Preparing for the transfer of PCT property: Outstanding issues

Recent guidance to PCTs on preparing for the transfer of property has very much focused on the detailed preparation for the transfer either to NHS Property Services or to providers. It is clear that the intention is that the associated contracts, rights and liabilities will also transfer with the property, and that NHS Property Services will also inherit the PCT’s rights under Grant Agreements. This strand of activity inevitably means considerable focus on ensuring that all relevant occupations are documented and that PCTs can identify the relevant property rights and contracts (including building and design contracts) which will need to transfer.

Stabilisation phase

In parallel, David Flory has been issuing guidance around the transfer of the clinical service contracts.  We are now in the stabilisation phase of the scheme set out in his guidance, which requires PCTs to adequately document what is missing from the reconciliation between the PCT clinical spend and the contract documents.  PCTs should also be checking that the contracts are up to date and actually reflect the current position. From our experience, in many cases as contracts evolve over several years, changes are made that are possibly documented in correspondence but not reflected on the face of the contract documents themselves. 

PCTs also need to consider carefully issues where contract services are being split, for example where some services will go to local authorities as part of their public health responsibilities but, as part of the same contract, there are clinical care services that will become the responsibility of the PCTs.  There may also be distinctions between what is currently contracted for by the PCT from mental health trusts and what will need to go to the CCG as primary commissioners as opposed to what goes to the Commissioning Board as part of the primary healthcare or specialised commissioning.

There are, however, some significant gaps in this process which will need to be filled to enable the Secretary of State to meet his obligations under s.301(7) of the Health and Social Care Act 2012 to ensure that all of the liabilities of the PCTs are provided for by transferring them to a new responsible body. 

This includes non-clinical contracts, expired or expiring contracts which may go back six or in some cases 12 years, together with non-contractual rights and liabilities which do not relate either to property or staff.

Non-clinical contracts

Whilst some of these will be property related and will transfer with the relevant properties there will be some which either spread between different properties going in different directions or be un-associated with property at all.  Examples include software licences, consultancy contracts, and contracts for professional services.

Expired contracts

It is also important to make sure that expired or expiring contracts are dealt with because the rights and liabilities under those contracts may not have crystallised prior to 31 March 2013. For example, at the simple level, establishing who will be responsible for making payments under contracts which expire but where the bills haven’t been delivered or the work is only done at the end of March 2013.  This may particularly be an issue about contracts which have expired some time ago but where the limitation period for claims is still valid. 

There will also be potential rights and liabilities arising in other ways and again, the obligations of the NHS must be picked up in some form.  Examples will include negligence claims, historic CHC claims, breach of privacy claims, defamation.  Although some or most of these may be covered by the NHSLA, this role does not remove the need for the liability to be formally transferred.

Sweeper clause

It is good practice for Transfer Orders to include a “sweeper” clause to pick up all liabilities and all assets not otherwise provided for, but consideration will need to be given to who the residuary liability holder will be, and how it would be possible to move rights and liabilities back from them if they are in the wrong place because of the failure to properly identify the destination of the rights and liabilities.

Accordingly, it is important for PCTs to focus on the proper handover of their responsibilities and work effectively with SHA and DH colleagues to achieve this.  The stabilisation phase may also be a good time to consider whether there is any scope to vary or renegotiate existing contracts in conjunction with the proposed recipients.

Bevan Brittan LLP can help you by working through the issues with you and providing support on individual matters as they arise.