GUIDELINES FOR HEALTH PROVIDERS LEASING OUT

Land and Property Section Health Infrastructure Unit Department of Health Updated April 2011 GUIDELINES FOR HEALTH PROVIDERS LEASING OUT OF HEALTH CENTRES HOSPITAL FACILITIES DENTAL CLINICS 6 April 2011

CONTENTS 1. DEFINITION... 3 2. RESPONSIBILITY FOR LEASING AND NEGOTIATION... 3 2.1. REGIONAL DIRECTORS/AREA CHIEF EXECUTIVES OF HEALTH REGIONS/AREA HEALTH SERVICES3 2.2. INFRASTRUCTURE PROGRAM DEVELOPMENT UNIT... ERROR! BOOKMARK NOT DEFINED. 3. LAND STATUS... 4 4. ESTABLISHING MARKET RENTAL... 4 5. MINISTERIAL AND EXCO APPROVALS... 4 6. LEASE AGREEMENTS: WHO CAN LEASE?... 4 7. LEASE NEGOTIATION... 5 8. MANAGEMENT... 5 9. LEASE COMPONENTS... 5 9.1. LEASE PARTIES... 5 9.2. PREMISES... 5 9.3. VALUATION... 5 9.4. RENTAL... 5 9.5. RENT REVIEWS... 6 9.6. TERM... 6 9.7. TERM OPTION... 6 9.8. SHORT TERM TENANCIES... 6 9.9. OUTGOINGS... 6 9.10. FURNITURE... 6 9.11. MAINTENANCE... 6 9.12. CLEANING... 7 9.13. INSURANCE... 7 9.14. OTHER CONDITIONS... 7 9.15. SPECIAL CONDITIONS (EG. EARLY TERMINATION OF AGREEMENT)... 7 10. PROCEDURES FOR LEASING... 7 10.1. PRELIMINARIES... 7 10.2. POWER TO LEASE : HEALTH CENTRES AND HOSPITALS... 7 10.3. VALUATION... 8 10.4. CONDITIONAL NEGOTIATION... 8 10.5. APPROVALS... 8 10.6. LEASE DOCUMENTS: PREPARATION AND EXECUTION... 9 11. CONVEYANCING: LEASE AGREEMENT... 9 12. EXISTING LEASES: OPTION RENEWAL... 10 13. RENT REVIEWS... 10 14. SHORT TERM TENANCIES... 11 15. FURTHER ADVICE... 11 2

1. DEFINITION "Leasing Out" in this instance refers to leasing arrangements whereby a Health Region / Health Provider through the Minister for Health or the WA Country Health Service (whichever is applicable), leases out consulting room facilities within Health Centres and Hospitals or other clinical health facilities to private Medical, Dental or Allied Health practitioners or other health or community groups at current market rental as determined by the Valuer General s Office. It also includes leasing out hospital kiosks. A formal lease agreement should normally be entered into for tenancy periods of more than 12 months for any arrangement in which a private practitioner has exclusive use of a consultancy room, either on a full time or part time basis, for private practice. Hospital kiosks can be dealt with as a license to occupy instead of a lease. Leasing Out of Health facilities should also be managed in accordance with the Department of Treasury s Government Asset Disposal Policy. The Department of Health is not permitted to retain properties/facilities that are surplus to the operational requirements of the Department specifically to lease to a 3 rd party. 2. RESPONSIBILITY FOR LEASING AND NEGOTIATION Approval from the Chief Executive, WA Country Health Service or Area Chief Executives of Area Health Services is firstly required before proceeding with any leasing agreements. Regional Directors/Area Chief Executives of Health Regions/Area Health Services are responsible for determining whether space is available for rent and the impact (f any) the proposed service will have on current government health services, establishing current market rental and negotiation and management of leases based on policy and operational advice provided by the Land and Property Section of the Health Infrastructure Unit. It is important to be aware that the Lessor under a formal lease agreement is to be the Minister for Health (in the Metropolitan Area) or the WA Country Health Service for reasons indicated at item 6. The complementary roles of Health Providers and the Land and Property Section of the Health Infrastructure Unit are identified as follows: 2.1. Regional Directors/Area Chief Executives of Health Regions/Area Health Services 2.1.1. Lease negotiation and primary management responsibility including: Valuation (Market Rental) - Valuer General s Office or private licensed valuer Rent Determination Lease Negotiation (ie: floor area, rental terms, period and conditions) Conveyancing - Lease Agreement Rent billing collection and follow up Rent Reviews - annual or otherwise 3

