Lease regularisation

Many of the occupations we inherited from the former primary care trusts were on a casual basis and this programme will ensure we have documented lease agreements for the space occupied.

 

This documentation will ensure that NHS Property Services and our occupiers have the same understanding of the space they occupy and the services we provide to them, in line with professional property norms. Documentation will enable us to achieve efficient management, transparent billing and strategic investment. It also provides a platform for planning future needs, so that we can help tenants manage space better, deliver services in a different way or identify extra services that might be needed.

The information below explains the changes that we will be agreeing, one by one, with our occupiers.

Q: What do you mean when you say you are documenting occupations?

Many of the properties we inherited from primary care trusts and strategic health authorities had been occupied on a casual basis and it is quite certain that the NHS had been paying for unused space and services. We will now ensure there are documented lease agreements for the space occupied and facilities management services provided for each occupier.

Q: Why are you putting documentation in place? The primary care estate hasn’t needed it before, has it?

It is not standard practice within the property industry for occupations to remain on a casual basis. Professional management of a national property estate relies on clear rights and responsibilities.

Combining 161 landowners into one has given us a chance the NHS never had before to manage property in a consistent and efficient way, taking advantage of a concentration of professional expertise, increased buying power and economies of scale.

Q: Will it make a difference to me if my occupation is documented?

With leases in place, both tenant and landlord have a clear understanding of what space the tenant occupies and which FM services are provided. By linking this information to our finance systems, we can give a fuller breakdown of costs in our invoices, so you know exactly what you are paying for.

Documentation should give you more certainty about having everything you need to provide your services. What accommodation do you occupy – including access, shared and common areas? How long do your rights last? How much does your occupation cost; how much can you expect to pay in coming years; how are costs calculated; and what are the rules by which rent can be changed? What services can you expect from your landlord under the service charge of the lease? Under what circumstances can you sublet or share space or assign your rights to a third party?

Clear documentation also provides tenant and landlord with a platform for planning future needs, to manage space better and identify extra services that might be needed or delivered in a different way.

Q: Is this a voluntary process for occupiers of your buildings?

No, it is essential that all of our occupiers and customers have consistent documentation in place. We understand that this formal approach is very different from what many of our occupiers have known in the past. It’s important they understand that in the first instance we are only documenting the space they currently occupy and the services they currently receive, and that any changes will only be made with their involvement and agreement.

Q: Will patients notice any difference?

Documentation will make transparent for the first time the actual cost of running the estate of around 7,000 occupancies. There will certainly be savings – without any detriment to patient care – and we will be able to make more informed decisions about effective and efficient ways to deliver patient care. Patients will benefit as more money is freed up within the system.

Q: If I already have a lease or a license, am I affected?

We are focused on undocumented occupations. Existing leases will be upheld until the end of their term. Where less formal documentation is in place – such as a memorandum of occupation – we might seek to replace it in the future, but not until undocumented occupations have been addressed.

Q: What does the process involve? Is it just lawyers putting things in writing?

There’s a lot of work to be done to get this right. We need to:

  • Survey all buildings and prepare accurate, consistent floor plans where these do not already exist.
  • Verify all information held about individual properties and store it in a consistent way.
  • Reach agreement on space occupied or used and the basic terms on which it is occupied, such as the appropriate level of rent and the length of a tenancy.
  • Agree the terms of a lease and get it signed by all parties.
  • At a later stage, reach agreement over the facilities management services delivered for each occupation and the cost of those services.

Q: Do I need to do anything to set this in motion?

No, you will be contacted by one of our regional teams outlining the process. You will then be liaising with a local asset manager to agree the space you use and the basic terms.

Q: What are the timescales?

This is a long process. We have over 4,000 undocumented occupations to cover and are tackling them in phases. We started in December 2014 and are currently on course to finish around the end of June 2017.

Q: How will this affect what I am currently paying NHS Property Services?

Commercial tenants (those without NHS contracts) will be charged on the basis of market rent. All other tenants will continue to be charged on a cost recovery basis, subject to a right for the landlord to initiate a review authorised by the Department of Health.

