In this episode, Ann Cojeen, commercial real estate partner at Hempsons, discusses how NHS providers can secure value for money in property transactions and disputes.

Ann delves into the estate code, particularly HBN00-08, and its references to value for money. She explores the roles of agents, surveyors, and solicitors in achieving value for money, the importance of commercial terms, and the benefits of appointing an agent.

Ann also covers the significance of fit-out works, the necessity of having a detailed specification, and the role of a dilapidations surveyor. Tune in for valuable insights and top tips on making informed decisions and achieving value for money in property transactions.

To find out more about our real estate services and to contact the team, visit https://hpsns.co/ytrealestate

Welcome to this podcast. I'm Ann Cojeen, partner at Hempsons, and today's session is about securing value for money for NHS providers. I'm going to be looking at the estate code, in particular HBN00-08, which has various references to value for money, and in particular, it's worth bearing in mind that because lots of healthcare services are commissioned by NHS England and ICBs as commissioners, there is a framework that trusts are required to follow. One of them is to ensure that the estate operates flexibly, economically, and efficiently; it provides and maintains appropriate and affordable healthcare facilities that are fit for purpose, represent value for money, they complement statutory requirements; and they also support the provision of good quality clinical care.

In today's session, I'm going to be having a look at how the professional team can assist you in trying to achieve value for money in property transactions and also property disputes. I'm going to be having a look at the role that the agent and surveyor can play as well as the role that a solicitor plays in it. I'm going to have focus in looking at the deal itself and heads of terms, as well as then taking some time to look at works that need to be carried out to a property and also look at potential dilapidations viability. As I mentioned, value for money is a principle that is mentioned throughout the estate code, and people ask me about the estate code and whether you need to follow it to the letter. My view is that it is representing best practice, but there might be certain situations and factors in play that mean that there are good reasons for not following the recommendations that are in the estate code in every situation. But you do need to have a look at this on a case-by-case basis, and most importantly, you do need to make sure that for audit purposes, you document your decision making so that you have an audit trail to justify the decisions that you've made.

One of the other key aspects of getting value for money is looking at commercial terms, and this is where when you are considering a transaction - if you have a look at property that you want to lease or you are looking at a property that you want to potentially sell or buy - it's really important right at the start of the matter to have a think about what the key objectives are for the trust. And one of the questions it's important to ask is whether it's really important, well, whether it's worth appointing an agent. There are some key benefits to appointing an agent; they do tend to know what's happening in the local market, and that's particularly important where you are having to try and secure premises for the trust because there is a new clinical contract that's been awarded to the trust and you want to make sure that the locality that the service is going to be provided from is the right one. One of the other key points that is beneficial in having an agent is that they are most likely to have the knowledge about what a headline rent and incentives that a landlord might offer could be, and they can then obviously negotiate the terms for you for that.

The third area is that an agent is most able to conduct a property search and find the most suitable space for your needs and at the right cost. So, if we consider the question, can an agent really save us money? If I give you an example of a situation that we've dealt with recently for a client who needed large commercial premises for clinical use, the key question to ask yourself is what deal can you negotiate directly with a landlord versus what concessions an agent with market knowledge might be able to obtain? We recently acted for a client who had been looking at trying to secure premises and had been offered the following terms: a 15-year lease. a rent of £250,000 pounds per year with no break rights and no incentives such as rent-free periods. Once the client had reviewed the heads of terms, they asked us for our views on them, and we suggested that they looked to appoint an agent who could at least give an initial assessment of their proposed heads of terms. Ultimately, the agent ended up negotiating the deal for the client who was able to walk away with a lot more beneficial deal of a 10-year lease at a rent of £207,000 per year, with a break right at year five, and a two-year rent-free period, which equates to a saving of £165,000 a year. So, you can see from that that there are key benefits in getting an agent to negotiate or at least certainly review proposed heads of terms first, and then potentially negotiate a better deal for you. There are times though when because of your own knowledge, it would be perfectly acceptable for you to be negotiating terms yourself, but if you are looking at various properties, you might not necessarily have the market knowledge that an agent can bring.

