National Code of Practice for GP premises

Part C: Premises leased from private landlords

15. Strategy For Gp Premises Leased From Private Landlords

Long-term strategy

15.1. The Scottish Government’s long term strategy is that no GP contractor will need to enter a lease with a private landlord. Health Boards will, over the course of the next fifteen years, take on the responsibility for negotiating and entering into leases with private landlords and the subsequent obligations for maintaining the premises from GP contractors who no longer want to lease privately. Health Boards will ensure that GP contractors are provided with fit-for-purpose accommodation which complies with the standards set by the Premises Directions.

15.2. GP contractors who wish to continue to provide their own accommodation are free to do so. They will continue to be eligible to receive rent reimbursements under the Premises Directions. Before a GP contractor agrees to a new lease with a private landlord, it should consult its Health Board on the terms of the proposed lease.

Short to medium term strategy

15.3. This Code sets out the actions that GP contractors who no longer wish to lease their premises from private landlords must take to allow Health Boards to take on that responsibility.

15.4. There are three ways in which Health Boards can take on the responsibility of providing a GP contractor with premises. Those are:

• negotiating a new lease for the GP contractor’s current premises, with the Health Board as the tenant;
• accepting an assignation of the GP contractor’s current lease; and
• providing alternative accommodation for the GP contractor when its current lease expires.

15.5. The difference in approach is set out in more detail in the subsequent sections of this Part.

16. Where Health Boards Lease Gp Premises From Private Landlords

16.1. This Code sets out two situations in which a Health Board leases GP premises from private landlords. Firstly, where the Health Board negotiates a new lease for the GP contractor’s current premises or for new premises. Secondly, where the Health Board takes on an existing lease replacing a GP contractor as the tenant (assignation).

16.2. In both these cases, the lease must allow the Health Board:

a) To use the premises for the provision of health and social care services (and not simply for the purposes of general practice);

b) To sub-let or grant a licence to occupy the premises or part of them for the purpose of providing health and social care services; and

c) To sub-let or grant a licence to occupy the premises on different terms from the principal lease.

16.3. Often leases only allow tenants to sub-let properties on the same terms and conditions as the principal lease. The Scottish Government wishes to support GP practices to continue as independent contractors. To allow this to happen, the lease to the Health Board (the principal lease) must allow the tenant (the Health Board) to sub-let or grant a licence to occupy the premises to a GP contractor on different terms from the principal lease.

16.4. One reason for this is that the Health Board must retain the obligation to maintain the premises, and to ensure the premises comply with relevant legislation or be able to require the landlord to do so. The Health Board will not pass on that responsibility to the GP contractor. The Health Board must make a reasonable charge, based on actual cost, to the GP contractor for maintenance and for any other services provided, such as utilities and cleaning.

17. General Approach

17.1. The closer a lease is to expiry, the more pressing the need to take action. The longer a lease has to expiry, the less pressing the need for the HSCP and the Health Board to take action. HSCPs and Health Boards should prioritise those practices whose leases expire first.

Leases - key points

If a lease expires before 1 April 2023, the most likely action is for the Health Board to negotiate a new lease or provide alternative accommodation.

If the lease expires after 1 April 2023, Health Boards will take on the existing lease from GPs where:

• the practice has ensured that its premises are suitable for the delivery of primary medical services and sufficient to meet the reasonable needs of its patients;
• the practice has met its statutory obligations regarding the premises;
• the practice has provided all relevant information to its Health Board;
• the practice has given sufficient notice to its Health Board of its need for assistance;
• the practice has registered the lease with the Health Board;
• the practice has the agreement of the landlord to the assignation of the lease (and the other necessary conditions);
• the practice has complied with its obligations under its existing lease; and
• the rent represents value for money.

GP contractors who wish to continue to provide their own accommodation are free to do so. They will continue to be eligible to receive rent reimbursements under the Premises Directions.

17.2. GP Contractors should formally advise their HSCP and Health Board as soon as they reach the point where their lease has no more than five years until the expiry date or until a break option can be exercised. This will give the parties time to develop the options for a plan for the GP Contractor to either continue in the existing premises or in alternative premises.

