Working with third parties

Our multidisciplinary strategic asset management team is made up of professional property experts who support the wider NHS estate in evaluating and delivering new healthcare environments. However, we also need to engage and work with various stakeholders across and beyond the NHS to achieve this transformation of the estate - identifying and considering all opportunities, be it new builds or refurbishments, acquiring new property, or selling surplus sites. 

I have an idea … why and when do I need to engage NHSPS?

As estates advisors to commissioners and the wider NHS, our remit is to assist your decision-making process and facilitate estate improvements to improve service delivery.

Wherever possible we will engage and find solutions; it is essential that NHSPS’ strategy, development, and transaction managers are involved at the earliest opportunity. As we will in most cases retain an interest in the land, we must ensure that any development, extension, or refurbishment is workable and sustainable.

I have an idea for a development opportunity, but don’t know where to start. What are my next steps?

Please come and talk to us – you can start through our Customer Support Centre and will be redirected to the appropriate team. We will engage with you and input into your Project Initiation Document (PID). The PID will identify the opportunity, show that alternative options have been considered following which to develop a site within NHSPS’ estate.

It is essential that you have agreed the clinical service requirements, or we can help you do so, although we expect variations in the requirements as the opportunity advances. We do not expect a worked-up business case and we can provide examples of PIDs to help you.

When assessing the financial viability of a project, NHSPS is appraising it in the best interests of the NHS. The financial analysis drives strategic decision making, helping to deliver value for money for the NHS.

When appraising a project, NHSPS needs to consider the costs of land and construction work involved, and the rent or repayment required to fund the project.

How do you financially appraise customer projects?

When assessing the financial viability of new build healthcare floorspace or an extension to an existing health building, NHS Property Services needs to consider the cost of land, the cost of the construction work, and the rent or repayment required to fund this.

• The cost of land is based on the market value of the land at the time of the project.
• Construction costs are based on a Gross Internal Floor (GIA) basis and are benchmarked continuously in line with the market and our own construction project data.
• Rent for new floorspace will be calculated on the Net Internal Area measurement and to either of the higher of 3.5% of capital employed or District Valuer (DV) rent.

How do you financially appraise refurbishments?

All major refurbishment requests by our customers will be reviewed on a case by case basis. Where refurbishment requests are approved to progress, costs which address the functional obsolescence of an asset will be categorised as NHSPS costs and not chargeable to our customers. Costs which are not categorised as NHSPS costs but are specific requests from the customer are charged to the customer as a ‘capital improvement charge.’ The capital improvement charge is charged on top of the Market Rent of the building.

Do you apply a profit margin to the projects you deliver?

No, we don’t.

NHS Property Services only disposes of property which is no longer required for the provision of NHS commissioned services, as declared by NHS England / Improvement (NHSE/I) or the relevant commissioners. A freehold sale can occur as part of a disposal, or as the result of a wider development scheme.

Can NHSPS sell freehold land?

No. Unless the site is declared surplus by the commissioners or NHS E/I, we are not permitted to sell an operational site. It is against NHSPS to dispose of land which is required for the ongoing delivery of commissioned health requirements.

The exception is where Assets have been clearly vacant for 6 months or more, and where NHSPS has attempted to contact the commissioner to provide evidence of any ongoing healthcare requirement. In this instance, NHSPS may start marketing those sites for disposal.

Any land sold by us will be at Market Value.

Is there a surplus land disposal process?

Yes, if the commissioner declares the site surplus a Property Vacation Notice (PVN) will normally be completed by the commissioner and given to NHSPS.

NHSPS have a prescribed PVN form which will require signatures from the commissioner’s Accountable Officer and the Chief Financial Officer copied to Director of Finance of Local NHS England Direct Commissioning Organisations (DCOs), or in the London Region, to the Financial Assurance Team.

You can learn more about our disposal process in our guide.

What happens next?

When a PVN has been served, NHSPS may place the property on the Register for Surplus Public Sector Land (ePIMS) for a period of 40 working days. NHSPS may also place the property on the Open Market for sale at this point, but no offer from the private sector can be accepted during the ePIMS period.

Does the local health economy benefit from the sales proceeds of surplus land?

All our proceeds are reinvested into the NHS. Previously, proceeds were pooled nationally and split between regions for reinvestment by the Department of Health and Social Care (DHSC). However as of May 2021, 50 per cent of the net proceeds from our property disposals of up to £5m now go to local health economies for reinvestment to support agreed ICS estate priorities. 50 per cent will continue to be pooled nationally and reinvested across the country by DHSC to fund national priority building improvements.

We are backdating this policy, applying it to properties that were handed back for disposal handback since 1st April 2020, enabling more schemes and communities across the country to benefit.

Is NHSPS ever permitted to recycle 100% of surplus land proceeds?

Yes, NHSPS is permitted by DHSC to develop land and recycle any capital released through the development sale of surplus land, as an alternative funding source. This will be considered if the proposal relates to an ICS priority project and only if there is a direct and significant link with the surplus land and the ICS priority project. An example of this would be where the proposed healthcare development releases land for disposal, on the same site.

How do you/ I demonstrate a project is an Integrated Care System (ICS) priority?

ICS governance needs to support investment as an estate priority, and ICS estate priorities as set out in the 2018 STP (now ICS) Estates Workbook and subsequent 2019 refresh. The onus would be on the ICS to update us to changes to the clinical and estate needs.

