership Review.
For more information about the GP Partnership Model and any other related topics, please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com
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What pregnancy and maternity rights does a partner have?
A partner is a business owner and employer, which by definition means they are not an employee. As a consequence, partners do not benefit from all the various employment protections afforded to employees. Despite this, we are often asked about partner entitlements, particularly regarding maternity and childcare.
What is the legal position?
Partners do not benefit from statutory maternity and childcare entitlements, although they are protected from being discriminated against by reason of their pregnancy and maternity, gender and marital status under the Equality Act 2012.
Broadly speaking, the Equality Act provides that women should not be subject to “less favourable treatment”, or subject to unreasonable requirements that they cannot meet because of their pregnancy/maternity or childcare commitments.
The majority of the maternity rights for a partner will be set out in their partnership agreement. These will be binding unless they are found to be discriminatory. In the absence of a partnership agreement, there are very few automatic rights that will accrue.
Common Issues
Particular issues where liability under the Equality Act could accrue include:
- Not engaging or promoting someone to Partner because of concerns that they will be absent due to maternity leave, or won’t be able to “pull their weight” because of childcare commitments;
- Not allowing for any maternity leave at all or a very short period only;
- Not allowing a female Partner who has a pregnancy related illness the same sickness absence entitlements as other sick Partners;
- Reducing profit share during maternity leave;
- Not accruing holiday leave during maternity leave;
- Not allowing a partner to work part time or change session times to deal with childcare commitments.
None of the above are entirely clear-cut and would need to be looked at on a case-by-case basis. For example, the Equality Act certainly indicates that holiday leave should accrue in the normal way during some of a partner’s maternity leave, but it is less clear whether this would accrue during the entire period of their absence.
Practices should be aware that they can claim under the SFE for payments to cover locum expenses during maternity, paternity and adoption leave. The common practice is that the absent partner continues to receive profit share whilst the SFE payments are being received. However, if you wish to do this, you will have to ensure that this is set out in your partnership agreement.
Conclusion
This is an area of law that is both complex and uncertain. There is only a limited amount of case law applying specifically to Partners, so each case is likely to be determined on its own merits.
Practices should be very wary of opening themselves to the risk of a discrimination claim, as these have unlimited liability. The best protection is to:
- Ensure that the practice has a clear non-discrimination policy in place which includes discrimination on the grounds of maternity and childcare commitments.
- Make clear that this policy applies to all staff, including partners.
- Ensure that the Partnership Deed is professionally prepared, that it is clear on the subject of maternity and other forms of leave, and that it is kept reasonably current as the law changes. Anything drafted more than 3 years ago may well be out of date with current best practice.
If you have any questions about this or any other matter, please contact Daphne Robertson on 01483 51155 or d.robertson@drsolicitors.com
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What does GDPR mean for GP Practices?
What is GDPR and what does it mean to be compliant?
I am sure that you will all by now be aware of GDPR. GDPR comes into effect on 25th May 2018 and seeks to give individuals more control over how organisations use their data.
GDPR is a European regulation, and automatically becomes law in the UK because of our membership of the European Union. Although Brexit would take us out of the European Union, the current plan is to incorporate all EU law into UK law, so GDPR is almost certainly here to stay.
Confusingly, the UK Parliament is drafting its own data protection law called the Data Protection Act 2018 (DPA 2018). This law will supplement the GDPR and replace the existing 1998 Data Protection Act. The DPA 2018 is still working its way through Parliament so is not finalised. Much of the commentary on ‘GDPR’ combines it with the DPA 2018, and so mixes actual law with a draft bill.
Who does it apply to?
GDPR applies to all individuals and businesses who have responsibility for handling personal data. GP practices are ‘data controllers’ registered with the Information Commissioner (ICO) and are responsible for deciding how and why data is processed.
In our experience, practices have long been familiar with the concepts of data confidentiality, but GDPR requires additional levels of process and control, and forces practices to think about all personal data, not just the confidential health data they hold.
The key to understanding compliance with GDPR is not to see it as a tick-box exercise to be completed by 25th May, but rather as developing and embedding a permanent change of culture, whereby protection of personal data is central to every decision made within the practice. When all staff are able to recognise personal data and make informed decisions about protecting and processing it, and know what to do in the event of a breach, you will be well on the way to compliance.
What can GP practices do to prepare for GDPR?
- If you haven’t found it already there is a very helpful 12 Steps to Take Now and Data Controller Self Assessment Toolkit on the ICO Website. Given that the ICO is the data regulator, they are the best place to start with your preparation.
