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Finance diary, October: Managing the costs of renting part of a health centre

The transfer of PCT-owned surgeries to NHS Property Services (PropCo) revealed many practices lacked formal paperwork for their NHS premises. In sorting out leases, service charges are one of the primary concerns for GP partners, particularly where a practice is not the sole occupant.

Typically the service charge covers heating and lighting, cleaning, repairs and maintenance and sometimes the telephones. There are generally two fundamental questions: how are the costs shared and can you reduce them?

Share costs between tenants

If there is uncertainty about how the costs are shared, establish the proportion of a building each tenant occupies. Ask a surveyor to help – although you can expect that all the tenants will want to discuss the methodology, and will dispute the results if it increases their costs.

Once the building is measured and the costs are accurately shared, the amount a practice pays may be lower. But at the same time, you may face higher costs than previously estimated. You will probably not be able to negotiate reductions on future costs, since the landlord will expect each tenant to pay their fair share. If, however, the landlord is seeking to make retrospective charges you should negotiate to write off arrears you do not consider yourselves liable for.

Reduce your costs

In a multi-occupant building, usually no-one has a strong interest in negotiating a good deal with an energy company, or ensuring the heating system is used efficiently. So practices can find the heating running when they don’t need it.

Repair and maintenance costs are the other big issue. Maintenance work will normally be carried out by a contractor who will charge for everything. A typical example might be a charge of £85 to change a tap washer, since it includes a call-out charge. The landlord will want the building maintained, but if tenants can ensure that is done the landlord should not object to them managing some elements of the work themselves, and the heating system – for instance, by employing a regular handyman.

Bob Senior is chair of the Association of Independent Specialist Medical Accountants and head of medical services at RSM Tenon