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A Service Charge is a ‘charge’ levied by a landlord for providing Services to a Tenant of Leased premises. These Services usually include but are not limited to:
-Repairs and maintenance of common/shared areas
-Repairs and maintenance of external areas
-Repairs and maintenance of structural elements include stairwells
-Repairs and maintenance of fixed plant and machinery
-Heating and lighting of common/shared areas
Services Charges are not strictly reimbursed by the NHS under the Notional Rent system. This is why reducing exposure to GP Clients is very important.
A Service Charge should recover actual costs associated with providing services, plus reasonable costs in managing, administering, calculating and producing schedules to show those services and how they are calculated. A Service Charge should NOT cover improvements to buildings/premises, but a Service Charge CAN include a Sinking Fund to build funds to ‘replace’ significant items such as old lifts for example.
The costs of service charges have been a problem for GP Practices all over the UK for several years. A large majority of the issues in England for GP Surgery tenants is where NHS Property Services are landlords or head tenants. Historically, these properties were owned by the PCT’s (Primary Care Trusts) which led to many practices not receiving any rent reimbursement (because the PCT’s would effectively have been paying themselves) and not having any formal leases or tenancy agreements in place. As a result, practices either weren’t charged, or were only partially charged for their service charge costs.
In 2013 the Department of Health created NHS Property Services (NHS PS) a new body that would own and manage any NHS Property. Many practices then found themselves pursued for significant sums of money by way of backdated service charges with some seeing annual increase by as much as 400%!
Some GP Practices believe they are being charged for services they do not have, and services they have never received. The NHS PS are applying a uniform policy that does not consider the specific facts of each individual case. The BMA, on behalf of its members are arguing in some instances the NHS PS charging policy is unlawful and unenforceable. NHS PS in turn, says it is both lawful and enforceable.
Services Charges are rarely reimbursed or capped by the NHS and are paid directly by the practices. This is why it is so important for practices to check the details of the charges, as in many cases they may include services which are not provided or space that they are not occupying.
It is important to have the service charge schedules and any lease agreements assessed by an independent surveyor or solicitor. They should be able to advise whether the service charges are in accordance with the lease or heads of terms. They can also confirm whether the practice have received the correct documentation to support the service charge claim and if any increases in service charges by the landlord are justified. It is also important to ascertain that the method of calculating the charges is correct.
We can offer a free service charge assessment. GP Practices can send us their historic service charge schedules along with a copy of their lease, in turn one of our specialist primary care surveyors will undertake a free initial assessment to ensure practices are not paying for services that they don’t receive. Or crucially that they aren’t overpaying for the resources that they do receive.
Should you have any questions or queries in regards to any of the above, or would like to discuss your circumstances with one of our expert advisors, then please don’t hesitate to get in touch on 0114 4420098 and we will be more than happy to help.
Sue Pyatt, Practice Manager
Francis Mulhern, Bretton Medical Practice Peterborough
Dr Adnan Mohammad, GP Partner, Newsome Surgery, Yorkshire
Jill Foster, Practice Manager, Beacon Primary Care, Lancashire