Service critical NHS property transfers
The Guidance issued by the Department of Health on 4 August 2011 states that aspirant Community Foundation Trusts, other National Health Service Trusts and Foundation Trusts (transferees) are to be given the opportunity to acquire the parts of the PCT estate deemed ‘service critical clinical infrastructure’. On 22 March this year, the Department of Health issued a draft Transfer Order (the Order) which is intended to effect these transfers. This alert provides guidance in relation to this latest publication from the department .
Although not statutorily required, there are a number of immediate actions transferees may wish to consider implementing to ensure they are not disadvantaged by the Order.
The Order provides that these transfers will be made subject to “any existing rights in the land.” Furthermore, the relevant NHS Trust (transferee) will be required to take all reasonable steps to ensure that any bodies providing services under the National Health Service Act 2006 (the Act) which “occupy, use or have any other interest in” the property after the date of the transfer may continue to do so to the same extent.
The Order also requires the transferee to transfer the property to the Secretary of State for Health (the Secretary of State) in certain circumstances (as set out below). To protect this interest, the transferee is required to apply to the Land Registry for a Restriction and Agreed Notice to be entered against the title of the property within 28 days of the transfer. If the transferee fails to apply for these entries to be made, the Secretary of State is permitted to do so.
The transferee is required to keep the property in a state of repair and condition that is “consistent with the use of the land for the provision of services under the Act”.
Where the property is leasehold, the transferee is required to comply with the tenant covenants in the lease, to notify the Secretary of State if it receives notice of any breaches and to give the Secretary of State the option to remedy any such breaches at the cost of the transferee. In addition, the transferee of leasehold property must not:
The transferee (or liquidator) must transfer the property to the Secretary of State or its nominee for nil consideration in the following circumstances:
However, the requirement to transfer the property to the Secretary of State does not apply to the following dispositions:
The transferee must notify the Secretary of State of any circumstances which give rise to the requirement to transfer the property as soon as reasonably practicable. The transfer must then take place as soon as reasonably practicable thereafter. For further details of the accounting treatment of such transfers reference should be made to the “Guidance on accounting for estate transfers” issued by the Department of Health in March this year.
The Secretary of State may either refuse to accept the transfer or waive the requirement for the transferee to make the transfer.
The Secretary of State may waive the requirement in the following circumstances:
The Secretary of State may refuse to accept the transfer if it considers that the property should not be transferred to it. In this instance, the transferee (or liquidator) may dispose of the property in accordance with the Schedule of the Order, which contains overage provisions. The amount of overage payable is 50% of the amount by which the “Receipts” exceed the “Base Value”. The “Receipts” are the higher of the amount received for the property and its market value. The “Base Value” is the higher of the net book value of the property shown in the transferor’s accounts at the transfer date or the net book value of the property shown in the transferee’s accounts immediately prior to the revaluation prior to the first disposition. The Secretary of State can elect whether it requires these overage provisions to bind successors in title to the land for a further 15 year period.
The Transfer Order and Overage schedule are complex legal documents and you should seek legal advice to understand what this means for the receiving NHS body.