he litigation between the parties commenced when proceedings were brought by the BMA on behalf of 5 GP practices seeking a declaration that certain standard polices that NHSPS operated in their calculation of service-charges had not been incorporated into the terms of tenancies. NHSPS counterclaimed against the 5 practices for judgment in respect of arrears of service charge. In total, NHSPS claimed to be owed over £175m by its GP tenants across the NHS estate. The case was of significant importance across NHSPS' estate, and is not simply limited to properties occupied by GP tenants.
In a complex judgment, the Court found that, where there is no written record confirming which services are to be provided by the landlord, the Court will look to the conduct of the parties to determine what was intended and imply terms where necessary. In these circumstances, the Court’s view was that the landlord could reasonably be expected to supply services and that the tenant should reimburse them the reasonable costs of doing so.
The judge essentially concluded, however, that each dispute will turn on its own facts and this decision was not to be considered a test case. The judge added that a tenancy is a contract and that each practice is bound by the express or implied terms of its occupation.
The Court also decided to list a second hearing to deal with the specific amounts owed to NHSPS by each practice. Prior to a decision being reached, the parties reached an out of court settlement for a total reduction in excess of £750,000, with one particular occupier seeing NHSPS' claim against them being reduced by more than 80%.
Whilst the forensic exercise to calculate the tenants' liability to NHSPS was therefore not carried out at trial, and the BMA has been careful to stress that they are not test cases, the large scale reductions are likely to lead to a number of occupiers of NHSPS buildings scrutinising their service charge bill in great detail. It is also worth noting that NHSPS effectively accepted in the case that it cannot unilaterally impose its Consolidated Charging Policy to override existing arrangements.
Key takeaways from the case are as follows:
- The Court was keen to stress that all occupiers of a building owned by NHSPS will have their own specific circumstances and a potentially different legal position to the affected practices.
- In circumstances where service charges payable to NHSPS are genuinely disputed, NHSPS should be requested to produce detailed information and documentation in support of its claims.
- The parties should seek to enter into constructive dialogue, to seek to resolve matters amicably without the need for expensive legal proceedings to be progressed if at all possible.
Ultimately, if an amicable resolution cannot be reached, an application to Court or referral to alternative dispute resolution (such as arbitration or mediation) may need to be considered.
If you would like to discuss your service charges and any plan for discussion or resolution with NHSPS, please contact George Taylor in our real estate litigation team or any of our real estate healthcare leads Victoria Armstrong and Lisa Geary.