The High Court has handed down judgment in a number of cases concerning the terms of tenancies, previously owned by primary care trusts, which vested in NHS Property Services Ltd in April 2013 as part of a major reorganisation of the NHS. The decision in Valley View Health Centre (a firm) and others v NHS Property Services Ltd [2022] EWHC 1393; [2022] PLSCS 95 will be of interest to landlords and tenants.
Most of the properties transferred were occupied by GPs who had practiced in partnerships, often for years, where there was no written lease or record of the terms of initial occupation. If a written record existed, it was often basic. Up until 2013, rent and service charges were reimbursed to GPs by the PCTs that commissioned GP services. After the transfer GPs continued to receive funding for rent and reimbursable service charges but were required to pay in full NHSPSL’s costs of providing landlord services. Five GP practices challenged the arrangements.
Tenancies at will or periodic tenancy?
Valley View had occupied its surgery for 14 years since 2007. For the first four years there was little negotiation for a formal letting. Later there were periods of negotiation but other periods when negotiations ceased or the parties were in dispute. The judge decided that Valley View was a tenant at will since the parties’ intention throughout had been that the claimant should take a sub-lease or an assignment of NHSPSLs own lease: Javad v Aqil [1991] 1 WLR 1007.
St Andrews occupied under a written lease contracted out of the Landlord and Tenant Act 1954 until March 2019: subsequently it held over paying rent. There were no negotiations for a new lease. The judge decided that the principles in holding over cases were the same as in Javad. The parties’ objective intention throughout remained that a new tenancy should be granted. St Andrews was a tenant at will.
Implied terms
In two cases the practices held periodic tenancies implied from conduct: landlord services had been provided over many years, with some payments being made towards them. In both cases, the judge decided that NHSPSL should be taken to have agreed to go on providing the same services as before, subject to its right to discontinue them if reasonable to do so. In return, the claimants should be taken to have agreed to pay the landlord’s reasonable costs of services reasonably provided. This covered all of the services previously provided.
Management fees
NHSPSL sought to recover management fees associated with services provided, to which the claimants objected. The court found that NHSPSL could only recover its internal management costs as part of recoverable service charges if the relevant lease contained a provision for the recovery of costs incurred which was sufficiently wide to include them. A close relationship between the costs incurred and the service to which they relate is required. There is no prescribed method for calculating and apportioning management costs: the question is whether the costs fall within the scope of the provision: Waverley Borough Council v Kamal Arya [2013] UKUT 0501 (LC). These principles apply equally to tenancies implied from conduct.
Louise Clark is a property law consultant and mediator