I'm now going to have a look at the heads of terms because I find that I often get asked by clients right at the start of a transaction, they send me heads of terms and I always ask, have you agreed them or not? Hopefully, most of the time they've not actually agreed them, but I get asked to give legal commentary on the heads of terms. But as I point out, I am not qualified to be able to comment on whether the heads of terms are commercial or not. So, whether the rent and the term offered and the financial concessions are actually, market terms and effectively a good deal. I can comment obviously on matters such as the term and the break rights, NHS concessions and flexibility around dealings such as assignment, and various other legal aspects. But I have to defer to a surveyor when I look at the commercial terms and so I find it's always beneficial to ask if a client has already got input from a surveyor or if an agent has negotiated the terms for them, before I give a legal commentary on them so that we can make sure that we're joined up and we get all the relevant input that we need from the relevant professionals.

Related to securing property, certainly when a client is looking to lease property, it's usually the case that fit out works need to be done to make sure that the property can be used for the intended use and delivery of service. But it might be the situation that there are also other works which should be carried out, for example, if the building is not in a very good condition, and the landlord or a previous tenant has clearly not been maintaining it. In those situations where you've got various types of works that need to be carried out, it's really important to step back and have a think about the best way of trying to structure the arrangement. You also need to have in mind the nature of the works that need to be carried out, and it's critical that the works are identified and they're detailed in a specification and drawings. And this is where a surveyor is invaluable and also potentially an architect, and there might be other professionals such as mechanical and electrical engineer, heating specialist. But if you're able to engage the services of a surveyor right at the start, when you know that you're wanting to go into the building, but works are required, they can provide a detailed list of the works that are needed, and they would also be able to guide you as to whose responsibility the works are. So, for example, there might be some works that need to be carried out to the building by the landlord because it's not in the best condition and it's not really right that as tenant, you should be footing the bill for those works, but you also want to make sure that the works are carried out to the right standard, and this is where it's important to ensure that you've got a contractual commitment from the landlord to do the works and you would need a detailed specification for those. This is where we normally advise entering into an agreement for lease to make sure that the landlord does the works to the required standard and does all the works that it is supposed to be doing. Whilst those works are carrying on, it's imperative that you do have inspection rights, so that you can be monitoring that the works are being done and they're being done to the right standard and also, coming up to the time when the works need to be, well, they are going to be completed and practical completion is looming, it's essential that your monitoring surveyor has the rights to be able to attend the inspection and make representations as to whether or not practical completion should be certified.

You can see in relation to works that it's not sufficient simply for a solicitor to be involved in trying to get an agreement for lease in place for you. It is also important that you get the input from other professionals such as the architect, surveyor, and others.

I'd like to then just talk a little bit about dilapidations and in particular really, terminal dilapidations. So, this is a situation where a lease is coming to an end and you are looking to move out of the property and the landlord wants the property back, potentially, but this is where a landlord might serve you with a dilapidations schedule detailing works, and a lack of repair of maintenance that the landlord thinks that you as tenant are responsible for before you hand the building back. So, we refer to it as a dations claim, and when you receive such a document, it would be a list of lots of works potentially, or certainly a list of works that the landlord thinks that you ought to be carrying out. The key here is how do you know what the claim is really worth? How do you know if all of the items listed on that dilapidation schedule are actually your responsibility and your liability as tenant? This is where a dilapidations surveyor can be really useful because they're used to looking at dilapidation schedules, they're able to review them against the responsibilities that you have in the lease, and also in any supplemental documents such as our license for alterations. And they can guide you then and give their assessment of whether they think that the dilapidation schedule is actually genuine or not, or whether there are aspects which ought to be removed. The key is making an informed decision.

So just to conclude, I'd like to talk through top tips to achieving value for money. One of the key aspects is obviously, as an NHS organisation, the strength of your covenant. The fact that you are good for the rent, you are going to comply with the obligations, it makes you a very attractive tenant for landlords. And it's important that we recognise that and have the right people advising you in relation to different aspects of the transaction or a dilapidations claim. You want to make an informed decision and engage early with suitable professionals, and I find that with dealing with more complex matters with surveyors and agents and other professionals, what I really like about it is that joined up approach for yourselves as NHS trusts, we're acting together as a team, making sure that we've got a joined up approach, because at the end of the day when we talk about value for money, it's not just about trying to save money. There is that bigger picture that we need to be appreciative of when we look at the estate code, the reference is to value for money do also talk about all those other aspects which help us achieve value for money. So, we have to look at the bigger picture and that's what's really important to help you. And hopefully you've found that there is some useful pointers and tips in this podcast today. But if you have any questions about today's session, please feel free to get in touch. You can use the email manchester@hemps.co.uk. We'd be more than happy to help. Thank you very much.