There is currently a concerted effort by various NHS landlord organisations to formalise existing undocumented occupations. This will be helpful for both land owners and occupiers.
If you are a landlord the benefits of documenting any arrangements with occupiers in your property include:
- Certainty over who is responsible for what (repair, insurance, outgoings etc.). This is a particular concern in the area of health and safety where uncertainty can result in both parties leaving necessary actions to the other.
- Ensuring that all occupiers contribute to operating costs.
- Securing a necessary income stream. This may be an essential requirement of your funders.
- Certainty over the demise that is being occupied. This may then “clear” other parts of the demise to enable a further tenancy to be granted maximising the use of NHS estate (which, in turn, can reduce the operating costs of all of the individual occupiers).
- Certainty over when you might get the property back will enable you to plan for the future.
But there are also many benefits to the certainty of a documented occupation for occupiers, including:
- As an occupier and an employer you will have statutory responsibility for the health and safety of anybody visiting your premises. It will be important to ensure that there are robust contractual arrangements in place which will enable you to discharge your responsibilities.
- Securing a change of planning use for a health facility, where that facility is required for health use, is not straightforward. However there are numerous instances of health sector tenants whose landlords have been successful in securing possession for a change of use.
- If you are in occupation of LIFT premises on an undocumented basis your occupation may not be covered by the building insurer’s waiver of its rights of subrogation. If that is the case then, in the event of insured damage, your Landlord would claim the cost of repairs from the insurers but the insurers might then look to you to contribute to the costs (if there was any suggestion that you might have contributed to the damage).
- If you are a practice of GPs occupying premises on an undocumented basis prospective partners might be concerned by the uncertainty over their obligations (for example, in respect of any backlog of maintenance) and the contractual term of the arrangements. This might be an obstacle to the retirement of existing partners. The lack of a lease may also be questioned when you claim rent reimbursement.
- If you are a practice of GPs and there are some property holding partners and other non-property-holding partners, you may believe that the practice is occupying pursuant to a partnership agreement but it is very likely that the occupation will be on the basis of an implied business tenancy (between the property owning partners, as landlord, and the practice as a whole, as tenant). Without a written lease, both property and non-property- holding partners will have uncertainty over the apportionment of risk and the practice’s longer term commitment to a site.
There are different types of agreement which could be used to document an occupation:
- A written tenancy at will may assist to document the repair and other obligations of the parties as a “stop gap” measure. However a tenancy at will can be brought to an end immediately, without any obligation to provide notice (though a reasonable period would have to be allowed to enable the occupier to vacate). As an occupier you may wish to document your occupation but you may not wish to accept that your current occupation is on the basis of a tenancy at will.
- A licence can provide certainty over term, whilst allowing for flexible time and space sharing arrangements.
- A lease will provide certainty over area and contractual term.
Before signing up to any agreement, you may wish to consider the following:
- If you are an occupier you may have existing statutory rights which should be reserved.
- If you are holding any clinical contracts and your interest in the property is linked to those contracts, will the property occupation agreement enable you to break the arrangement if those contracts are lost or expire?
- If you are a practice of GPs you may wish to ensure that NHS England will reimburse the rent payable before committing to the space under any proposed agreement.
- When you complete a lease or LIFT Underlease plus Agreement, there may be Stamp Duty Land Tax, Land Registry fees, legal and surveyors fees (for yourself and the Landlord) to pay so you may wish consider negotiating with the Landlord on these.