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Service charge claims and the need for clarity on invoices: pressure on GP practices in leased premises

The pressure on GP practices in leased premises has led to many debates on service charge claims and the need for clarity in invoices from landlords.

In the recent case of ‘(1) Valley View Health Centre, (2) Coleford Family Doctors (3) Bushbury Health Centre (4) St Andrews Medical Centre (5) St Keverne Health Centre v NHS Property Services Ltd (2020)’, the High Court of Justice considered the effect of the NHS Property Services’ (NHSPS) Consolidated Charging Policies 2016/17 and 2017/18 (‘the Policy’), upon existing tenancies and the findings are of interest to tenants.

Background

Each of the five claimants was a GP practice, occupying premises which vested in NHSPS on 1 April 2013 in accordance with a series of statutory transfer schemes, made under the Health and Social Care Act 2012.

The GP claimants were disputing the amount of service charge which NHSPS were seeking to recover from them. They felt that the Policy failed to consider the terms of their respective tenancies and that the Policy sought to retrospectively alter the same. Each of the claimants occupied their premises under a different type of tenancy.

Accordingly, they sought judgment on admissions made in NHSPS’s defences and invited the court to grant the following declarations:

  1. The terms of the tenancy do not include the provisions of the defendant’s Consolidated Charging Policy 2016/17 or 2017/18;
  2. There is no implied term of the tenancy that the claimant should pay charges in accordance with the defendant’s Consolidated Charging Policy 2016/17 or 2017/18;
  3. There is no agreement between the claimant and defendant to vary the terms of the tenancy by the provisions of the defendant’s Consolidated Charging Policy 2016/17 or 2017/18;
  4. The terms of the tenancy have not been varied by the provision of the defendant’s Consolidated Charging Policy 2016/17 or 2017/18; and
  5. The provisions of the defendant’s Consolidated Charging Policy 2016/17 or 2017/18 are not incorporated into the tenancy.

Leading up to the case, NHSPS’s stance had been inconsistent, as evidenced in correspondence between the parties. However, the defences defined their position.

In their defences, NHSPS said that the Policy had not been retrospectively incorporated into the tenancies. They stated that the service charges under each tenancy are not calculated in accordance with the Policy and that the service charges claimed were due under the terms of each tenancy. NHSPS considered there to be no dispute around the effect of the Policy and denied the need for the declarations sought.

Their defences mirrored a statement previously made by NHSPS’ legal advisors as follows: “It is our client’s position that it has always been entitled to recover service charges on the basis later enshrined in the Charging Policy. This is so because:

9.1 - Written leases (whether still held or now lost) and oral leases, are most likely to have made provision for the landlord to recover all, rather than merely part, of the costs it incurs in providing services to and for the benefit of the tenant in the usual way.

9.2 - Where leases have risen by implication, it is likely that the conduct giving rise to them will have involved full, rather than incomplete, recovery.

9.3 - Where services have been provided to the tenant otherwise than under the terms of a lease, our client will be able to recover its full costs under that separate agreement or applying ordinary restitutionary principles.”

As summarised in the judgment of Chief Master Marsh, NHSPS had established that the Policy was relevant to their ability to recover service charges, because it was part of the course of dealing between the parties. NHSPS were not saying that the Policy was incorporated into the tenancies.

Chief Master Marsh found no compelling reason to grant the declarations sought and therefore dismissed the applications. He too was of the opinion that there had been no dispute about the incorporation of the policy or retrospective variation of the tenancies at the time the applications were issued. He considered there to have been adequate clarity on that date, and that there was no longer a dispute. Further, he found “no utility” in granting the declarations as the words used in the defences of NHSPS put the position clearly.

So whilst the judgment found against the GPs this was on the basis of very specific facts and a case will always turn on its own facts. The landlord will need to establish he has a right to charge the tenant and whilst it is likely that a tenancy document will provide for the payment of services, it is not guaranteed. The estate which vested in NHSPS came from a variety of landlords nationally and the approach of each and every landlord was far from consistent. There remains a number of undocumented occupations and occupiers should always seek professional advice in relation to their rights and liabilities. A tenant should always consider whether there is a tenancy in place or whether there is some other relationship, and they should check the terms of that arrangement. If there is no tenancy they should consider the conduct of the parties and whether any expectation for the payment for services has legitimately arisen. Notwithstanding the contentions made by NHSPS at 9.3 the position is not as clear cut as this and again, scrutiny of all of the particular facts will be essential in every individual case.  A course of dealings, statements made by one or other party, or any other material factors, may impact upon the outcomes. A party alleging a debt must prove their case.

Additionally, even where the payment of service charge is not disputed in principle, a careful review of the nature of services proposed and charged for should be undertaken. Tenants should enter into dialogue with their landlord and ask for clarity where this is not apparent. 

Above all, a tenant should look at the paperwork they hold and consider taking professional advice at the earliest opportunity.

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