2.2. Land and Property Section of the Health Infrastructure Unit 2.2.1. Consultancy, advice and liaison. 2.2.2. Advise Health Providers on specific issues: Policy & Procedures Land status Ability to Lease Legislative & Legal requirements and constraints Ministerial & EXCO Approvals 3. LAND STATUS It is important for Health Providers to check on land status with the Land and Property Section of the Health Infrastructure Unit before proceeding with a new proposal to lease out premises. Land held as a Crown Reserve (ie: Crown Land Title with a Management Order) must have a Management Order in favour of the Minister for Health or the WA Country Health Service (whichever is applicable) for a specified Hospital/Health purpose with power to lease. A Management Order is provided by consent of the Minister for Lands. Land held in Certificate of Title by the Minister for Health or WA Country Health Service is owned by the Department and leases over such lands need to be compliant with the current zoning of such land. (Local Government Authorities can advise in this regard). All leases require EXCO approval (Governors consent in Executive Council). 4. ESTABLISHING MARKET RENTAL An early and important step is for Health Providers to contact the Valuer General s Office (or private Licensed Valuer) and obtain a market rental valuation as the basis for leasing out space at an agreed rental. It is essential to initially identify, the floor space in square metres for lease, the period and optional period if any and a proportional cost of outgoings to enable valuation to be undertaken. A Regional Director/Area Chief Executive has discretion to apply less than market rental in individual circumstances but only where special consideration is warranted. 5. MINISTERIAL AND EXCO APPROVALS Proposals for leasing of Crown Reserves require approval from Minister for Lands. The Minister for Health s approval and the Governor s Consent (EXCO Approval) is also required where the site is held in freehold title and where a site is held as a Crown Reserve and power to lease is provided under a Management Order. Section 10.6 provides more specific information on approval requirements. 6. LEASE AGREEMENTS: WHO CAN LEASE? The Minister for Health or the WA Country Health Service (whichever is applicable) are the corporate bodies/ name that own or control health/hospital land and property. 4

To be legally correct, formal lease agreements must be in the name of the Minister for Health or the WA Country Health Service (whichever is applicable) as Lessor, dependant on how each individual property is owned, vested or controlled. However, short term rental agreements for a tenancy of less than 12 months may be simply dealt with at a local level with approval from the Regional Director/Area Chief Executive. This can be achieved by an exchange of letters between the Regional Director/Area Chief Executive as Lessor and the proposed tenant as Lessee for expediency, refer sections 9.8 and 14. 7. LEASE NEGOTIATION Lease negotiation with a proposed tenant is the responsibility of Regional Directors/Area Chief Executives acting on behalf of Health Regions/Area Health Services. (Refer Sections 2.1 and 10.5) Regional Directors/Area Chief Executives must ensure that any formal offer and acceptance advice exchanged between parties, as the basis for executing a lease agreement, clearly states the rental, terms and conditions of the lease arrangement as agreed. This includes any special conditions of the lease proposal such as the offer and acceptance being conditional to the Minister for Health s approval, and the Governor s Consent in Executive Council (EXCO in approval) and the Minister for Lands approval as detailed in Section 10.6. 8. MANAGEMENT The management of established leases including collection of rent and rent reviews is a Health Service/Health Provider responsibility. 9. LEASE COMPONENTS 9.1. Lease Parties Identify lease parties consisting of the Lessor and the Lessee. The Lessor (owner) will either be the Minister for Health or the WA Country Health Service (whichever is applicable) according to how the site is vested or owned. The Lessee will be the tenant with whom a lease is negotiated and granted. 9.2. Premises Identify areas to be leased on a floor plan and if possible calculate the area of floor space to be let. Identify access to common areas. Land and vesting details will also need to be determined for the lease agreement. (Refer items 3 and 6) 9.3. Valuation Obtain a valuation for rental of the area to be leased out from the Valuer General's office or private licensed valuer. Outgoings (Refer item 9.8) can be included in the rental figure for convenience. 9.4. Rental Offer or negotiate a rental rate with the intended Lessee based on valuation advice received from the Valuer General's Office (or private Licensed Valuer). Rental under normal circumstances should be at the market figure determined by the Valuer General's office. 5