Rents will be assessed by independent valuers and will not necessarily be any more expensive than cost recovery.

Q: When will I know what I am being asked to pay?

That will be an important part of the discussion when an asset manager contacts you. You will have no unexpected invoices.

Q: Are you liaising with commissioners so they understand what I am being asked to pay?

Yes, we are meeting with commissioners to ensure that they understand the process and that they also have a chance to benefit from the transparency that this process produces. They are likely to be glad of a chance to make more informed decisions about investment and about the delivery of services.

Q: Who else have you consulted on the approach you are taking?

This process was initiated and shaped by the Department of Health and by NHS England. Where GPs are concerned, we are negotiating the terms of a standardised lease with the BMA.

Q: If I have been paying more than I should have been paying, will I get a refund?

No, we will not be revisiting past agreements, whether formal or informal, but this is an understandable question and does show the potential benefits for occupiers in engaging with this process.

Q: Is NHS Property Services going to charge me a management fee?

We will be recovering the costs of providing services to the common areas of the building through a service charge. In accordance with the RICS Service Charge Code of Practice, this will include the costs of management of the property, but not the cost of collecting rents.

Q: Will I need to instruct a solicitor to act on my behalf?

Yes, you will need to take legal advice on this process.

Q: Who will be paying my legal costs?

You will pay your own legal costs.

Q: CHP also has an interest in my building and is talking about a similar process of ‘regularising tenancies’. Will both organisations want to put documents in place?

No, only one of us will be subletting to you and it will be that organisation that documents your occupation. As a rule, it will not be necessary for us to contact tenants of CHP.

Q: Will my lease be tailored to my circumstances?

There will be a set of standard leases, with different versions depending on whether we have a freehold or leasehold interest in the property, whether the occupation is of the whole or part only of the property and depending on the type of occupier: GP, commercial or NHS provider. In this way, the terms will be tailored to the circumstances of occupiers.

We are looking to achieve consistency across our national estate and will not be tailoring terms to individual occupiers any further than is absolutely necessary to fit their circumstances.

Q: Will a service charge schedule be agreed at the same time as the lease itself?

We will be putting service charge schedules in place, but not necessarily at the same time as we agree the other terms of the lease. We are in the process of rationalising facilities management services and will not be able to pass on the benefits of streamlined services and lower costs until the rationalisation process is complete.

Q: Is VAT charged on rent and service charges?

The vast majority of the properties we own are not elected to VAT and our current policy is to maintain this status. For these properties, VAT is not chargeable on rent. However, service charges will be inclusive of irrecoverable VAT.

Where we hold a property by virtue of a lease and our landlord has elected the property to VAT, we will need to pass the cost of irrecoverable VAT on rent through to tenants. However, in this instance, there should be no irrecoverable VAT within the landlord’s service charge.

VAT is already reflected in the cost recovery rent we charge on properties, so VAT will not be a new cost to tenants.

GPs will be able to recover VAT on rent under the reimbursement scheme, as described in the Premises Costs Direction 2013.

Q: What if the area we occupy in the building does not match the area on the plan provided by NHS Property Services?

That should not happen in most cases, where a new plan is drawn up after an inspection of the property and a discussion with you. You will have an opportunity to agree with us the area you occupy and that will be reflected in the plan that is agreed and eventually attached to your lease. It is an intention of this programme that your tenancy reflects your actual use of space, so we will be keen to establish that accurately with you.

Q: If there is an empty space within the building will we have to pay for it?

It is an intention of this programme that the NHS no longer pays for unused or wasted space. That said, we cannot generalise about which of the many parties involved – landlord, tenants or commissioners – will be responsible in each case.

Q: If I have any queries, who should I contact?

Once the team comes to your property, you will be given a clear set of contacts. If you have any queries in the meantime, you are very welcome to get in touch with your local property manager – you can find the contact details for your site in the Our Properties section of our website at http://our.property.nhs.uk/