17.3. Where a lease is due to expire, if the GP contractor does not want to continue to provide its premises itself, it should not agree a new lease with its landlord. Instead, the Health Board must either negotiate a new lease for the current premises with itself as the tenant, accept an assignation of the lease, or offer alternative accommodation to the GP contractor. This is a decision for the Health Board to make.

17.4. If a lease expires within the next five years (before 1 April 2023), the Health Board will only agree to assignation of the existing lease in the rarest of circumstances. The most likely course of action is for the Health Board to negotiate a new lease with the landlord or to offer alternative accommodation to the GP contractor.

17.5. If a break option can be exercised within the next five years (before 1 April 2023), the Health Board may decide to negotiate a new lease or provide alternative accommodation to the GP contractor, asking the GP contractor to exercise its right to terminate the lease at its break point. The Health Board may also accept an assignation of the lease if the conditions set out in section 19 are met.

17.6. If a GP contractor’s lease expires after 1 April 2023, the GP contractor may apply to the Health Board for its lease to be included on a register of the leases that the Health Board is willing to accept the assignation of the tenant’s interest. The lease may then be assigned to the Health Board at an agreed future date if the conditions set out in section 19 are met.

18. Negotiation Of New Leases Or Provision Of Alternative Accommodation

18.1. Where a lease is due to expire and the GP contractor is to remain in its existing premises, the most likely option for the Health Board to take is negotiating a new lease and not assignation of the existing lease.

18.2. The Health Board’s approach should be informed by the priorities, identified by the HSCP for the Health Board’s operational area. Where there is more than one HSCP, the Health Board, together with the HSCPs in its operational area, will have to agree the Health Board’s priorities.

Negotiation of a new lease

18.3. If the delivery of primary medical services from the existing premises continue to meet the needs of the local community, and if the premises continue to be suitable for the provision of primary medical services, the Health Board may attempt to negotiate a new lease with the landlord.

18.4. The GP contractor must meet the cost of the dilapidations claim it agrees with the landlord.

18.5. The Health Board should seek in its negotiations on the new lease with the landlord to minimise the level of dilapidations for which the contractor is liable without prejudicing its own position. The Health Board may provide financial assistance to the GP contractor with negotiating any dilapidations claim.

18.6. GP contractors who have, in the opinion of their Health Board, taken all reasonable steps to maintain their property to the standards required by their leases and the Premises Directions, may be able to recover part of the cost of any reasonable dilapidations claim from the GP Premises Sustainability Fund. This will be permitted only where budgets allow. The GP contractor must take all reasonable steps to reduce the amount payable to its landlord in respect of dilapidations.

18.7. In these circumstances, a GP contractor must allow its Health Board to inspect its premises and provide to its Health Board a copy of its lease (with any accompanying schedule of condition and schedule of dilapidations), copies of its accounts, any invoices for repair and maintenance and details of the steps taken to negotiate the level of the dilapidations claim. This is to allow the Health Board to determine whether the GP contractor has taken all reasonable steps to maintain its property to the standards required by its lease and the Premises Directions and to reduce the amount to be paid in respect of the dilapidations claim.

18.8. If the Health Board decides to accept an assignation of the lease rather than negotiating a new lease, the conditions in relation to the assignation of a lease as set out in section 19 will apply.

Alternative accommodation

18.9. If the GP contractor is not to continue in its existing premises, the Health Board must offer alternative, fit-for-purpose, accommodation to the GP contractor which complies with the standards set by the Premises Directions.

18.10. The GP contractor must meet the cost of the dilapidations claim it agrees with the landlord.

18.11. The Health Board may provide financial assistance to the GP contractor with negotiating any dilapidations claim.

18.12. GP contractors who have, in the opinion of their Health Board, taken all reasonable steps to maintain their property to the standards required by their leases and the Premises Directions, may be able to recover part of the cost of any reasonable dilapidations claim from the GP Premises Sustainability Fund. This will be permitted only where budgets allow. The GP contractor must take all reasonable steps to reduce the amount payable to its landlord in respect of dilapidations.

