Service charges for GP practices

Service charges are frequently a bone of contention between landlords and tenants, and GP practices are not immune to this issue. In many cases, GPs don’t have a written tenancy agreement and, in the context of commercial service charge disputes, this may prove problematic.

NHS Property Services’ (NHSPS) charging policy, which they have sought to apply retrospectively, has seen a number of practices pursued for significant sums of money by way of backdated service charges and they have seen their annual charges increase by as much as 400%. In some cases, GP practices say they are being charged for services they do not receive, on the basis that NHSPS apply a uniform policy which does not take account of the specific facts of a particular case. NHSPS say that their charging policy is lawful and enforceable against all of those practices falling within their jurisdiction. The British Medical Association (BMA), on behalf of its members, says it is not.

Test case

Matters came to a head in 2020 when the BMA, on behalf of five GP practices, issued proceedings against NHSPS seeking a declaration that the charging policy did not form a part of those five practices tenancies. Prior to the court hearing, NHSPS conceded that the policy did not vary the tenancies and, as such, the court deemed it inappropriate to grant the declarations sought. 

In response to the BMA’s claim, NHSPS counterclaimed, contending that, notwithstanding the concession made, this was not the end of the matter, the policy was still enforceable and the sums claimed were lawfully due. 

The outcome of the test case

Unfortunately for the GP practices, on 8 June 2022, Mr Justice Edwin Johnson found in favour of NHSPS and as such, in principle, NHSPS may pursue a recovery of charges from GP practices pursuant to the terms of its charging policy (where applicable).

A second trial is to be listed within the next 12 to 18 months at which the court shall consider the extent to which charges claimed by NHSPS are reasonable. The service charge debts projected by NHSPS totalled £175 million in October 2021 and are projected to rise by as much as £30 million per year.

Many practices have been withholding payment of sums that they were being pursued for by NHSPS pending the outcomes of this case, in the hope that the decision would go in favour of the GP practices, and it would in turn offer them greater ammunition in their own challenge against these charges. However, in light of this development, many practices now face increased uncertainty and the risk that, if left unchallenged, at best they will have considerable debts to pay off in a short period of time and, at worst, they may have to close their practices.

However, it is important that all practices which are potentially affected by this decision remember that the outcome of these cases does not automatically mean that they are bound to pay all charges being pursued by NHSPS. Whether or not NHSPS’ charges are recoverable in principle (which is a question of law in every individual case) those charges must be reasonable and they must have been properly incurred in order to be recoverable. Again, that is a question to be determined on analysis of every case individually. There is no ‘one size fits all’ approach.

In a postscript to the judgment, Mr Justice Johnson emphasised that although it was hoped that the five practices' case could help NHS Property Services and other practices resolve disputes over services charges without the need for expensive litigation, he would be wary of classifying these five actions as test cases. He said, ‘I do not think that it is sensible for any GP practice to adopt what I would describe as a policy of non-engagement; by which I mean refusing to pay service charges pending explanation of the position by [NHS Property Services].’

It is now essential that any practice potentially affected seeks independent legal advice as soon as possible in order that they may better understand their position