Procedures Section 4 : Sale of Health Centres/Surgeries

4.2 Health centres have for many years served the purpose of improving practice premises whilst bringing together under one roof the primary care team. There is no weakening of the commitment to the provision and operation of suitable accommodation to fulfil that aim. Many practices already operate, in a similarly integrated manner, from high-quality premises either owned by the practice or, increasingly, leased from 3rd parties. There is no reason in principle why health centres should not be sold and operated in a similar manner provided. This is to the benefit of NHSScotland and patients. The consequences of the strategic shift to primary care in terms of premises, the increasing integration of GP community health and outreach services, and the desirability of GP leadership within primary care should be recognised in any such sale arrangements.

4.3 This guidance applies to health centres where title rests with NHS Health Boards. The Holding Body with whom title rests is responsible for considering applications to purchase health centres either from occupying GPs or 3rd parties.

4.4 Under these arrangements GP’s may be eligible to apply for a cost rent in relation to the acquisition of premises where these are being acquired for substantial modification in accordance with the relevant sections of the Primary Medical Services (Premises Development Grants, Improvement Grants and Costs) Directions 2004; otherwise GP’s will qualify for reimbursement under the relevant sections of the Primary Medical Services (Premises Development Grants, Improvement Grants and Costs) Directions 2004.

4.5 Alternatively, GP’s may seek reimbursement in respect of redeveloped premises under the GP Rent and Rates Scheme where the premises are leased from 3rd parties. Dependent on the extent of the accommodation needed for the extended primary care team a separate lease may be required.

4.6 Nothing in this section overrides the provisions of the relevant sections of the Primary Medical Services (Premises Development Grants, Improvement Grants and Costs) Directions 2004 as may be from time to time in-force.

4.7 Each proposal to sell a health centre should be considered on its own merits along with the costs and benefits of sale.

4.8 Transfer of ownership of health centres to GP occupiers or 3rd parties may offer the following advantages:

• The new owner would be able to undertake direct improvement in the quality and standards of primary care premises for patients; particularly where the health centre currently requires extension or replacement on the same site;
• The GP practice may be able to expand the range of primary care services that could be offered to patients;
• Better space utilisation of the accommodation may be achieved;
• GPs would have a greater say in the use of the centre, service provision and future development consistent with the concept of GP-led primary care.

4.9 Potentially there are also a number of financial benefits which may accrue to the wider NHSScotland. Holding Bodies may be able:

• to rationalise their property holdings;
• to reduce expenditure on health centre running costs;
• to focus expenditure on service provision;
• to secure a reduction in their capital debt and consequently in the payment of capital charge equivalents; and
• to arrange appropriate and cost effective arrangements for its own staff accommodation in respect of the services it would continue to provide.

4.10 Against these benefits may need to be set any of the following potential disadvantages:

• any costs to Holding Bodies and other agencies in leasing the community health and outreach services portion of the health centre; and
• the incurring of legal and other costs involved in arranging the sale and of resourcing and facilitation of any major initiative. However a Holding Body will be able to set off its legal costs against the capital receipt.

4.11 Before taking a decision to sell, or notifying a proposed sale to the Accountable Officer if required, the Holding Body should carry out an appropriate appraisal of the options having regard for Management: Section 3 of this Handbook.

4.12 The Holding Body must be satisfied that any sale would be consistent with its service and related strategies and take account of the overall interests of the occupiers of the premises. The following specific factors should be considered:

• Degree of GMS utilisation;

Where less than 10% of the existing space in a health centre is used for non-GMS, and non primary health care team purposes, the projected requirements of the GP and Primary Health Care Team occupiers should be paramount. Where non-GMS use is more extensive, careful consideration should be given to the needs of other NHS users (see paragraph 4.16);

• Upgrading required;

Careful consideration should be given to the extent of upgrading necessary to meet the developing space demands for services to be provided from the premises, the potential for appropriate development, and the suitability of the premises for finance under the relevant sections of the Primary Medical Services (Premises Development Grants, Improvement Grants and Costs) Directions 2004;

• Prioritisation of development;

Proposals should receive attention in the light of the need for premises development as identified in the Holding Body’s Property and Asset Management Strategy, and the need to prioritise all development requiring Rent and Rates Scheme funding;

• Formal process to identify preferred 3rd party developer;

A formal procedure should be followed, in conjunction with prospective tenants such as GP practices, in the selection of any preferred 3rd party developer to purchase for redevelopment an existing Health Centre.