18.13. In these circumstances, a GP contractor must allow its Health Board to inspect its premises and provide to its Health Board a copy of its lease (with any accompanying schedule of condition and schedule of dilapidations), copies of its accounts, any invoices for repair and maintenance and details of the steps taken to negotiate the level of the dilapidations claim. This is to allow the Health Board to determine whether the GP contractor has taken all reasonable steps to maintain its property to the standards required by its lease and the Premises Directions and to reduce the amount to be paid in respect of the dilapidations claim.

18.14. The Health Board should also consider leasing the existing premises on a short-term basis while it finds more suitable alternative accommodation.

19. Assignation Of Leases

19.1. Health Boards should establish a register (’the Register’) within the Estates Terrier Section of the Estate and Asset Management System ( EAMS) of the leases in which they are willing to accept an assignation of the tenant’s interests.

19.2. Only those leases which expire after 1 April 2023 are likely to be included in the Register for the reasons given in section 17.

19.3. The number of leases that Health Boards accept assignation of each year will have to be managed. Health Boards do not have the capacity to accept assignation of all or even most GP leases within a short period of time.

19.4. A GP contractor may apply to the Chief Executive of its Health Board for its lease to be included on the Register. The application must include:

• the date on which it would like the lease to be assigned to the Health Board;
• the reason(s) why that date has been chosen;
• an explanation of why a later date is not reasonable or practical;
• a copy of the lease;
• confirmation in principle by the landlord that it will consent to the assignation; and
• confirmation in principle by the landlord that it will consent to the Health Board using the premises for any health or social care purpose (where such consent is necessary).

19.5. Once an application has been received, the Health Board will check the application to ensure it is accurate and gather any additional information it considers necessary from the GP contractor to carry out this check. The Health Board and the GP contractor will agree the date on which the lease is to be assigned. Where the Health Board is of the view that it is reasonable and practical for the lease to be assigned to it at a different date to that included in the application, the Health Board and GP contractor may agree to amend that date in the application. The Health Board may choose another date for assignation of a lease on the grounds of capacity. If agreement on a date cannot be reached, the Health Board may refuse the application.

19.6. Once the lease is on the Register, the Health Board will accept an assignation of the tenant’s interest in the lease on the agreed date provided:

i. that the lease has not been varied in such a way that it no longer represents value for money since the Health Board approved the payment of financial assistance with the GP contractor’s rental costs under the Premises Directions; and

ii. the GP contractor can provide the following:

a) A variation of the lease to allow assignation (where necessary);

b) The landlord’s consent to assignation (where necessary);

c) A variation of the lease to allow the premises to be used for health and social care purposes (where necessary);

d) A variation of the lease to allow the tenant to sub-let and grant a licence to occupy on different terms from the principal lease (where necessary);

e) A schedule of dilapidations which has been agreed between the landlord and the GP contractor for the GP contractor to fund and/or carry out prior to the assignation being completed;

f) Sufficient funds to meet the cost of any dilapidations not undertaken by the time of the assignation;

g) Confirmation and evidence from the GP contractor to the Health Board’s satisfaction that the premises comply with all relevant statutory obligations;

h) Confirmation and evidence to the Health Board’s satisfaction that the premises comply with the minimum standards set out in the Premises Directions;

i) A signed sub-lease or licence to occupy in the form provided by the Health Board.

Value for money

19.7. In most cases, the Health Board will have already satisfied itself that the terms of the lease represent value for money when granting financial assistance with rental costs to the GP contractor under the Premises Directions.

19.8. However, it is possible that a lease has been varied by the GP contractor and the landlord since the Health Board decided to grant financial assistance with rental costs. The Health Board will have to be satisfied, where appropriate in consultation with the District Valuer, that the varied lease still represents value for money.

19.9. If the lease no longer represents value for money, the Board may refuse to accept assignation.

Variation of lease and landlord’s consent (points a to d in paragraph 19.6)

19.10. Most leases contain a clause about assignation. Often the lease will say that the tenant can only assign its rights and obligations to another person with the landlord’s agreement, usually with the proviso that this consent is not to be unreasonably withheld. Only rarely will a lease say that the tenant cannot assign the lease at all.

