Estates acquisition opportunity for NHS providers

In order to set the scene, we first need to go back to 2013 and the wholesale transfer of NHS estate from primary care trusts and strategic health authorities to the then recently created NHS Property Services Limited and, for LIFT properties, Community Health Partnerships Limited (the NHS property companies).

The default position was that properties transferred to the two dedicated property companies, but there were also some transfers to providers (including the ex PCT provider arms) where the Trusts in question requested the transfers and could demonstrate they were providing services from at least 50 per cent of the estate in question.

Estates guidance supports collaborative approach to planning clinical provision in local areas

The department has recognised that in some circumstances, the transfer of property currently held by the NHS property companies to NHS trusts and foundation trusts may assist a collaborative approach to planning clinical provision in a local area. In essence, this is a second chance for those Trusts that missed out on the opportunity in 2013.

The guidance issued by DHSC sets out the basis on which applications can be made and the criteria by which applications will be assessed.

While this may represent an opportunity for Trusts to take control of property assets at a local level, Trusts should note the conditions that will be attached to any transfers including:

1. Transfers will be made at the Net Book Value shown in NHS property company’s books.  DHSC states that more detailed guidance regarding the accounting treatment will be issued shortly.
2. Transfers will be subject to existing occupancies including any undocumented arrangements.  Trusts will be responsible for any existing rent arrears or other outstanding debts.
3. The properties will be transferred in their current condition with the Trust taking on responsibility for any backlog maintenance.
4. All other existing liabilities and contracts relating to the property will also pass to the Trust.

Trusts will therefore need to undertake adequate due diligence on the properties before a property is transferred.

Finally, what if the property becomes surplus to requirements in the future? 

The Transfer Schemes include conditions on the transfers of the land with provisions for the property to be offered back to the Secretary of State (or to the relevant NHS property company as his nominee) in the event the property ceased to be used for the provision of healthcare services, or were to be sold by the Trust. If the property was not transferred back, any subsequent sale by the Trust would be subject to overage provisions with a share of any profit above net book value being paid back to the Secretary of State.

Unlike the conditions attached to the Transfer Schemes, the DHSC guidance makes no reference to properties having to be offered back, but an overage payable to the relevant NHS property company based on 50 per cent of any uplift in value is to be imposed. 

There are a number of points in the guidance that Trusts need to consider:

1. There is no indexation so, unless the Trust gets agreement in advance, the NHS property company will also get:
   1. 50 per cent of the benefit of any property inflation during the Trust’s ownership.
   2. Any uplift due to improvements carried out by the Trust.
2. The overage is going to be secured by a Restriction on the Trust’s Land Registry title (as with the Transfer Scheme properties) but also a legal charge, which is less usual in arrangements between members of the NHS family. Trusts will want to ensure that mortgagee consent is not required for short term lettings, for example, as this will lead to an administrative burden for both the Trust and the NHS property companies.