• Best value;

Arrangements detailed in the relevant sections of the Primary Medical Services (Premises Development Grants, Improvement Grants and Costs) Directions 2004 plus any supplementary guidance from time to time in-force are intended to achieve best value for NHSScotland in respect of the provision of leasehold accommodation for GPs.

4.13 As with other NHSScotland disposals, the health centre or other medical practice property to be sold to a practice or 3rd party must be professionally valued. The Property Adviser is also expected to provide advice on related matters such as planning potential. See also paragraphs 1.7 to 1.9 of Section 1.

4.14 If the outcome of the option appraisal concludes that a sale is the best way forward, Holding Bodies should consider the need for safeguards, taking advice as necessary from professional advisers. Such safeguards may be necessary if there is concern that the land involved could attract planning consent for a more financially valuable use at a later date. The available safeguards are clawback, right of pre-emption, title restriction or a combination of such measures in the same way as could apply for any other sale of NHSScotland property. Careful consideration however should be given to the extent of safeguards introduced for sales to general medical practitioners. It is important to ensure that the purchaser of the health centre or practice premises cannot sell on the property for significant profit particularly within the 5 year period immediately following the sale, although due allowance should be made for subsequent investment in improved facilities. It should be borne in mind that the restrictions in the terms of sale for any disposal may have the effect of lowering the sale price or preventing significant financial investment into related patient benefits.

4.15 Holding Bodies should therefore include in the conditions of sale the minimum safeguards to ensure that the public sector are achieving the best possible price in the case of a sale to a GP practice. They should consider why the opportunities available to Holding Bodies as commissioner of GMS services should not themselves provide sufficient safeguards for ongoing NHSScotland use. In any event, the Property Adviser should advise on these aspects.

4.16 In the case of a health centre where there is multi-occupancy, careful consideration should be given to how a potential sale may be achieved which safeguards the interest of all current occupiers. Where several GP practices occupy a health centre and not all wish to purchase, or there are other occupiers, such as dentists, appropriate leaseback facilities must be available to those who wish to continue as tenants of the new landlord. Circumstances may also arise in which a GP practice does not wish to acquire the whole property or exceptionally that retention of part of the centre is in the public interest. Whilst it may in some cases be possible to separate physically part of the building, in the majority of health centres this will not be practical.

4.17 The considerations in paragraph 4.16 may be particularly relevant where the health centre provides a pharmacy since a community pharmacist may not enter into any association with a medical practitioner which may compromise the pharmacist’s professional independence. In the case of pharmacies, particular care may be necessary to ensure that sale rather than lease offers the best return for NHSScotland. Sale of pharmacy accommodation may need to be accompanied by suitable safeguards in the legal agreements to ensure that NHSScotland enjoys the benefits of any subsequent increase in turnover or rental income. It should be borne in mind that the proximity of a pharmacy to a medical practice, even where physically separate, materially increases the rent and thus the capital value of the premises.

4.18 Where disposal of a health centre to a GP practice is contemplated, and where existing GMS and primary health care team space utilisation is less than 90%, the Holding Body should consult with other existing occupiers in order to consider what accommodation to be used for community health or allied purposes should properly be retained. In this regard the Holding Body should ensure that sufficient area is reserved for future use and that appropriate arrangements are negotiated in the form of tenancy agreements.

4.19 It is the responsibility of the Holding Body as advised by the Legal Adviser, to ensure that the terms of sale do not give rise to any subsequent suggestion that NHSScotland has not achieved best value as a result of the disposal. Since the circumstances of sales may vary greatly, depending on the users and other aspects, the protection necessary and the legal means of doing so may need to be tailored to each case.

4.20 Holding Bodies are free to progress sales of health centre/surgery property (or sites for such provision) without involving the Health and Social Care Directorates unless notifications to the Accountable Officer is required in the specific circumstances listed at Annex I. The notification arrangements and certification requirements are described at paragraphs 1.17 to 1.18 of Section 1. However, because the statutory powers of Holding Bodies are limited in this area it is necessary for the execution of instruments for all such disposals by these Bodies to be carried out by the Scottish Government Health and Social Care Directorates. Certification, as required by Annex III, should be provided by the Holding Body at the notification stage.

