1.Based on a report by the Comptroller and Auditor General, we took evidence from the Department of Health & Social Care (the Department), NHS England and NHS Improvement and NHS Property Services Limited.
2.NHS Property Services was established in December 2011 as part of reforms to the health system to manage, maintain and improve NHS properties in England and facilities then owned by 10 strategic health authorities and 151 primary care trusts. It is a company wholly owned by the Secretary of State for Health and Social Care and began activity in April 2013. A shareholder director represents the Secretary of State as a board member of NHS Property Services.
3.NHS Property Services’ portfolio consists of about 2,900 properties (about 12% of the entire NHS estate by floor space) with an estimated value of £3.8 billion. More than 60% of its properties are health centres, surgeries or clinics. It has almost 7,000 tenants. Almost half of the Service’s tenants are NHS trusts and NHS foundation trusts (31%) and GPs (18%).
4.NHS Property Services has three main roles. First, it acts as a landlord to manage the estate, agreeing and recording the basis on which its tenants occupy buildings (rental agreements), billing them, collecting payments and chasing outstanding debts. Second, it provides strategic estates management by modernising and maximising the use of current facilities, buying new facilities, selling facilities the NHS no longer needs and releasing surplus public land for housing. Third, it provides support and facilities management services such as maintenance, cleaning and catering services.
5.The Department did not set up NHS Property Services with the powers that a commercial landlord can use to enforce occupancy contracts and charges, because of the need to maintain the clinical services that its tenants provide. It therefore cannot act like a “normal” property company because of the public interests involved. For example, it does not have access to conventional remedies such as legal action, penalty charges, cessation of services or eviction for NHS bodies. Any enforcement action that NHS Property Services plans to take against tenants must be approved by the Department on a case-by-case basis.
6.NHS Property Services inherited a range of issues from its predecessor organisations. These issues included: limited data on properties and tenants; two-thirds of its tenants had no leases in place; tenants were not always fully charged for rent and services; and over 2,500 different facilities management arrangements with different suppliers. The Department acknowledged that it had not been widely understood how little information about the previous system was going to be handed over to NHS Property Services and therefore how much remedial work would need to be done. For example, there was no paperwork for many tenants that were occupying buildings.
7.The Department is currently undertaking a review of NHS Property Services. The review will examine whether there is still a need for this company and if so whether the correct control and governance arrangements are in place. The review was due to be completed by 31 October 2019. The Department confirmed that the timetable had slipped and said that it will now be completed by the end of 2019.
8.About two-thirds of the tenants that NHS Property Services inherited in 2013 did not have rental agreements in place and therefore it has been retrospectively trying to agree leases with occupiers already in situ. NHS Property Services told us that it has sought to get more agreements in place by simplifying them and by issuing 3,500 non-binding summaries of the main features of the lease arrangements. NHS Property Services has put in place over 1,750 new occupancy agreements of various forms over last few years. However, because of churn in the tenants that occupy its buildings, by April 2019, only 30% of its tenants had rental agreements in place. NHS Property Services acknowledged this not where it wants to be and that without these rental agreements in place, it is difficult to manage those properties effectively.
9.Rental agreements need to be based on a common understanding between the tenants and landlord about what is being rented and how much it costs. The data that NHS Property Services holds on its properties and tenants has improved but this data is liable to degrade if tenants do not inform it of changes to the space they use. The absence of leases means that there is no enforceable process to ensure that tenants inform NHS Property Services of changes to the space they use. NHS Property Services recognises that it needs to continue to improve the accuracy of its data. However, without effective powers of enforcement, it needs national bodies to do more to ensure that tenants engage, agree the supporting data and sign rental agreements. NHS Property Services told us that if it gets the data right and puts tenant-friendly draft documents in front of occupiers, it would be helpful if there were some sort of requirement that tenants enter into those agreements.
10.NHS Property Services stated that it is working with the national bodies—the Department and NHS England and NHS Improvement—to agree a joint plan to get rental agreements in place for all its tenants. It told us that key elements to the action plan include: getting the national bodies to pre-endorse a suite of occupancy documents for tenants to sign; improving the data that they hold and making sure that tenants inform them of any changes to the space they use; and introducing a “no lease, no occupancy” policy going forwards. However neither the Department or NHS Property Services could provide us with a clear timetable for all tenants to have signed rental agreements in place. NHS Property Services told us that it aims to have deemed rental agreement in place for 90% of its tenants by April 2020, where the rental area and rent are agreed with tenants but without a signed document.
11.Tenants are taking longer to pay their bills and outstanding debt is increasing. The average number of days that tenants take to pay their bills increased from 91 days in 2015–16 to 214 days in 2018–19. Outstanding debt has increased from £210 million in March 2014 to £576 million in March 2019. About 55% of the debt is for bills issued in 2018–19, the rest of the debt relates to bills NHS Property Services issued in previous years. NHS Property Services told that it had made good progress on the £800 million it had billed tenants for in 2018–19, recovering £600 million. Between 2014–15 and 2018–19, the Service wrote off £110 million of debt. NHS England and NHS improvement informed us that any future decisions on writing off debts will be made on a case-by-case basis. It noted that, in some cases, it may be necessary for NHS Property Services to write off an element of historic charges. For example, where past charges prove to be inaccurate or where the charging position going forward is agreed and there is no value to the health system in incurring additional cost to work through the historic billing.
12.About half of the current debt is subject to review because it has been challenged by tenants for a range of reasons, including bills being based on inaccurate information or inappropriate apportionment of costs. Written evidence we received from a number of tenants, or bodies representing tenants, cited the inaccuracy of information as a reason for disputing debt. For example, NHS Clinical Commissioners told us that its members are still raising concerns about billing accuracy and would like to see a fundamental change in degree of information that is provided within a bill. NHS Property Services said that it plans to be more robust on recovering the debt. It plans to sit down with 2,000 customers to agree the charges it has issued this year and pre-agree those charges for 2021, to remove scope for dispute.
13.NHS Property Services stated that it has a debt recovery plan with a range of actions, including direct payment of rental charges, where commissioners give occupiers the funds to pay their rent to NHS Services. It also acknowledged that the dispute resolution process, where tenants challenge bills, needs to work better than it does now in terms of speed and outcome. To date, NHS Property Services has proposed 60 cases for arbitration to the national bodies for approval, of which 19 were approved. The Department told us that arbitration should only be used when all other options have been exhausted.
1 Report by the Comptroller and Auditor General, , Session 2017–19, HC 2222, 26 June 2019
2 Q 102; , paras 1, 1.1
3 Qq 7, 152; , para 2
4 Q 26; , para 2
5 Qq 1–2, 8–10, 95, 98, 103
6 Qq 9, 99; , para 1.6
7 Qq 1–2, 39, 127; , para 1.5
8 Qq 95, 127
9 Qq 127–129; , para 3.3
10 Qq 2, 5–6, 55
11 Qq 1–2, 6–7, 17; , Figure 7
12 Qq 3, 6
13 Qq 2, 95
14 Qq 7, 66; , para 2.5
15 Qq 6–7, 10, 18, 53, 98
16 Qq 7, 10–12, 16, 78–79
17 Qq 51, 57–63, 121–122
18 Qq 1, 19; , paras 2.11–2.12
19 Q 1, 14, 135; ; , para 2.13
20 , Figure 12
21 Written evidence from NHS Clinical Commissioners (), Central London Community Healthcare NHS Trust (), Sussex Healthcare Partnership () and the British Medical Association ()
22 Qq 17–18
23 Qq 10, 17, 56
24 Qq 8–9, 99–102; , para 2.15
Published: 5 November 2019