A Regional Director/Area Chief Executive has discretion to strike a rate other than that recommended by the Valuer General's office but only where special consideration is warranted. 9.5. Rent Reviews The rental rate is normally reviewed annually or biannually and also at the time of taking up an option. The provision for rental review and at what periods is to be incorporated into a lease agreement. 9.6. Term Determine the period for the lease in years to identify the duration of the agreement. Under normal circumstances it would be appropriate to limit the availability of premises for tenancy for a period of up to 5 years in total, comprising the initial term and any options of renewal as per item 9.7. Refer advice at section 9.8 for short-term tenancy arrangements of up to 12 months. 9.7. Term Option An option for a further specified term, which may be taken up at the discretion of the tenant, may be included in an agreement. Refer comments at item 9.6 for maximum period of tenancy. 9.8. Short Term Tenancies It is not normal practical to enter into formal lease arrangements for tenancy periods of up to 12 months. These arrangements can be dealt with locally as a short term rental agreement and can be put into effect simply by way of an exchange of letters between parties under the authority of the Regional Director/Area Chief Executive. It will not be necessary to seek Ministerial and EXCO approvals for a short-term rental agreement arrangement as described above. The letters between parties need to contain all the main details of the rental agreement for tenancy so that parties have a clear understanding of the tenancy arrangement. 9.9. Outgoings Identify overheads and how the tenant is to meet proportional costs for power and water, building insurance, cleaning, gardening, or other outgoings that may apply where a building is occupied on a shared basis. Outgoings can either be charged supplementary to rental in which case they need to be identified as part of the agreement, or else as a component of monthly rental. The latter arrangement is easier for management purposes. 9.10. Furniture Indicate a schedule of furniture and equipment if provided by the Health Centre for use by the Lessee. 9.11. Maintenance The tenant (Lessee) is held responsible for day to day maintenance of the portion of the building occupied under a shared arrangement. Responsibility includes floor coverings, if provided, and damage to interior paintwork, repairing or making good any damage at vacation of premises. 6

9.12. Cleaning Cleaning of the tenanted area and associated costs is the responsibility of the Lessee (tenant) under normal lease practice. The Lessee would need to be charged accordingly where the Lessee requests the Health Service to undertake tenancy cleaning. 9.13. Insurance The tenant is responsible for taking out Public Liability Insurance cover and for insurance of any possessions owned by the tenant. 9.14. Other Conditions Permission of Lessor required for any alterations to premises. Use the leased premises for a Community Health Centre and no other purpose without consent of the Lessor. Not to sublet or part possession of the premises without the consent of the Lessor. Not to create any nuisance. Provision for no smoking in premises. 9.15. Special Conditions (eg. early termination of agreement) Provision can be made in an agreement for termination by either party subject to notice if parties require some form of escape clause. This is not usually included in a formal lease as it defeats the purpose of a lease agreement other than where one or other party is in default (eg: through not paying rent). 10. PROCEDURES FOR LEASING 10.1. Preliminaries Leasing of facilities by private medical, dental and allied health practitioners or other groups including negotiation of rental is the responsibility of the Health Service Manager. 10.2. Power to Lease : Health Centres and Hospitals Check the land tenure of the site with the Land and Property Section of the Health Infrastructure Unit, (ie: if the site is a Crown Reserve it must have a Management Order in favour of the Minister for Health or the WA Country Health Service (whichever is applicable) with an appropriate purpose of (ie: Health - Hospital and Allied purposes) with power to lease the whole or any portion thereof for any term. The Land and Property Section of the Health Infrastructure Unit will need to arrange or amend Management Orders through Department of Regional Development and Lands (DRDL) if the land is unvested or incorrectly described. If the land is held in Certificate of Title, the proposed purpose of the lease must comply with current land zonings. EXCO approval (Governor s consent in Executive Council) is required under Section 17(2) of the Hospitals and Health Services Act for ALL leases. 7

