Stradbroke Doctor’s Surgery. What actually happened.

It is well known in Stradbroke that there has been an ongoing disagreement between the Parish Council and the Trust, that until recently, rented the doctor’s surgery building to the doctors.

This has ended with the Trust handing their lease back to the Parish Council (who have always owned the freehold). The Council now lease the building directly to the Doctors without the “middleman” of the Trust.

A number of stories with varying degrees of accuracy are circulating about what happened. This blog is an attempt to set the record straight and explain not only what happened but, crucially, why.

Why then?

A number of rumours seem to suggest that the Parish Council has been out to get the Trust. The dispute you will read about below has taken both time and money that could have been used for other projects so why did the Council persist with this? After all it would have been much easier to just allow the Trust to have their own way.

The simple answer is to ensure the future of the surgery. The Council was alarmed that the Trust wanted to use the surgery building as security for loans to raise money for other projects. They were also concerned how little money was being spent on maintaining the surgery. The Trust on the other had were insistent they would continue spending most of the money on other projects and refused to even tell the Council what they were spending. It even had a solicitors letter sent to the Council saying that it did not have to tell the Council how much rent it received from the doctors.

With the neighbourhood plan meaning growth for the village and an increasingly ageing building the rent money was now needed for the surgery building and sadly the only way to achieve this has been a dispute with the Trust to ensure the money can be spent on the surgery.

In 1995….

A bit of local history is necessary to understand what happened. Back in 1995 the existing local doctor (who unsurprisingly lived in Doctor’s Lane) was retiring. It looked like Stradbroke would be left with no local doctors and that everyone would have to travel to Fressingfield.

Understandably a number of people thought this was not a good thing and the Parish Council set about working out how they could ensure a doctors surgery remained in Stradbroke.

After much discussion it was decided the best thing was for them to give some land opposite the Community Centre and set up a Charitable Trust to be called the Stradbroke Health Trust.

The Health Trust was given a lease on the land that enabled it to borrow money to build the surgery. They would use the income received from renting the surgery building to the doctors to pay the mortgage off.

Once this borrowing was paid back the lease said that a “fair market rent should be paid” to the Council:

Indeed Peter Smith who was the Chair of the Health Trust wrote to the Council confirming that once the mortgage was repaid they would expect to negotiate a new lease at a commercial rent that would bring a reasonable revenue to the Parish Council.

Health Trust becomes Charitable Trust

In 2008 some new Trustees had arrived and the Health Trust took over some longstanding local charities to become the Stradbroke Charitable Trust.

Once the mortgage had been repaid the Charitable Trust continued to pay a very low annual rent on the surgery of no more than £50. It was receiving a fairly substantial rent of around £10,000 a year and the Trust began to spend this money more on other projects than it did on maintaining the surgery building (which at the time was reasonably new anyway).

The Trust carried out a number of charitable projects – for example buying land for the allotments. They managed to get additional funding for a number of these and there is no doubt these projects have been of benefit to Stradbroke.

The 2016 Rent Review

In 2016 the Stradbroke Charitable Trust very sensibly decided to convert to become a Charitable Incorporated Organisation in order to avoid the need for Trustees to be personally liable.

However it isn’t actually possible to covert from an unincorporated charity to a CIO so what actually needed to happen was that all the assets of the old Trust needed to be transferred (or to use the legal term assigned) to the new one.

This process started and the lease was dusted down by new councillors. It transpired that the three yearly rent reviews hadn’t really happened and so one was commenced. The councillors asked the clerk for advice on the rent review process and a huge disagreement erupted.

At the time a number of councillors were also trustees and they suggested that the rent should just be for the land. A “ground rent”. Various valuations were produced, one of around £12,000 a year as a full market rent and £1,200 as a ground rent.

The Council at the time chose the lower £1,200 ground rent figure suggested by professional valuers but the Trust was still furious. It even refused to pay the rent for a period of time.

Assigning the Lease

The process to assign the lease to the new CIO continued but ended up in a dispute over the “deed of assignment”.

