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Property groups threaten to reclaim premises and oust management of care homes in order to claim payments owed Landlords at the centre of a dispute with Britain’s largest care homes operator have threatened to seize control of the company rather than accept a cut in rents. The landlords, among them some of Britain’s biggest property groups, have been asked to take a 30% cut in rents to keep Southern Cross afloat. But the Guardian has learned they have reacted furiously by putting forward a plan to oust the management, take back leases and sever ties with the company, which can no longer afford its annual rent bill of £230m. Under the terms of the leases, many can take back the properties if they do not receive 100% rents. The beleaguered company announced plans to axe 3,000 jobs. Last week the government was forced to step in to guarantee alternative accommodation for its 31,000 residents if it goes under. NHP, the biggest landlord which owns 250 of the company’s 750 homes, is understood to be ready to parachute in a new management team while retaining existing nursing staff to ensure continuity of care for residents. A similar plan is being drawn up by London & Regional, another big landlord. But both companies are prepared to sit down and try to thrash out an agreement with Southern Cross rather than act unilaterally. The landlords’ move looks set to escalate the battle for control of the company. It controversially sold off its freehold properties while under private equity management before it was sold off at great profit, but is now locked into rent deals it can no longer afford because of declining local authority fees and higher operating costs. Paul Saper, of healthcare consultancy LCS International, said: “Make no mistake, the rent reduction is deeply resented. Why should the landlords take all the pain, while other creditors, such as the banks, remain unaffected?” Landlords such as Bondcare, which has 39 homes but is also a care operator, would sequestrate leases and run the business themselves. Other landlords are in talks with rival care home operators such as Barchester, Bupa and Hallmark, which would step in and replace Southern Cross. Southern Cross directors and landlords are in constant contact with ministers because the government is anxious to ensure an orderly wind-down of the company to ensure protection for residents. It is not known at this stage how many of the group’s 80 landlords could opt to stay with a “rump Southern Cross”, allowing the firm to keep its listing on the London stock exchange. One analyst said: “It’s hard to avoid the impression that shareholders stand to be wiped out.” But administrative receivership would be politically explosive at a time when private sector involvement in health and social services has been lambasted by Labour and unions. The firm’s decision to cut 8% of its 44,000 strong workforce was greeted with incredulity by the GMB union. Paul Kenny, general secretary said: “This is bound to affect the quality of care for patients, as well as add to further uncertainty for long-suffering families and friends.” Kenny said it was time for the government to intervene at the company to avoid “a massive social scandal.” He added: “How can it be right to step in and save the banks, but ignore the needs of the most vulnerable in our society? Something doesn’t smell right.” Southern Cross claimed staff reductions reflected falling occupancy rates at its homes from 92% three years ago to 84%, and improvements to IT. A spokesman said: “Our announcement is part of a £20m cost-cutting programme that we flagged up last year and is aimed at making the group more efficient. Patient care will not be affected.” But critics have pointed out that falling occupancy at Southern Cross is due partly to a lack of clarity about its future, as well as cutbacks by local authorities which pay fees to the private sector for looking after elderly and infirm people. Southern Cross’s precarious finances mean it has been unable to spend as much on its homes as more prosperous competitors, which make its premises less appealing. The company said employees hit by the latest round of staff cuts would be mostly part-time or agency staff, and include caterers, cleaners and nurses. But it admitted a number of compulsory redundancies were inevitable, although home managers, deputy managers, relief managers and activity co-ordinators “will not be directly impacted by the proposed reduction in jobs, a process that is expected to be completed in October.” Southern Cross’s chairman, Sir Christopher Fisher, said: “Decisions on our future must be governed by a paramount concern for the welfare of our residents. We believe that for a critical mass of our landlords, supporting a restructured Southern Cross remains the most attractive option open to them, as we intend to demonstrate.” Southern Cross Healthcare Healthcare industry Social care Richard Wachman guardian.co.uk