The NHSPS and consolidated charging policy
In 2013, the premises of around 3,600 NHS premises in England were transferred to NHSPS (NHS Property Services). NHSPS is a DHSC (Department of Health and Social Care) owned company with the Secretary of State as sole shareholder. In 2016, NHSPS implemented its Consolidated Charging Policy ('the Policy'). The stated aim of this Policy is to levy charges against surgeries for rent, maintenance and service charges on the basis of recovering all costs.
In the years that followed, the BMA received hundreds of reports from practices that believed NHSPS was charging them unjustly (i.e., not in accordance with their existing contractual terms) and for much higher levels than that charged by NHSPS’ predecessors.
The recent court case
We successfully supported five GP practices in legal proceedings against NHSPS to get clarification of the basis on which NHSPS calculates service charges. The case and subsequent settlements resulted in significant reductions in the amount of debt NHSPS sought to reclaim from the practices involved.
After a lengthy court case and subsequent settlement process, the BMA has successfully assisted the five GP Practices in reducing the quantum of service charge claims demanded by NHSPS.
These practices have had to pay significantly less than what was being claimed by NHSPS with one practice seeing NHSPS’ claim against them reduced by more than £400,000 - a reduction of more than 80%.
For the period between 2013/14 and 2019/20, the BMA assisted the five practices in reaching a settlement with NHSPS. This settlement secured reductions ranging from £25,000 to over £400,000 on the amounts claimed by NHSPS and a total reduction of more than £750,000.
The considerable reductions achieved by these practices that challenged their service charge claims underlines the importance of querying service charge demands that appear disproportionate or unrepresentative to the services practices receive.
Practices should take care when interpreting the results of these settlements and directly applying them to their own circumstances, as these are not test cases. As noted throughout this guidance, each tenant’s obligations will turn on their specific context and occupancy arrangements.
Why we supported legal action against NHSPS
For some years, BMA members have been raising concerns about the basis on which NHSPS was issuing charges to practices and the increasing amounts NHSPS was seeking to recover.
Crucially, these practices had been informed that they were required to make payments to NHSPS in accordance with the Consolidated Charging Policy. These charges have reached a magnitude to make some practices unviable. We have heard from many partners who are reluctantly contemplating handing their GMS (General Medical Service)/PMS (Personal Medical Service) contracts back as a result. Underlying this were additional concerns about NHSPS’ business practices. Specifically, there were concerns about NHSPS’ inability to provide a coherent explanation to GP practices about what they owed NHSPS and the legal basis for the demands and invoices it was issuing.
Five practices, with support from the BMA, chose to take legal action against NHSPS. This was initially in pursuit of declarations from the court that the introduction of the Policy did not automatically change or ‘vary’ the terms of the practices’ occupation including the amount they must pay in service charges.
The aim of our legal action
The purpose of getting declarations from court was to clarify that NHSPS could not rely on the Policy alone to change the practices’ legal obligations; that instead, the practices’ obligations arise from their existing terms of occupation and changes must be provided for under those terms or otherwise mutually agreed between the practices and NHSPS. The purpose of the litigation was to deter NHSPS from its bullish strategy of demanding increases from practices (sometimes under threat of legal action against the practice) without adequately establishing or explaining the legal basis for those increases. The case began at the outset of 2020. In June 2020 when NHSPS filed its response at court, it conceded that the policy had not been incorporated into, or retrospectively varied, the tenancies and existing service charge obligations of the five practices. At the same time, NHSPS counterclaimed against the five practices claiming arrears of service charges.
This escalated the legal proceedings into a major commercial lawsuit in the middle of the global pandemic. This was just as practices were working hard to roll out the national vaccination programme. We were disappointed that NHSPS decided to escalate the process rather than focus on the narrow issue of the Policy. NHSPS’ decision to sue these five practices created huge amounts of work for the five practices, causing enormous stress to the practice partners and staff involved. NHSPS’ decision to drag the five practices through protracted legal proceedings during a period of national crisis was shocking to both the BMA and the five practices involved.
Just over a month before the final hearing, the court decided that the proceedings would be split into 2 hearings. The first hearing would deal with the principles of what services NHSPS can charge each of the practices for, and the second hearing would deal with the specific amounts due to be paid by the practices.
Handed down on 8 June 2022, the judgment on the first hearing deals with the principal elements of NHSPS’ counterclaims (i.e., what are the terms of these five tenancies?). In the ruling, the judge found that each of the five practices are liable to pay NHSPS its reasonable costs for providing the services on the basis that each have agreed or implied terms of occupation.