10.3. Valuation Obtain a market rental valuation through the Valuer General's Office (or private Licensed Valuer) to determine rental to be applied. The Health Provider will need to make a proportional assessment of outgoings for rental valuation based on the following items: Example: distillate gardening electricity rubbish gas cleaning excess water cleaner's wages Shire and water rates A Regional Director/Area Chief Executive of a Health Region/Area Health Service has discretion to apply less than market rental in individual circumstances but only where special consideration is warranted. 10.4. Conditional Negotiation Regional Director/Area Chief Executive are to negotiate a preliminary agreement with a prospective tenant (Lessee) that is conditional to approval by the Minister for Health, the Governor s Consent in Executive Council (EXCO approval) and the Minister for Lands, when required. The signatory to a lease agreement is the Director General of Health (as the delegate of the Minister for Health or the WA Country Health Service (whichever is applicable)) according to ownership or vesting of the land on which the Health facility is located. 10.5. Approvals Formal proposals for leasing out facilities are required from the: Minister for Lands where land is held as a Crown Reserve Minister for Health (refer Notes of Explanation below) The Governor in Executive Council (EXCO) Notes of Explanation a) Management Order (formerly Vesting Order): In a straight forward leasing out of consulting rooms where the site is a Crown Reserve and is vested by way of a Management Order in the Minister for Health or the WA Country Health Service (whichever is applicable) with power to lease as consented by the Governor, a Regional Director/Area Chief Executive can cover this arrangement by accepting a lease offer that is subject to the Minister s approval and is stated as such in the letter of acceptance. Then the legislative requirement to seek the Minister for Health s approval and the Governor s consent in Executive Council (EXCO approval) as required under the Hospital s and Health Services Act or the Health Act can be progressed. b) In leasing out proposals where land is held in freehold title by the Minister for Health or a Hospital/Health Service Board, there is a legal legislative requirement to seek the Minister s approval and the Governor s consent (EXCO approval) as required under the Hospital and Health Services Act or the Health Act. This process is mandatory. 8

c) A Regional Director/Area Chief Executive should seek further advice from the Senior Land and Property Adviser, Land and Property Section of the Health Infrastructure Unit (08) 9222 4459 or Land and Property Adviser, (08) 9222 4360 if there is any doubt on how to proceed. 10.6. Lease Documents: Preparation and Execution Procedures are described under Section 11 - Conveyancing : Lease Agreement. 11. CONVEYANCING: LEASE AGREEMENT The preparation and execution of a formal lease agreement is to be arranged by the Land and Property Section of the Health Infrastructure Unit as follows: 1. Prepare instructions for lease and send to the State Solicitor s Office or a private solicitor for preparation of draft lease. Advise who is to be the Lessor (Minister for Health or the WA Country Health Service and also provide details of property holding and ownership or vesting which needs to include power to lease). Provide Lessee details for the purpose of executing the lease. Advise any special conditions to be incorporated. Refer to use of a standard lease agreement where possible. (The State Solicitor s Office can provide a copy). Where a site is held as a Crown Reserve, the new Land Administration Act (section 19) now requires the lease interest for a Crown Reserve to be registered as a dealing or alternatively recorded as a caveat against the Crown Land Title etc that is issued, or will be issued, for that Reserve under the provisions of the new Act. Compliance with this requirement is mandatory for any new lease agreement to become legally effective in relation to a Crown Reserve holding. Lease agreement documents should preferably be in a registrable form for this purpose and registered as a dealing but alternatively can be in a nonregistrable form and recorded as a caveat. Ask the State Solicitor s Office or private solicitor to arrange registration or recording against the Crown Land Title along with any prior notification processes required by the Landgates Land Titles office. The Sealing Clauses for the lease agreement are as follows: Minister for Health (Metropolitan Health Services) SIGNED BY [ current DG name ] DIRECTOR GENERAL OF HEALTH AS DELEGATE OF THE MINISTER FOR HEALTH DIRECTOR GENERAL Witness Name: Occupation: WA Country Health Service 9

