NHSPS put itself back in the spotlight recently, by announcing its intention to increase service charges and facilities charges for GP practices who request changes associated with Covid-19. This will undoubtedly add fuel to the many ongoing disputes over demands for increased service charges. The vast majority of our GP clients who occupy NHSPS owned and managed buildings have been living with a stalemate for the last couple of years, which is causing a variety of problems as time marches on.
The DHSC recently published its review into the current state of NHSPS. You can read the summary here and in this blog, we look at what the recommendations might mean for practices occupying NHSPS buildings.
- For readers who have been hoping that NHSPS would just go away, I’m afraid that won’t be happening anytime soon! There was found to be no benefit in divesting NHSPS of its functions, but rather a recommendation that it align itself more closely to the commissioner footprint and work more closely with NHSE. Having your commissioner and your landlord work more closely together could work either way for practices. One possibility would be that NHSE, as the ultimate funder, agrees to pick up a greater share of the disputed costs. Perhaps more likely though, is that NHSPS and NHSE will put increased pressure on practices to ‘pay up’ by turning the tenancy dispute into a GMS/PMS contractual dispute. This is one to watch carefully.
- NHSPS have been told (again) to regularise all their tenancies. This means that the pressure on GP tenants to sign up to leases will continue, but unless there is a resolution to the service charges issues most practices will continue to be reluctant to sign anything.
- The DHSC recommends that NHSPS “must make progress in customer sectors not currently engaged and ensure that agreement of FM-service and specifications, utilities and management charges are also covered”. In other words, the issues around increased service and facilities charges must be sorted out.
Readers may be aware of the ongoing High Court test case brought by the BMA on behalf of 5 GP Practices to challenge the legitimacy of some of the claimed charges. Whilst this has probably temporarily chilled NHSPS’s enthusiasm for chasing ‘arrears’, and some Practices may also have paused the process for reaching agreement on claimed charges pending the outcome of this test case, the case is unlikely to resolve soon.
The problem for practices though, is what to do about the large NHSPS liabilities now sitting on their balance sheets? As partners come and go this liability becomes a larger share of their capital accounts. We are seeing retiring partners ask why should they leave their capital behind for a liability that no-one believes is really owed? Practices should check to ensure that this question is fully addressed in their Partnership Deed, or alternatively create a separate agreement with retiring partners.
- Potentially the most significant recommendation is ‘to explore & implement changes to the funding mechanism where it will not fundamentally undermine the user-pays model, including central funding of management fees, elements of structural and external maintenance and greater use of direct payment of property costs by commissioners’. This suggests that there may be opportunities for doing deals where the commissioner pays some or all of the service charges – both historic and possibly ongoing – as a means of breaking the deadlock.
Whilst the offer of somebody discharging your historic service charge liability (and possibly some of the future costs) might be tempting, it is likely that it will come with the strings attached including that you sign up to a new lease. We are very wary of the small print on this one!
So, has our advice to affected clients changed? In short, no. Practices should normally only sign up to a new lease once they are happy with the terms and once any historic service charge issues have been resolved. Even then, Practices need to understand their current legal position as regards their occupation of the premises before being able to make an informed decision about what does and does not constitute a ‘good deal’. This is a complex area and one with lasting financial implications for the sustainability of the practice.
When you are ready to start negotiating with NHSPS we strongly advise you seek specialist legal advice, but in the meantime, practices should agree and document how they will deal with the claimed service charge liabilities as the partnership changes over time.
We have a team of specialist property and partnership solicitors who all have deep expertise in advising primary care professionals on their premises issues. If you would like to speak to one of the team, please call Bethan Dodd on 01483 511555 or email firstname.lastname@example.org