The second hearing was to focus on the specific amount owed to NHSPS by each practice. After repeatedly failing to disclose evidence to back up its claims in accordance with the court timetable, NHSPS significantly amended its claims at the eleventh hour. In one of the five cases NHSPS reduced the amount it was claiming by 34%, amounting to a deduction of over £178,000.
NHSPS’ inability to disclose evidence to back up its original claims in a timely way and its last-minute changes to its claims suggests that it launched its claims against these practices without having first clearly identified what services it had in fact provided the practices and how much it was entitled to charge for these.
The BMA remains concerned that NHSPS sought to bring these claims in circumstances where it was unable to readily evidence its claims and had mistakenly overvalued the debt owed by three of the practices by over £235,000. It reinforced both our concerns that some of NHSPS’ demands of practices may be inflated and the BMA’s advice to practices that they cannot always accept those demands at face value.
At the very least, this called into question the reliability of NHSPS’ ability to calculate what these five and other tenant practices owe NHSPS.
What this means for NHSPS tenants
The length and complexity of the judgment shows the difficulties facing practices in trying to navigate changes NHSPS is making to its approach to service charges. The judge in this case avoided setting precedents for the wider system. Instead, he emphasised that the basis and amount owed by practices must be determined on a case-by-case basis.
NHSPS admitted in these claims that it cannot rely solely on the policy when charging practices. Instead, NHSPS must have regard to the individual facts and circumstances of the practice concerned. This includes written and unwritten occupancy arrangements.
Despite this, the judge determined that NHSPS had remained committed to ‘the Policy’ and has sought to implement the policy in practice in both documented and undocumented tenancies.
NHSPS has been asked time and again to produce information and documentation to support the invoices it supplies to practices. It was only after years of legal action that NHSPS did this for these five practices. When NHSPS did finally provide the documentation, it had to amend its claims as it no longer relied on the majority of the disputed invoices it had issued to the practices since 2014.
If this information been provided at the beginning, the practices would have been able to better understand the service charges levied against them. This may have made for a more constructive dialogue with NHSPS and avoided the need for costly legal action. NHSPS will need to provide a similar level of information to all its other tenants where the accuracy of historic invoices are in dispute.
We have always advised practices to engage constructively with NHSPS. Practices should seek their own advice on their position and put their particular case to NHSPS on what they believe is or is not, recoverable by way of service charges. Amounts in dispute should be raised with NHSPS. NHSPS should then respond and confirm the basis on which each item is being charged to each practice specifically. NHSPS should also demonstrate that these services have actually been provided and, in the absence of any contrasting terms in the tenancy, to a required standard and at a reasonable cost.
You and your practice may enter into discussions in good faith with NHSPS in an attempt to find mutually agreeable terms of occupancy going forward. You should be mindful that any agreements do not jeopardise your existing legal rights and do not put future sustainability of the practices at risk. As in every case, we encourage you to seek independent legal advice before agreeing to anything.
Practices should only make payments if they agree with the legal basis upon which NHSPS have claimed the charges are due and agree they are accurate.
NHSPS has conceded in court that its Consolidated Charging Policy (the Policy) had not been incorporated into, or retrospectively varied, the tenancies and existing service charge obligations of practices. Read our guidance on service charges for more detail.
The BMA GPs committee will stand with you where NHSPS enforces these charges despite there being no legal basis to do so.
We have been working to reach an agreement nationally. We are prepared to consider all options to reach a fair process for calculating service charges. The process should take into account previous arrangements and not result in practices having to fund the historic neglect of buildings owned by NHSPS.
Key issues for NHSPS practices
- It is vital that you do not sign any lease or Heads of Terms (including those based on the national template GP lease) until you fully understand and are comfortable with your liabilities.
- Appropriate due diligence as to your potential liabilities should be carried out.
- Care should be taken on the issue of service charges so as to avoid a situation where there is an exposure to uncapped and unreasonable costs.
Some practices have been invited by NHSPS to sign facilities management service level agreements (SLAs) and/or similar documents badged as 'charters'.
NHSPS have stated that these documents are designed to set out, among other related matters, the services that will be received by the practice. They are not intended to be legally binding agreements, but caution needs to be exercised because once agreed these documents could affect the terms of your tenancy.
While clarity by NHS PS is welcomed, information on services and facilities management should not be considered or agreed in isolation.