- It is critical that practices can demonstrate that they have sought to comply. The ICO has been clear that they are looking to see reasonable efforts being made. To do this you will need to have identified, documented and explained the legal basis for all the data flows to and from the practice. This is likely to be a time consuming undertaking and will be difficult to do unless you have a member of staff who is familiar with documenting processes and data flows. Remember that this documentation will have to be kept up-to date, so be careful not to outsource all your understanding of this information audit.
- Data Protection policies and procedures must also be updated. Many practices have historically relied on ‘template’ policies, but these are unlikely to be adequate, as procedures will have to relate to the data flows identified in the information audit.
- Privacy Notices are another important part of GDPR. These must be displayed prominently, which as a minimum is likely to be on the practice website and the noticeboard. Practices should think hard about opportunities to draw patient attention to these Privacy Notices, since one of the key principles underlying GDPR is transparency about how you deal with data. New information which must be added to privacy notices includes how you intend to use data, and the ‘lawful basis’ for what you are doing.
- Be aware that much health data falls under one of the GDPR special categories. In addition to the ‘lawful basis’ that all data controllers must identify, practices need to satisfy a second separate condition that the processing is necessary for the purposes of healthcare.
- Staff training is also an important part of compliance. Practices will need to be able to demonstrate that they have trained all their staff, including Partners, in GDPR and have an ongoing program to ensure that they are kept up to date as the law changes.
- One significant change is that practices can no longer charge patients for access to their medical records except in exceptional circumstances. This may unfortunately increase the administrative workload as patients and others get used to making ‘subject access requests’. The time limit for dealing with these has been reduced from 40 days to one month.
- An interesting example of the current uncertainty is the role of the Data Protection Officer (DPO). Under GDPR, it is not at all clear that practices are required to appoint a DPO. However, the DPA 2018 if enacted in its current draft form would certainly require practices to appoint a DPO.
So what happens if there is a breach and what are the risks of non-compliance?
In the event of a data breach affecting patient’s privacy rights, you must notify the Information Commissioner’s Office (ICO) no later than 72 hours after you become aware of the breach. If the breach is likely to present a high risk to their data, the patient must also be informed. You should have a clearly documented process for managing a data breach. This is another example of how proper documenting of processes and staff training is going to be vital.
Conclusion
It is important that practices take ownership of GDPR themselves. Compliance is not really something that can be outsourced, although there are plenty of commentators looking to profit from it. The ICO have made clear that the world will not end on the 25 May 2018 as they realise this is a journey for all businesses and they want to be supportive rather than punitive, but they will want to see evidence that practices are taking data security seriously throughout the organisation.
If you are concerned about your GDPR readiness, then please give us a call and we would be happy to talk through your plans. In our experience, most local medical committees are also aware of what needs to be done and are able to assist members and share good practices on GDPR.
If you would like to discuss GDPR or any other legal matter, please contact Nils Christiansen on 01483 511555, n.christiansen@drsolicitors.com
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Stamp Duty Land Tax on Surgery Leases
Stamp Duty Land Tax (SDLT) was introduced in December 2003. It is a tax payable on a variety of property transactions, including purchases and transfers of freehold and leasehold land and property.
GP Practices sometimes believe they are exempt from SDLT because of the ‘partnership exemption’. Whilst this may be the case for some transactions, the truth is unfortunately much more complicated.
What types of transaction are liable for SDLT?
SDLT is payable on UK land transactions that have a chargeable consideration – for example, on the purchase price of a property, or when a lease is granted.
For the purposes of SDLT, a chargeable consideration is defined by HMRC as “anything given for the transaction that is money or money’s worth”. When the value of a transaction rises above a certain threshold, the purchaser is liable to pay the tax.
The calculation of SDLT on the grant of a new commercial lease depends on the length of the lease, the premium paid (if any) and the rent payable under the lease. A helpful SDLT calculator can be found on the HMRC website: www.gov.uk/stamp-duty-land-tax/nonresidential-and-mixed-use-rates
Who is responsible for paying SDLT?
It is the responsibility of the purchaser or tenant (upon the granting of a lease) to calculate the amount of tax and complete and submit a Land Transaction Return (SDLT1) to HMRC within 30 days of the effective date of completion of a transaction.
A solicitor can help complete this on behalf of the purchaser or tenant, but legally the purchaser is responsible for the accuracy and timeliness of the information submitted. Failure to submit the Land Transaction Return and/or to pay SDLT on time will result in penalties. Interest is charged on both late paid tax and outstanding penalties.
Joint purchasers, such as a partnership, are jointly liable to pay the tax, although the proportion that each individual partner should pay can be subject to private agreement within the partnership.
Additional points practices should be aware of:
- SDLT regulations for freehold and leasehold properties differ.