SIGNED BY [ current DG name ] DIRECTOR GENERAL OF HEALTH AS DELEGATE OF THE WA COUNTRY HEALTH SERVICE DIRECTOR GENERAL Witness Name: Occupation: 2. Receive draft lease from the State Solicitor s Office and: Check draft lease for accuracy Send a draft copy to the Lessee for acceptance as a lease document. Advise the State Solicitor s Office that draft is satisfactory or otherwise. 3. Receive final lease documents (2 or 3 copies) from the State Solicitor s Office and: Refer documents to Lessee for signature. Arrange signature by Director General of Health (as the delegate of the Minister for Health or the WA Country Health Service) following signature by Lessee. This can be arranged through the Land and Property Section of the Health Infrastructure Unit. 4. Signed documents: return copy to the State Solicitor s Office. 5. Signed documents (2 or 3 copies) proceed as follows: Forward one copy of the Lease to the Lessee for retention. File one copy of the Lease on either the Regional Director/Area Chief Executive filing system, the Health Providers filing system or both. Advise Health Providers as required. Regional Directors/Area Chief Executive arrange for the collection of rent. Arrange for rent reviews as required in the lease agreement. 12. EXISTING LEASES: OPTION RENEWAL Renewal of lease through provision of option period if included in lease. Lessee (tenant) to notify Regional Director/Area Chief Executive of intention to take up the lease option period provided in the lease agreement. It is the Lessee s right to exercise this option subject to the Lessee not being in default of the lease covenants. A Regional Director/Area Chief Executive acting on behalf of the Lessor (Minister for Health or the WA Country Health Service) may formalise the lease option simply by an exchange of letters with the Lessee as opposed to executing a formal Deed of Extension. 13. RENT REVIEWS Rental valuations are usually reviewed annually or biannually as per the anniversary date indicated in a lease agreement and also at the time of taking up a lease option. Rent reviews are the responsibility of Health Region/Area Health Service. 10

Health Providers are to arrange a rental/valuations review through Valuer General's Office. Regional Directors/Area Chief Executive are to notify the Lessee of rental increases applicable within the time frame specified. The Lessee has 14 days to reject the increase (refer appropriate clauses in lease document). The Regional Directors/Area Chief Executive may choose to negotiate a rental increase with the Lessee, otherwise it is a matter of Arbitration through the Commonwealth Institute of Valuers if parties cannot agree. 14. SHORT TERM TENANCIES Short-term rental arrangements for tenancy periods of up to 12 months can be dealt with as described in sections 6 and 9.8. 15. FURTHER ADVICE Enquiries, further information and guidance are available through the Land and Property Section of the Health Infrastructure Unit. Principal contact officers are: Senior Land & Property Adviser (08) 9222 4459 Land & Property Adviser (08) 9222 4360 11

LEASING REQUEST BRIEFING FOR APPROVAL ADDRESS OF PREMISES: BACKGROUND PROVIDE - Reason Leasing IN or Out is required and detail what service will be provided from the leased premises. CURRENT STATUS PROVIDE THE FOLLOWING INFORMATION: If requirement is for Leasing In Office Accommodation, that the Govt Office Accommodation Directorate (GOAD) of Building Management Works (DTF) has been consulted with regard to whether any suitable available accommodation is available (not applicable for clinical leases eg: child health service, health centre/nursing post etc..) NB: GOAD has a separate Business Case form that requires completion. If LEASING IN - Lease cost per annum (excluding or including GST). Proposed Lease commencement date Lease terms plus options to renew. Area of Leased m 2 If requirement is for Office Accommodation Number of staff to be accommodated. (Govt Office Floor Space Standard formula = Number of full time employees x15m2 = Acceptable Total Leased Area) If LEASING IN - Recurrent funding for lease costs + capital cost for fitout of premises (if applicable) is available within Region/Area budget. Valuer General s Office (Landgate) or private valuer assessment of Rental (attach report). Proposed Rent Valuation Whether Leasing Consultants have been engaged to negotiate lease and prepare lease documentation. 12

RECOMMENDATION The Area Chief/CEO WACHS approve this lease proposal for referral to the Land & Property Unit, Health Infrastructure for processing. Area/Regional Director METRO AREA HEALTH SERVICE/WACHS Date: Area Chief/CEO WACHS METRO AREA HEALTH SERVICE/WACHS Date: 13