Any agreement regarding service provision must only be signed with due consideration of the existing tenancy arrangements, whether written leases or implied tenancy, and only in conjunction with the costs associated with such services.
Care should be taken to avoid the issue of agreeing services independently from the cost of those services and without any regard to the existing terms of the tenancy.
Some transitional arrangements are being offered to either:
- cover increased costs that NHSPS charge
- act as an incentive for practices to sign a new lease.
Agreements for transitional funding should only be entered into where you are entirely satisfied that when the transitional period ends, you will not be left having to meet increased costs.
In the BMA’s view, transitional arrangements are not the solution.
There are many reasons for which practices may dispute what NHSPS asserts that it is owed. There are many examples of overcharging, charging for services that were not delivered, delivered to an unacceptable quality, or where these services were unnecessary or unrequested.
Any amounts that are disputed should first be raised with NHSPS with the basis for disputing them. If they disagree, NHSPS should explain the charges by reference to what they say are the terms of occupation. In some cases, parties may be able to come to an agreement about what is owed and plot a way forward.
The legal case has served to demonstrate the problems NHSPS has in terms of managing its methods of calculating charges and record keeping. It took the better part of two years for NHSPS to work out what it believes is owed by the mere five practices in this case. What they actually owe may yet have to be determined by a judge after a further lengthy court hearing. Unless NHSPS takes a more cooperative approach to sharing information relating to the specific charges, we do not expect other practices to have their disputes quickly resolved. Practices cannot be expected to pay for services where neither party has a record of them being delivered, or where NHSPS have failed to set out the legal basis upon which they are claimed.
The significant reduction in the size of claims made by NHSPS clearly proves that NHSPS was unable to justify them when put under the scrutiny associated with the legal process. It also proves what practices have been saying all along – that NHSPS cannot prove all of its charges when questioned by practices. Without the BMA’s support to these practices and without the subsequent legal action, these practices could have paid charges well in excess of what NHSPS could justify and what practices are lawfully required to pay.
It is entirely possible that some practices might have paid charges to NHSPS or might be pursued for charges by NHSPS that it is unable to substantiate. Practices should ask NHSPS to provide evidence for all the charges that it is claiming which they do not understand, otherwise they might end up paying charges that NHSPS is not legally entitled to. In some cases, practices might even be due a refund for charges that have been paid but which cannot be substantiated by NHSPS.
NHSPS have confirmed that, subject to the terms of occupation, it would be willing for practices to contract other suppliers for services. Practices intending to do this should inform NHSPS before doing so to avoid incurring charges for unwanted services. NHSPS are likely to ask practices to enter into a service agreement to clearly document the provision of services and who is responsible for what. Practices should seek independent legal advice on any such document.
It is not generally necessary to agree a written lease with NHSPS. You can continue to operate under the occupancy arrangements you already have in place. NHSPS could initiate formal lease renewal proceedings requesting a written lease by serving a Section 25 Notice (Landlord & Tenant Act 1954), but are yet to do so with any practice that we are aware of.
Although written leases should not be agreed under duress, there are some advantages to signing leases. They serve as a useful opportunity for practices to negotiate and agree occupancy arrangements. This can provide contractual clarity, certainty of expenditure and help to avoid disputes in future.
The BMA has not agreed a standard or template lease. Each tenancy is an individual contract and practices should seek independent legal advice before signing a lease with their landlord.
Practices should not be forced into signing a lease or any other document that jeopardises their existing legal protections or put their future sustainability at risk.
The court ruled that for each of the five practices, NHSPS can charge some management costs. The exact figure or percentage of management fees to be paid will be determined at the second hearing of the cases. However as noted elsewhere, the outcome of these cases is specific to the 5 practices circumstances and other practices’ obligations will vary.
In a related development, in August 2021 NHSEI (NHS England and NHS Improvement) issued a policy note setting out its expectations regarding the charging and payment of NHSPS fees. It outlines that management fees charged by NHSPS and CHP (Community Health Partnerships) should be reimbursed by the commissioner.
Both CHP and NHSPS charge a management fee for certain reimbursable costs; where these are being charged, these should also be included in the reimbursable amount paid by the commissioner and it is therefore important that these costs are fully agreed and understood before agreeing terms.NHSEI Policy note
This outcome should give hope of a fair resolution to the other NHSPS tenants struggling with rising service charges and resulting disputes. We will continue to work with NHSPS and other stakeholders to find a fair resolution for its tenants, and will continue to update this guidance as these discussions progress.