- SDLT may be payable on certain changes to the lease. For example, lease renewals have the same SDLT implications as new leases.
- A sale and leaseback would normally trigger two payments of SDLT; one by the purchaser of the surgery and the second by the tenants on completion of their lease. However, you can claim tax relief on the lease element of the transaction if the seller and the tenant are identical. Be aware though that this doesn’t get you off the hook for ever – the SDLT will become due on the first lease assignment.
- If SDLT was paid in full when the lease was originally entered into, it is only payable on the premium element of any lease assignment. As most GP surgery leases are 25 years or less and have no premium value, surgery lease assignments are usually SDLT free.
- Some changes in partnership arrangements may incur SDLT. This is a particularly complicated area, but introducing and withdrawing property from a partnership are both chargeable events, regardless of whether the name on the lease or at the Land Registry changes.
- If an original lease term expires, but the tenant remains in occupation of the premises, it is called holding over. Once the lease runs past its contractual expiry date, it is treated as if the original term of the lease has been extended by one year. If SDLT was paid at the outset of a lease, or if the additional year takes the lease over the SDLT threshold, then a further SDLT return will need to be filed with HMRC and relevant tax paid. This is required for each subsequent year the lease is held over.
If a rent review occurs within the first 5 years of a lease, SDLT should be recalculated using the new rent for the remaining years, and a new submission made to HMRC. This can result in either additional tax to pay, or a refund in the event SDLT has been overpaid.
If you need advice on SDLT payments for your practice or any other matter related to your Surgery building, contact DR Solicitors on 01483 511 555, or email at info@drsolicitors.com.
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Should a GP practice accept gifts and legacies?
Every now and then, a practice might be fortunate enough to be remembered in a patient’s Will or to receive gifts from grateful patients. Research has shown that the proffering of small gifts is relatively common place. Whilst it is obviously nice to be recognised for one’s good work, it does give rise to a number of professional and legal issues.
Professional issues
Good Medical Practice Guidance states that “You must not encourage patients to give, lend or bequeath money or gifts that will directly or indirectly benefit you.” However you “may accept unsolicited gifts from patients or their relatives” provided that it doesn’t affect the treatment you provide.
Whilst this appears to permit the receipt of unsolicited gifts and legacies, there is a big caveat. In each case, you must “also consider the potential damage this could cause to your patients’ trust in you and the public’s trust in the profession. You should refuse gifts or bequests where they could be perceived as an abuse of trust.” This is clearly a judgmental matter which will be easier to balance for a box of chocolates than for a £100k legacy.
Legal issues
The PMS and GMS Regulations are clear that practices must keep a register of gifts from patients or their relatives that have a value of £100 or more. You should record the name, the NHS number or address of the donor, the nature of the gift, its estimated value and the name of the recipient.
The next question which arises is how should the gift or legacy be shared?
To determine the answer to this question, you need to look at both the gift or legacy itself and the partnership deed.
For example, a legacy may be left ‘to the partners at the XXX Surgery’. So has the gift been left to the GP partners individually in equal shares, or left to the partnership to be divided between the partners in their respective profit sharing ratios? Was it intended for the partners in the practice at the time the Will was written, at the time of death or when the legacy is actually received? Alternatively, is it actually intended for the benefit of the patients and therefore shouldn’t be taken as income at all, but rather invested in healthcare within the practice area? Sometimes the intended purpose is clear because the donor has perhaps left a letter of wishes stating how they want the money to be spent or shared. Unfortunately, this is frequently not the case and a large legacy can often be a source of dispute between the partners.
Recommendations
Practices need to be careful about what gifts and legacies they accept and how these are recorded. The larger the gift, the more care needs to be taken.
Remember that this is, at heart, an ethical issue and whatever decision you make, would you be comfortable in justifying it in front of the GMC, or perhaps even a journalist?
For larger gifts and legacies, in addition to recording them in the gift register, we would recommend that you prepare a paper trail setting out your thinking behind the decision you took and any professional advice that you sought.
You would also be well advised to check what your partnership deed has to say about sharing of gifts and legacies to minimise the risk of future partnership disputes.
If you have any queries relating to legacies and gifts, or any other matter, then please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com
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Does your professional indemnity insurance put you in breach of your employment contract?
GP practices and salaried GPs are advised to check the terms of their employment contracts if employed clinical staff are considering taking out “claims made” insurance, such as that recently offered by the MDU.
In a previous blog, we looked at the broader implications of claims-made insurance policies (Will you or your practice be impacted by the MDU policy changes?). However, another potential consequence, which we’ll be focusing on here, is how claims-made policies may inadvertently put salaried GPs in breach of their employment contract.
