04 November 2009,

Guide to....GP Premises Under the LIFT Scheme

Article Source: 'Guide to...GP premises under the LIFT scheme' from GP newspaper by James Atkins' - 22 October 2009.

Searching for 'LIFT' on www.healthcarerepublic.com swiftly reveals that the private-public partnership scheme in England has attracted a lot of criticism.

For example, a story from GP on 21 August 2009, about a York University Management School study, is titled 'LIFT fails to offer value for money'.

Yet for some GPs stuck in out-dated and overcrowded surgeries, moving into a LIFT development may be an attractive way to escape, and LIFT schemes do have some positives.

LIFT organisations

Officially called NHS Local Improvement Finance Trusts, local LIFT companies are public-private finance partnerships developed by the DoH to construct new, purpose-built buildings for primary care services.

The new building(s) is provided via a local LIFT company (LIFTco) established by Community Health Partnerships (CHP), an independent company owned by the DoH.

The LIFTco shareholders are CHP, the local NHS and a private sector partner. GPs can sometimes buy shares in a LIFTco allowing them to have a financial interest in the project. According to DoH guidance, all GPs are welcome to participate in LIFTcos in their locality.

The private sector partner is generally a property development company. Once the building has been constructed it is owned and maintained by the LIFTco.

The head lease on the building is usually granted to the PCT which in turn grant subleases to GP practices, the local NHS trust, dentists, pharmacists, social services or other health care providers, and so on

Non-LIFT premises

According to 2007 data from the DoH, only 40 per cent of primary care premises are purpose-built. Most GP surgeries are owner-occupied or leased from private landlords.

Commercial property leases may well be weighted in landlords' favour. The practice's solicitor will suggest amendments, but this can be time consuming and expensive.

Even where one or more of the partners owns the premises the GPs may find themselves considering the terms of commercial leases or licences to occupy because the practice as a whole will be the property-owning partners' tenant.

Third party development (3PD) schemes under which GP practices lease their premises, are still prevalent and involve construction of new buildings or extensive refurbishment of existing buildings by specialist property developers.

With 3PD schemes, solicitors generally generate paperwork on a case-by-case basis and may not include points that would favour the practice and which are automatically included in LIFT documents.

LIFT documents

With LIFT there are standard documents such as the 'lease plus agreement' (LPA) and the 'underlease plus agreement'. (ULPA). A benefit is that the leases have been drafted with the tenants' interests in mind and contain a number of advantageous provisions not normally found in commercial leases.

GP tenants should still seek professional advice, but are unlikely to have to endure long, drawn out negotiations.

LIFT leases offered to GPs are typically for 25 years, to allow the LIFTco a guaranteed income stream to recoup development costs. The LPA provides a number of advantages. These are set out in full in 'NHS LIFT: Lease Plus Agreement - Guidance for GPs', at www.communityhealthpartnerships.co.uk

There are numerous ongoing and planned LIFT projects and they can allow GPs to practice from purpose-built premises on favourable terms.

However, there are some downsides. In particular, some GP practices have complained about high charges for central services (supplied to all the building's tenants), such as cleaning and security, which are usually provided by the PCT.

Pros and cons of LIFT

ADVANTAGES

  • Unlike most commercial leases, if parts of the surgery cannot be occupied, under LIFT the practice can make deductions from the rent. It can also deduct costs it incurs to make an area usable.

  • Clear standards of service delivery from the landlord and certainty of liability are laid down in the lease plus agreement (LPA). A standard commercial lease may require only that the landlord uses 'reasonable endeavours'.

  • Service charges will not vary according to the cost of providing the service. With commercial leases, service costs often increase.

  • Some insurance risk remains with the landlord who is also obliged to obtain utilities from the supplier providing best value.

  • The LPA imposes clear responsibilities for external repair and maintenance. The dilapidations liability of the tenant will be limited, unlike an ordinary commercial lease.

DISADVANTAGES

  • Practices must take on the lease before the building is constructed. However, this is not significantly different to third party development (3PD) schemes where investors and developers will not commit funds until suitable tenants are legally committed.

  • LIFT documents are long and cumbersome (the LPA stretches to almost 200 pages). But the paperwork for 3PD schemes can be just as time consuming to go through.

  • Practices may not wish to be tied to the premises for 25 years, but they may be able to negotiate a shorter term.

  • There have been reports of PCTs making very high charges for cleaning and security.

Mr Atkins is a solicitor specialising in commercial property at Radcliffes LesBrasseurs, www.rlb-law.com