19.11. If a GP contractor’s lease says that it cannot be assigned at all, the GP contractor must obtain a variation to the lease to allow assignation before it can be assigned to the Health Board.

19.12. If a GP contractor’s lease requires the landlord’s consent to the assignation of the lease, the GP contractor must obtain the landlord’s consent to the assignation when the contractor assigns the lease to the Health Board.

19.13. Where the documents at points a, b, c and d in paragraph 19.6 are required, the assignation to the Health Board cannot proceed until they are obtained by the GP contractor. If the documents are not forthcoming by the date on which the lease is to be assigned, the Health Board may remove the lease from the Register. The Health Board will then be under no further obligation to accept an assignation of the tenant’s interest in the lease.

19.14. There are three parties that have to reach agreement to allow a Health Board to take on an existing lease from a GP contractor – the Health Board, the GP contractor and the landlord. Both the GP contractor and the Health Board must do what they can to achieve the timescales as agreed between them. This includes, where the GP contractor requires and requests it, the Health Board facilitating and supporting the GP contractor with discussions between it and the landlord.

Dilapidations (points e and f in paragraph 19.6)

19.15. The GP contractor should pay the funds for any dilapidations directly to the landlord. The Health Board may provide financial assistance to the GP contractor with negotiating any dilapidations claim. The landlord should then confirm in writing to the Health Board that the dilapidations costs have been paid by the GP contractor, when and how the remedial works will be undertaken and that the Health Board will have no on-going liability for those dilapidations.

19.16. Alternatively, the Health Board may agree to the GP contractor paying the agreed cost of the dilapidations directly to the Health Board. This will allow the Health Board to carry out the remedial work itself. The Health Board will have to ensure that the dilapidations claimed by the landlord are fair and reasonable. In this case, the Health Board will accept liability for all dilapidations at the expiry of the lease, including those dilapidations which occurred while the GP contractor leased the premises.

19.17. Once the lease is assigned to the Health Board, it will become responsible for maintaining the property according to the terms of the lease. If it fails to do so, the Health Board will be responsible for paying any future dilapidations claim. Therefore, if a GP contractor fails to satisfy points e and f, the Health Board may refuse to accept an assignation of the lease.

19.18. GP contractors who have, in the opinion of their Health Board, taken all reasonable steps to maintain their property to the standards required by their leases and the Premises Directions, may be able to recover part of the cost of any reasonable dilapidations claim from the GP Premises Sustainability Fund. This will be permitted only where budgets allow. The GP contractor must take all reasonable steps to reduce the amount payable to its landlord in respect of dilapidations.

19.19. In these circumstances, a GP contractor must allow its Health Board to inspect its premises and provide to its Health Board a copy of its lease (with any accompanying schedule of condition and schedule of dilapidations), copies of its accounts, any invoices for repair and maintenance and details of the steps taken to negotiate the level of the dilapidations claim. This is to allow the Health Board to determine whether the GP contractor has taken all reasonable steps to maintain its property to the standards required by its lease and the Premises Directions and to reduce the amount to be paid in respect of the dilapidations claim.

Compliance with statute and the Premises Directions (points g and h in paragraph 19.6)

19.20. If the GP contractor cannot provide the confirmation and evidence required at points g and h in paragraph 19.6, it must pay the Health Board an amount which the Health Board is satisfied will cover the cost of the Health Board improving the premises so that they do comply with statutory requirements and the minimum standards set by the Premises Directions. If a GP contractor fails to provide the confirmation and evidence at points g and h in paragraph 19.6 and it fails to provide payment to cover the costs of compliance, the Health Board may refuse to accept an assignation of the lease.

Assignation and repairing obligations

19.21. Once the lease is on the Register, the GP contractor will be expected to continue to comply with the tenant’s obligations, including any repair, maintenance and statutory obligations, until the date of assignation to the Health Board.

Negotiation of a new leases for premises on the Register

19.22. Instead of accepting assignation of a lease on the Register, the Health Board may negotiate a new lease for the premises with itself as the tenant. If those negotiations are unsuccessful, the Health Board will still accept assignation of the lease if the conditions are met.

Scottish Government
November 2017