How can practices challenge unfair hikes in premises service fees?
Lawyer Edwina Farrell looks at what legal actions practices can take if they face hikes in their premises services charges under changes to their leasing arrangements with NHS Property Services.
What legal options do practices have?
There is no one-size-fits-all fix for the lease and service charge challenges currently faced by many GP practices. Historical arrangements will dictate what a practice can demand at law, and the extent of the property for which they are responsible.
For those practices that have never paid any rent or service charge, it may prove difficult to argue any real rights to remain in a property. It is highly likely that their occupation is based on a bare permission or license, so their right to remain is minimal. Practices need to check their records carefully to establish whether rent payments were made on their behalf under the PCT, NHS England or latterly CCG accounting processes. Rent should have been paid to the landlord if it has been reimbursed under the Premises Costs Directions.
However, statute can offer protection for business tenants. Most practices should be able to prove previous rental payments and exclusive possession of the space from which they operate. Those that can will be able to demonstrate implied tenancies through historical agreements, putting them in a stronger position to resist many of the fresh proposals from NHS Property Services (NHSPS). They could use the statutory process and turn to the courts to grant them a secure lease on many of the terms previously enjoyed, although it is likely they will need to agree the length of that lease with NHSPS.
Such a route can be costly for everyone involved if it ends up in a full court hearing. It is likely that the parties would move to resolve any dispute before it reached the courtroom.
What else can the hardest hit practices do?
A large number of practices that have never paid service charge, or only relatively small sums in respect of services, yet are now facing significantly higher bills. In some instances, practices are also facing charges for unbilled historical service delivery.
The NHS estates arm is being tasked to operate more commercially than previously, but the onus is on them to demonstrate that they have the right to charge the sums they are seeking to recover from practices.
Due to variation in how occupation has been documented nationally, it is possible that some practices might successfully argue that elements of the charge NHSPS is now seeking to recover are not recoverable. Practices need to undertake a review of any previous payments and course of dealings. While nothing is ever guaranteed when it comes to litigation, some practices may be able to successfully defend any action against them to pay some elements of the historical charges.
What parts of the increased charges are reimbursable?
At the time of writing, a contractor who is a tenant is entitled to the reimbursement of an NHS approved rent under the 2013 Premises Directions. Although the expected publication of amended Directions was put on hold ahead of the General Election, the reality is that any suggestion that reimbursement will be abolished would be met with uproar. Different contracting models in the future may, however, look at reimbursement.
By contrast, service charges are seldom reimbursable or capped, and come straight out of the practices’ pockets and profits. This is why the substantial increases have caused such alarm at a national level.
Can NHS England force practices to sign a formal lease?
Ultimately the freehold (or superior leasehold) interest of the premises are the property of NHS Property Services and there are instances where the organisation would, at law, be entitled to take possession of its premises. However, such a course of action would not be without significant damage to the ability of a commissioner to ensure general practice was able to operate and deliver quality primary care services. It also makes no financial sense for it to risk leaving its buildings to stand unoccupied.
A softer approach might be to offer occupiers more incentives and deals, based entirely on historical occupation, and negotiating future service charge costs that reflect the importance of GPs’ public service and their pivotal role within the NHS.
Edwina Farrell is a partner specialising in NHS GP property and partnership matters at Weightmans LLP