The Council asked the Trust to agree to a clause that would mean that the surgery building couldn’t be used as security for loans. The Trust refused to agree to this.

The Trust asked the Council to agree to change the rent determination clause in the lease to ensure that only a ground rent of 10% of market rent would ever be paid. The Council did not agree to this.

Eventually both sides agreed to a deed without either clause in. The Council remained concerned that the lease might be used as collateral for a loan. The Trust remained concerned that the Council might put up the rent.

A number of councillors who were also trustees resigned from the Council.

The 2019 Rent Review

In Summer 2018 the next rent review process commenced. Attempts to agree a rental figure between the two parties (or even to agree on an independent valuer to set one) failed and so in accordance with the lease a reference to the President of the Royal Institution of Chartered Surveyors (the RICS) was made.

The RICS Dispute

The RICS appointed an independent valuer to agree a rent and it soon became clear there was a significant disagreement between the Trust and the Council on the basis for how the rent should be set.

The Trust argued this should just be for the ground and that the building should be disregarded. The Council argued the rent should include the building and that this was the original intention of the lease.

The Barrister’s Opinion

The RICS valuer instructed a barrister to give his opinion on the dispute which he did in a 15 page document.

The barrister wasn’t able to take account of the documents the Council submitted showing the intention of the Council back in 1995 but stated that:

…the exclusion of the correspondence and the Feasibility Study is a matter which is beneficial to the Trust in this dispute. While I accept they are not totally unambiguous, in my view they definitely point towards the parties subjectively intending that more than a mere ground rent would be payable in the future.

The barrister went on to comment:

The Lease clearly aims to set up a balance between the interests of the Council and the Trust through the rent provisions. In recognition of the fact that the Trust had paid for the building, payment of the ‘fair market rent’ was to be deferred until after the borrowing had been repaid. No date was set for that to be done – an omission which was of course beneficial for the Trust. The concessionary rent during this period was just £1 pa. That is a very significant financial benefit for the Trust, and detriment to the Council, as compared with a full rent. It is also relevant to note that this was, essentially, a 50 year lease. Thus, while the Trust bore the expense of the HC, it would reap the benefits of occupation for a significant time.

The barrister decided in favour of the Council and agreed that the building should be included concluding:

It may well be apparent, from reading this Advice so far, that my view of the Lease is that as a matter of the language used, the Health Centre forms part of the Premises and ought to be valued. My view is fortified because it accords with the fundamental principles involved in cases of this nature, in particular those relating to the desirability to value property ‘as it is (the presumption of reality)…..

On balance therefore, although this is a difficult and complex case, I am of the view that the Premises, within the Rent Review Clause, includes the Health Centre and can therefore be taken into consideration…when certifying the fair market rent.

Surrender of the Lease

The Council invited the Trust to meet and discuss what the rent might be in the light of the barristers opinion. The Trust declined to meet or to propose a rent figure and insisted the Council proposed a rent. The Council proposed £12,500 a year (which is the rateable value and what it had initially proposed). The Trust responded with a letter surrendering the lease.

The Council agreed to accept the surrender as it felt it was the best way to secure the long term interests of the doctors surgery. Since the surrender the Council has met with the practice manager, undertaken a conditions survey and begun to address the issues found. It also voted to spend an additional £10,000 of money from the “community infrastructure levy (CIL)” that comes when new houses are built on surgery improvements.

Conclusion

Hopefully this post answers some questions that have been raised in the village. Throughout this whole process all of the parish councillors have had one concern. To protect the doctor’s surgery. It is a shame it hasn’t been possible to work with the Trust to do this but the new arrangement will enable the surgery to be protected for the future.

You can read the full supporting documents on the Parish Council website.

The author of this post has been Chair of Stradbroke Parish Council from May 2018. It is written in a personal capacity.

Election Impint: Promoted by and published on behalf of James Hargrave, 3 Meadow Way, Stradbroke, EYE IP21 5JW (this is because I am a candidate in the 2nd May 2019 Stradbroke Parish Council election).