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The evolving real estate of primary care - Gateley Plc

Providing high standard real estate premises from which primary care can be effectively and efficiently delivered remains one of the key challenges for the NHS and the Clinical Commissioning Groups (CCGs). It is estimated that 90%1 of all patient contact with the NHS takes place with GPs so, for patients, the local health centre or GP surgery is the face of the NHS. The type of premises, and therefore the legal framework behind those premises, has changed significantly over the last 70 years of the NHS’s existence. When the NHS was founded in 1948 most GPs operated from home. It was originally intended to rehouse GPs in medical centres but this proved unaffordable. It was not until new GP contracts were introduced in the late 1960s that modern purpose built premises came into existence. This was supported by the ‘cost rent’ scheme which allowed GPs to invest and borrow money to fund premises development which was then amortised and reimbursed by the NHS as ‘rent’. From a legal perspective GPs were still owner occupiers but they now had to deal with borrowing money and being responsible for developing their own premises.

Subsequently, in the 1990s, other GP contracts and NHS capital investment came into play allowing GPs to engage third party developers and private landlords to procure new purpose built health centres. These often involved sale and lease back arrangements whereby the GP partnership sold their existing out dated premises to the developer who, in turn, built a new centre on the site with the GPs taking a lease back at an agreed market rent. The back bone of this arrangement was the rental reimbursement that the GPs were entitled to under their GMS and PMS contracts governed by the Premises Cost Directions. Clearly, the legal implications of a sale and lease back arrangement are complex, but when done successfully, it allowed for the development of high quality medical centres with the development risk being placed on a third party, rather than the GPs. The key for the third party developer was that the lease back to the GPs was regarded as ‘institutionally’ acceptable as an investment because it was perceived as being underwritten by the Department of Health. This also followed a trend of GPs moving away from being owner occupiers to being tenants of NHS bodies or private landlords.

More recently, there have been improvements and extensions to premises through funding from the Primary Care Transformation Fund, with a move to expand the range of services provided in primary care centres. It is clear that over the 70 years of the NHS’s existence, the legal framework behind the primary care real estate assets has had to evolve alongside the changing premises. Although it is estimated that 55% of primary care premises are still owned by GPs, as they have begun to move away from owning premises to leasing new modern purpose built accommodation, the complexities of landlord and tenant law have become more relevant.

It is probably no surprise that many GP practices have no formal written lease governing the occupation of the practice premises, despite the fact that rent is being paid to a landlord. This can cause problems for claiming rental reimbursement but the process of trying to write down informal arrangements that have been in place for many years, often involving former and current partners whose interests may no longer be aligned, can be a fraught exercise. Even where the landlord is NHS Property Services Limited the expectations on all sides can create tensions. Consequently, a template form of GP lease has evolved2 which is intended to assist in the negotiations by already addressing many of the usual issues. Like any legal document, it still requires careful navigation though and service charge arrangements, (which tend not to be reimbursed to GPs), remain contentious.

In the 2014 Five Year Forward View it was stated that the future of the NHS “no longer sees expertise locked into often outdated buildings”. In Scotland the latest changes are intended to achieve this objective by taking the primary care premises out of the ownership of GP partnerships and putting it in the control of Health Boards. This potentially means the Health Boards buying premises off GPs; taking assignments of existing leases and taking on any new leases granted by private landlords.

The very diverse nature of the primary care real estate is a result of historical arrangements with GPs. Prior to the NHS being born GPs were private professionals and largely remain as private contractors to the NHS rather than employees. The primary care real estate has therefore historically been in the control and ownership of GPs. The legal framework for those GP owned assets remains a mixture of partnerships owning their premises with notional rent and GPs who are tenants with rental reimbursement. The future, certainly in Scotland, seems to be to remove some of the challenges associated with GP ownership, by moving towards a model where fewer GPs own the premises directly and the NHS bodies take control and responsibility for the primary care real estate assets.
1 NHS England - Tranforming primary care in London
2 Negotiated between NHS Property Serices Limited and the BMA

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