Upper Tribunal holds that Framework Agreements are QLTAs: Leaseholders LAPN no longer
In so holding, the Upper Tribunal has laid to rest years of uncertainty for public sector landlords as to whether compliance with the statutory consultation requirements is possible in the case of framework agreements. Had the Upper Tribunal held otherwise, it would have put in jeopardy the recoverability of millions of pounds of service charges from leaseholders, where qualifying works have been undertaken by framework contractors.
This uncertainty was created by the 2007 Leasehold Valuation Tribunal decision in London Area Procurement Network v All Right to Buy lessees (“LAPN”) which many leaseholders have relied upon in the years following as the basis for arguing that public authority landlords cannot use framework agreements, without obtaining statutory dispensation from the consultation requirements. In LAPN, the LVT held that proposed framework agreements were not QLTAs to which section 20 applies because “relevant costs” would not be incurred “under” the framework agreements, but would only be incurred “under” the resulting call-off contracts.
In the Kensington case, the Borough’s Tenant Management Organisation was proposing to enter into four framework agreements with construction companies, to facilitate the delivery of £90m to 130m of repairs maintenance and improvement works to the Borough’s housing stock. It then proposed that two-year partnering contracts would be issued to the two highest placed framework contractors in a bespoke form of TPC2005 Term Partnering Contract, with works then being commissioned from those contractors by way of individual task orders. For the remaining years of the framework agreements it was proposed to hold a mini-competition between the framework contractors prior to the award of later partnering contracts and the issuing of task orders.
The Borough’s lessees were consulted on the entry into the framework agreements under Schedule 2 of the Consultation Regulations. The Borough’s case before the Upper Tribunal was that that this was legally correct, because costs would be incurred “under” the framework agreements. It accepted that there would later be a need to comply with Schedule 3.
The Tribunal agreed with the Borough’s arguments. It held that:
“…there must be a sufficient factual nexus between the subject matter of the agreement and the works themselves. However, we do not consider that this means that the only agreements contemplated by section 20 are contracts for works to be carried out whether subject to public notice or not. In this case we have ample evidence to be satisfied that where works are carried out by one of the contractors identified under the terms of the Framework Agreement that such a nexus exists.”
The decision of the Upper Tribunal is welcome news for local authorities and registered providers who are now able to plan investment in their housing stock, by means of framework agreements, secure in the knowledge that they can comply with the statutory consultation requirements and recover full service charges from their leaseholders.
Ranjit Bhose QC appeared on behalf of the Royal Borough of Kensington and Chelsea.
Click here to read the judgement in full.