Memorandum of Occupation

As 1 April rapidly approaches not all CCGs yet have a clear idea of what will be put in place to regulate their use of NHS Property Services (NHS PS) premises - let alone what costs may be associated with this use. What is clear is that NHS PS will be requiring each CCG to initially enter into a Memorandum of Occupation (MOO) as an interim measure and subsequently into a formal lease.

For the uninitiated a MOO is a form of licence and at one extreme could encompass use a whole building and at the other extreme might cover limited use of particular workstations. As well general obligations to be observed by the occupier the MOO will include provisions relating to an occupation fee.

Where NHS PS is itself a tenant the MOO (and the eventual underlease) should be a pass down of an appropriate proportion of the costs from the lease under which NHS PS holds the property. There could be additional costs arising out of any extra services NHS PS agrees to provide or any service charge NHS PS must pay. On the face of it this should leave CCGs with broadly commercial financial terms in respect of its occupation (albeit that NHS PS may be locked into rents which are now above market rent and it may also be the case that CCGs may be required to take more space than perhaps they would ideally want).

The occupation fee in the case of freehold property may be more complicated. NHS PS has declared its intention that the running costs charged to successor bodies and tenants will be based on the total current costs incurred through PCTs and SHAs. What is not clear yet is what these costs will consist of. There will be rent or something equivalent to rent. The reference to running costs suggests that the rent will not necessarily be an open market rent but may be based on holding costs (which could include depreciation and possibly capital charges if NHS PS is subject to the capital charges regime) as well as other management costs factoring in the cost of services provided.

There has been some concern that NHS PS might use such leasing arrangements to help plug a reported funding gap but there is nothing to suggest that this is the case. The declared aim of NHS PS is clarity for CCGs (and indeed all of its occupiers) in respect of rent leases and services and as well as achieving stability and transparency in property costs.

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