Summary and implications

Earlier this month the Department of Health issued guidance on the future of Primary Care Trust Estates (PCT), in particular the transfer of property comprising “service critical clinical infrastructure” to aspirant Community Foundation Trusts (aCFT), other NHS Trusts and Foundation Trusts (FT) (together Acquiring Trusts).

If you are a landlord of a PCT Estate comprising service critical clinical infrastructure the implications are:

  • You should expect to receive applications for consent to assign; and
  • You should expect the applications to include a request for consent to a possible subsequent assignment to the Secretary of State.

If you are a PCT, you should be:

  • Reviewing your estate in light of the guidance;
  • Agreeing, with the Acquiring Trusts, lists of properties for transfer;
  • Submitting the lists to the Strategic Health Authority, for approval, by 14 September; and
  • Making applications for consent to assign those parts of the leasehold estate that are to be transferred, where the landlord’s consent to assignment is required or assignment is prohibited.

If you are an Acquiring Trust, you should be:

  • Reviewing, with the PCT, which parts of the PCT’s estate you require in order to perform your services; and
  • Agreeing, with the PCT, the property for transfer (or the principles for any alternative occupational arrangements where transfer is not appropriate, as set out in the guidance).

The abolition of Primary Care Trusts

The Health and Social Care Bill 2010 is currently before Parliament and it provides, amongst other things, for the abolition of PCTs. The Government intends that they will be abolished by April 2013.

Thoughts have turned to the arrangements for the future ownership and management of the estates of the PCTs and earlier this month the Department of Health issued guidance in respect of part of the PCT Estate.

The Department of Health Guidance

For a copy of the Department of Health Guidance “PCT Estate: Future ownership and management of estate in the ownership of Primary Care Trusts in England” click here

The Department of Health guidance

Which parts of the PCTs’ Estates does it cover?

PCT Estate covered by the guidance

This guidance covers leaseholds and freeholds of “service critical clinical infrastructure”. Typically these are premises in local settings integral to the provision of clinical community services including:

  • Accommodation with high specification equipment, theatres or wards;
  • Community hospitals.

It does not cover any parts of the PCT Estate that are not “service critical clinical infrastructure”, nor does it cover:

  • Third party developments (3PDs) where the PCT have taken the head lease;
  • NHS Lift sites;
  • PFI/PPP sites;
  • ISTC buildings;

PCT freehold and long leaseholds

Net book value

PCT freehold estate is to be transferred at the Net Book Value shown in the PCT’s accounts at the point of transfer.

PCT leases

What should be assigned?

Whole leases should be assigned to the Acquiring Trust where they are to be the majority occupier. Parts of leases cannot be assigned so sublettings to minority occupiers may have to be put in place first, before the lease is assigned to the majority occupier.

Parts of leases cannot be assigned so sublettings to minority occupiers may have to be put in place first, before the lease is assigned to the majority occupier.

Landlord’s consent?

If a landlord’s consent to assignment is required by the lease or the lease prohibits assignment then landlord’s consent should be applied for as soon as possible.

Resistance will be futile as, under the NHS Act 2006, the Secretary of State for Health may order the transfer to an aCFT or other NHS Trust (but not an FT), and that order will be binding on a landlord notwithstanding any restriction or prohibition on assigning in a lease. Once enacted, the Health and Social Care Bill would provide that the Secretary of State may, in connection with the abolition of a PCT, make a property transfer scheme transferring property, rights and liabilities from a PCT to a permitted transferee. Acquiring Trusts are all permitted transferees.

Subsequent assignment to the Secretary of State

Any transfer of a lease should provide for the lease to be assigned subsequently to the Secretary of State (or a body nominated by him) in the event that the Secretary of State exercises its option to buy (mentioned below). The application to consent should therefore include a request for further consent to the possible subsequent assignment to the Secretary of State (or a body nominated by him).

The transfer

Power to transfer

Currently there is no power to transfer the property to FTs. This will be in the enactment of the Health and Social Care Bill 2010. Therefore memoranda of occupation should be used as an interim measure. No transfers of land should occur by legal conveyance without the Department of Health’s consent.

 In the case of aCTFs, transfer orders do not need to be made simultaneously with establishment orders, although the properties to be transferred must be identified in accordance with the timetable set out in the adjacent table.

Form of transfer

Although not yet available, there is to be a standard form for the transfer order which incorporates buy back provisions (see below).

All liabilities, obligations and any warranties relating to the site are to be transferred to the transferee e.g. contracts for estates and facilities management services and works associated with the buildings.

Secretary of State’s option to buy

The transfers are to be subject to an option for the Secretary of State for Health (or a body nominated by him) to reacquire individual properties in the event that the Acquiring Trust:

  • Fails to retain a service contract;
  • Vacates property;
  • Ceases to exist; and/or
  • Becomes insolvent.

The option applies if the whole or part of the building is affected. If parts of the building are still required for the delivery of community services, then appropriate occupancy arrangements may be negotiated.

Overage

If the Secretary of State declines the offer to have a lease assigned to it (or a body nominated by it), or declines to take a transfer of a property (either directly or to a body nominated by it) pursuant to its option, then the Acquiring Trust may (subject to any requirements of the lease or the title) dispose of its interest. Overage of 50 per cent of any gain achieved, based upon gross proceeds of sale less the lower of the net book value at the date of acquisition or the net book value before any revaluation prior to sale, will be payable to the Secretary of State.

Situations where the entire PCT interest will not be transferred

In most cases the entire title will be transferred, but note the following:

  • Where an Acquiring Trust requests a transfer of premises, they will have to take the whole of the estate deemed to be “service critical clinical infrastructure”. If this would lead to inefficiencies due to the Acquiring Trust already having its own estate, the PCT has discretion to exclude it from the transfer.
  • In the event that an Acquiring Trust:
    • Will be a minority occupier in property which has service critical clinical infrastructure; or
    • Needs to occupy surplus property, in the short term,

an appropriate lease or licence, either co-terminus with the service contract or for a shorter period if necessary should be granted. The estate code (chapter 9) provides guidance on this.

  • The estate should not be transferred where it is known that the Acquiring Trust will only be in occupation on a temporary basis.

Sites in multiple occupation

Where organisations occupy premises in the service critical clinical infrastructure category, which are shared by a number of users, the following principles are to be adopted (Note: “majority” is more that 50 per cent of the lettable area):

  • Transfer the whole to the majority occupier (provided it is an Acquiring Trust);
  • If the majority of the property is vacant, the PCT is to retain for the time being;
  • If the majority of the property is occupied by an organisation other than the Acquiring Trust, then the PCT is to retain;
  • To establish the majority occupier, different GP practices and other primary care users should be aggregated and counted as a single occupier, as this will point to the property being used for delivery of primary care rather than community care.

Proper arrangements to document occupancy by minority occupiers (which may be an Acquiring Trust) and to agree the split of shared costs must be put in place by the PCT as soon as possible. Where property is to be transferred to an Acquiring Trust, this must be done before the transfer is completed.

Timetable for transfer

Click here to see table