The amount of service charge levied against GP practices has been a cause of real concern to GP partners and can, in some cases, threaten the viability of a practice. While the recently settled case of Valley View Health Centre v NHS Property Services Ltd highlights the complexity of the issues at play, it fails to provide one-size-fits-all guidance.
What Valley View does demonstrate is that NHS Property Services (NHSPS) cannot simply apply their Consolidated Charging Policy without question. This means that each practice’s service charge needs to be considered on its own merits.
NHSPS’s approach to service charge
NHSPS implemented the Consolidated Charging Policy to achieve market service charge rates and recover all property costs from tenants. This blanket policy does not reflect rights that GP partners have as tenants within landlord and tenant law. Furthermore, NHSPS were shown in the Valley View case to be unable to prove the costs had actually been incurred for the specific practices.
Are these charges justified?
Valley View and the subsequent settlement agreements demonstrate that, when put under legal scrutiny, NHSPS will not always be able to justify the service charge sums claimed.
For example, one assumption of the Charging Policy is that service charge should include a separate management charge set at a blanket 5% of the rent. The Charging Policy broadly justifies the charge as “reflecting the work done by NHSPS.” While it is likely some management fees are recoverable, like with all aspects of a service charge, the calculating mechanism will need to be determined on a case-by-case basis.
What should GP practices do?
While it is sensible to query NHSPS charges the myriad issues (including legal issues) sitting behind the charges can be complex.
It was recommended in Valley View that GP practices should be proactive and establish their particular case to NHSPS. The British Medical Association guidance now also encourages engaging proactively with NHSPS.
Where there are several years of alleged service charge arrears in dispute, the savings to a practice can be substantial – with one settlement agreement reportedly achieving an 80% reduction in sums demanded.
A note of caution
If your GP practice has paid nothing to date it is possible that some backdated service charges may become payable once you are able to reach an agreement with NHSPS. It would therefore be sensible to make provision for this within your practice accounts.
This blog was written with the support of Justine Rae, trainee solicitor.
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