So, what exactly is the issue and what action should you take?
Current employment contracts
The ‘BMA Model Employment Contract’ states that “The practitioner will maintain full registration with the General Medical Council and membership on an occurrence based basis with a recognised medical defence organisation commensurate with your responsibilities”. (What is the BMA model contract and does it apply to me?)
This point is regarded as so important, that it is repeated in both the BMA model contract and in the BMA model offer letter. It is clear that the BMA negotiators assumed that all salaried GPs would be insured on an occurrence based basis – i.e. a policy that offers protection for any incident which occurs during the policy period, even if the claim is filed after the policy has ended.
Since all GMS practices, and many PMS practices, are required by their provider contracts to engage their salaried GPs on employment contracts that are ‘no less favourable’ than BMA model terms, it is likely that most salaried GP contracts will include a similar clause.
As a consequence, if a salaried GP moves to a claims-made indemnity policy, they may be unwittingly breaching the terms of their employment contract.
Our recommendations
As a first step, we would advise all practices and salaried GPs to look at their employment contracts and Staff Handbook, to see whether there is a requirement for employees to have an occurrence based indemnity policy.
If the requirement is included, practices need to have procedures to ensure compliance. The BMA model contract states that salaried GPs should provide “written proof and evidence of such membership”, so practices would be free to request this.
If there is currently no written requirement, practices should consider whether they are content to allow salaried staff to move to a claims-made contract or not, and employees should consider whether they wish to make the move. This is a question of understanding the risks involved, such as whether the employing practice is exposing itself to more risk by permitting claims made policies. All parties would be well advised to speak to a specialist IFA to fully understand this.
Practices which do not currently require occurrence based policies but wish to do so going forward will need to consider making changes to their employment contracts. We recommend that you always seek appropriate legal guidance before doing this.
If you are at all unsure about any of the issues we have covered here and how they might affect your practice, then please do not hesitate to get in touch.
For more information, please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com
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Cheema vs Jones: The importance of an up-to-date Partnership Deed
Regular readers will understand the importance of keeping your partnership deed up to date. This is particularly true when new partners join, as this can easily supersede and invalidate the former partnership arrangements. A recent High Court case has demonstrated some of the risks.
The case of Cheema vs Jones
In this case, two GPs – who we’ll refer to here as A and B – entered into a partnership to provide medical services under a GMS contract. The terms of this agreement were set out in a Partnership Agreement which was signed in April 2016.
Shortly afterwards, A and B decided to admit doctors C, D and E into an expanded partnership, and it was agreed that this larger partnership would start on 1 July 2016.
Solicitors were instructed to prepare a new partnership agreement. However, before the terms could be finalised a dispute arose between A and B. Matters escalated and when B was prevented from seeing patients and refused access to medical records, B obtained a High Court injunction allowing him back into the surgery.
A, C, D & E then served a Notice on B dissolving the partnership. Their intention was presumably to exclude B, enabling the others to continue the practice without him.
The High Court agreed with A, C, D & E that a Partnership at Will had been created in July 2016, and the April Partnership Agreement was no longer relevant. They were therefore entitled to dissolve it by serving notice on B.
Consequences
Sadly, A, C, D & E’s High Court victory was pyrrhic. By dissolving the partnership they immediately put the GMS contract at risk since this was held by a Partnership which no longer existed. Within weeks the practice had been given notice by NHS England and a temporary contract to ensure continuity of care had been placed with another practice.
Key lessons
- When you are considering admitting a new partner to the practice, make sure you agree the terms of the partnership in advance. This can be either a Deed of Accession to the existing Deed, or by signing a new Partnership Deed.
- Always issue a comprehensive partnership offer letter to prospective new partners. This will set out the key terms of the appointment and help ensure the current partnership deed continues, at least in the interim. For more information see: Why is a partnership offer letter so important?
- Probationary periods are not relevant to the continuation of the ‘old’ partnership. Once a new partner joins, the old partnership arrangements fall away unless there is strong evidence to the contrary.
- It is always very risky to dissolve an NHS medical partnership. The contract and the future of the practice is immediately put at risk. Dissolution is such a draconian step it should normally only be undertaken as a last resort and with very careful contingency planning.
- Having an up-to-date partnership deed is your best protection in the event of a dispute. It can be invalidated in whole or in part for a number of reasons, so you should revisit it on a regular basis. For further information see: The dangers of having an out of date partnership deed
Our recommendations
The Partnership Agreement is a critical document for managing your practice and securing your future. Revisit it regularly, always use a solicitor who is experienced in Primary Care matters, and don’t rely on unregulated ‘advisers’ or borrowed templates.
For all your partnership matters, please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com