I have been asked to sign a Commissioning Comfort Letter (CCL), what is this?

This is a letter of support and intention from the commissioner to support the development and in consideration for NHSPS’ capital spending commitment to commission services, and pay rent on completion of the development for an agreed period. If it is a large development project, an agreement for lease may be required between the commissioner and NHSPS.

The comfort letter will state whether the commissioner will refund NHSPS’ professional fees if a project is aborted. An agreement will be required to record this, giving assurance that the rent and occupancy costs will be paid during the whole lease period.

NHSPS have a CCL proforma which can be used by commissioners to confirm project support. The letter should be agreed and signed by an Integrated Care System or Clinical Commissioning Group Chief Executive Officer and Director of Asset Management at NHSPS or equivalent persons at the relevant commissioner before it is sent to the NHSPS development project lead surveyor.

How do we to work with NHSPS if we are considering an Asset Transfer?

NHSPS is committed to working with you to provide short, medium, and long-term property solutions to optimise the NHS estate, resulting in a fit for purpose, agile estate to meet the needs of the local healthcare economy.

If you are considering an Asset Transfer, we welcome an approach in the early stages of your internal Asset Transfer discussions to ensure all options are evaluated, supporting you and your estate requirements, and to ensure a transfer is achievable.  

Notwithstanding ownership, as a lead NHS advisor across a wide range of Property & Facilities Management disciplines, we have an opportunity to apply our professional knowledge, skills, and expertise to directly support you in your future estate plans.

Learn more about the NHS asset transfer policy.

Where there is insufficient NHS funding available for a property development project, we can explore alternative funding sources individually or in combination, such as third-party developer capital.

I would like to redevelop a NHSPS property, can I do this in partnership with a third party?

Yes, but NHSPS must be provided the opportunity to look at delivering in the first instance and we must be engaged at the early stages of your opportunity is not possible for us to deliver, then we will consider entering a leasehold arrangement with a third party so that the third party can deliver the opportunity.

To take this option forward, NHSPS must agree the extent of the land required, the rent payable under this arrangement, the service model and schedule of accommodation. These considerations would be required by a commercial development to enable the scheme, including details of the funding routes.

Will NHSPS take a head lease on a new healthcare building?

Yes, NHSPS can agree overriding and head leases. Under IFRS 16 these leases, including those that at peppercorn rents, will be recorded at market value. This means there will be a CDEL impact to NHSPS and therefore the DHSC balance sheet. If CDEL cover is provided and if lease terms are commercial and the proposal is the best solution for the system, NHSPS will agree to these types of leases.

Can you help me calculate the CDEL impact?

Yes, NHSPS can assist in calculating the likely impact of CDEL, please get in touch.

The NHSPS Town Planning team provides support on activities such as planning application submissions, policy lobbying, strategic site promotion, and Section 106 (S106) / Community Infrastructure Levy (CIL) funding opportunities for projects and sites within and beyond the NHSPS estate.

What is Strategic Site Promotion?

The NHSPS Town Planning team proactively identify opportunities for strategic site promotions through the planning system, to ensure that NHS sites are appropriately allocated through local planning policy documents. This enables a smoother planning process for the future development of our sites and maximises the value of surplus NHS sites. This activity has already generated £millions in value uplift for NHS sites that are surplus to NHS requirements and resulted in dozens of sites being allocated for health use.

Subject to resource availability, this service will not be chargeable for health commissioners where dedicated NHSPS resource or external consultancy time is not required i.e., policy examination appearances

Can you help with a Planning Policy Consultation?

Yes, the Town Planning Team lead on joint NHS responses to all major planning policy consultations for the wider NHS, including the National Planning Policy Framework and London Plan. The team review planning policy consultation documents in England and, where appropriate, respond via engagement with other NHS teams to ensure NHS interests are protected and promoted. If beneficial, ICS Planning leads can choose to jointly submit representations with NHSPS if a planning policy will impact them.

This service will not be chargeable for health commissioners, subject to resource availability.

What about planning applications on a non NHSPS site, can you help?

NHSPS can assist NHS colleagues on non NHSPS sites across a range of planning matters and assistance can be extended on non NHSPS sites, subject to team capacity.

This service will be provided on a time/2*salary basis, or a fixed fee as agreed.

I don’t know how to capture S.106 or CIL funding to help part fund a project?

Working collaboratively with commissioner leads, the NHSPS Town Planning team will be seeking to capture more funding for NHS priority estates and capital strategies. NHSPS can manage the professional and technical aspects of engagement with the Local Planning Authority for the purpose of securing funds.

All activities directly related to the NHSPS portfolio are self-funded and would incur no external charges.

On non NHSPS owned sites assistance will be offered on a cost recovery basis of 5% which, where possible, is a cost included into the funding bid. If third party professional fees are required, e.g., a Barrister or Quantity Surveyor this will be pre-agreed on a case-by-case basis with the instructing ICS.

Can you offer advice in Business Cases?

Yes, we can help with Business Cases. NHS Property Services has in-house expertise to support the business case process, whether we are developing the case ourselves or supporting you as the customer. We can advise our NHS partners, even if we are not to be the holder of the Head Lease on a newly developed property, for example.

Read our guide on the business case process and how we can support you.