4.21 When an option appraisal concludes that a sale should take place to the resident GP/GP practice/consortium of GP practices, the Holding Body should write to the Property Adviser (with copy to the Legal Adviser) asking for a formal valuation of the property. The Property Adviser will provide a Market Value (MV as per the RICS Appraisal and Valuation to update) subject to the special assumptions detailed below. At the same time, his advice should be sought on any other aspects, such as development potential (see paragraph 4.13) which may be relevant to the terms of the sale. If there is development value there should be a clawback for at least 5 years for the sale to the sitting GP or 3rd party. He may also advise on the suitability of the premises for cost rent in accordance with the relevant sections of the Primary Medical Services (Premises Development Grants, Improvement Grants and Costs) Directions 2004 if the sale is to a GP or GP practice. The Holding Body should then instruct the Legal Adviser to make a formal offer to the purchaser, at the selling price recommended by the Property Adviser and the Holding Body should indicate to the GP practice whether and to what extent extra cost rent finance may be available. The special assumptions are:

(a) Planning permission would only be available for Use Class 2 (Use Classes) (Scotland) Order 1997 and reflecting the value of the adaptations, alterations and extensions not only to an incoming doctor but also to competing users such as dentists, veterinary surgeons and other professionals, and

(b) That only one General Practitioner (or one General Practice) is permitted to be in the market to use the premises for practice purposes and any element of goodwill attaching to the premises by reason of the fact that a medical practice has previously been established is excluded.

4.22 If the purchaser is unwilling to accept one, or more, of the conditions attached to the sale, the Holding Body should seek the advice of the Property Adviser and the Legal Adviser on the implications of accepting the purchasers’ wishes. If the sale is covered by notification requirements, a fresh notification should be submitted to the Accountable Officer if the basis on which the original approval was given materially changes.

4.23 If the offer for sale is accepted, the Legal Adviser should carry out the necessary conveyancing. However, the Holding Body is ultimately responsible for coordinating the necessary action on completion of the sale and for ensuring that the legal arrangements provide the appropriate level of protection of NHSScotland interest. Final certification should be completed at the conclusion of the sale.

4.24 When the Holding Body reaches a conclusion on an application to purchase a health centre, it should inform the interested parties in writing of its decision and the reasons underlying the decision.

4.25 Holding Bodies may also receive proposals from GPs for the purchase of surgery premises with little or no community health provision, or unused sites. Such proposals should be considered against the broad principles in this Section and take account of other parts of the Handbook e.g., those covering health related sales and the importance of avoiding piecemeal sales prejudicing wider disposal action. In considering the sale of a site, other potential interest in the land and possible proceeds should be taken into account in the appraisal of options, with the assistance of the Property Adviser. Consideration of the need for clawback may be particularly relevant where disposal of an unused site is involved (see paragraph 4.14).

4.26 All potential sales should be assessed as outlined above, with the modifications noted at paragraphs 4.26-4.28 and 4.30 for proposals from 3rd parties. Sales to 3rd parties should be at Market Value subject to special assumption to consider any potential bid by a special purchaser.

4.27 In respect of the potential benefits identified at paragraph 4.8, Holding Bodies will need to consider how far such potential benefits could be realised by GPs as tenants of a third party and what safeguards could be introduced to ensure that the developing needs of GP and other tenants would be appropriately addressed. Holding Bodies should place due weight on the possible benefits to be gained where PPP would allow renovation, development or extension of the premises, with all current occupiers becoming tenants of the new landlord, set against the potential return required by the third party.

4.28 In the case of potential sales to third parties, consultation should involve the GP practice(s) occupying the Health Centre and should not proceed without the agreement of all existing tenants. The guidance at paragraph 4.14 on safeguards of sale with particular reference to potential third party sales should be carefully considered.

4.29 Where the health centre is on a site shared with other NHSScotland facilities, the Holding Body should, in conjunction with all interested parties including occupying GPs, appraise both the ongoing ownership options for the health centre separately and for the site as a whole.

4.30 Applications of this kind should be considered in the light of the guidance outlined above. The valuation of the existing property should take all relevant factors into account.