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Kensington and Chelsea judgment offers clariity for housing framework agreements

A recent judgement has provided long-needed relief for public sector landlords wanting to procure housing works through framework agreements – and provides assurances for contractors that funding is more secure.

The judgment of the Upper Tribunal in the case of The Royal Borough of Kensington and Chelsea v Lessees of Pond House and Others [2015] UKUT 395 provides long-needed relief for public sector landlords wanting to procure housing works and services through long-term ‘framework’ arrangements.

The case is relevant to programmes of works and services to housing stock owned by public sector landlords.

These will generally rely in part on funding from leaseholders of properties that have been bought under the Right to Buy.

Consultation requirements

The contribution of leaseholders of their share of the costs is most often collected by way of service charges that vary depending on the costs of works and services required.

To be entitled to collect those service charges, the landlord will have to comply with strict consultation requirements (most often called ‘leaseholder consultation’ or ‘section 20’ consultation).

“This is a very significant step forward for public sector landlords procuring frameworks”

Kensington and Chelsea council was proposing to enter into framework agreements with Keepmoat Regeneration and Wates Living Space to carry out repairs and maintenance and improvement works with an intended value of £90m to £130m over the course of the framework agreements.

Framework agreements are umbrella arrangements which allow the call-off of works and services by entry into specific call-off contracts.

In this case, the call-off contracts are intended to be in the ACA’s and ACE’s standard form of contract for term partnering, TPC2005.

The case decided that the frameworks agreements were the agreements that ought to be subject to the section 20 consultation, rather than the call-off contracts.

Costs incurred

This is a very significant step forward for public sector landlords procuring frameworks in accordance with the Public Contracts Regulations and advertised in OJEU.

Since the old Leasehold Valuation Tribunal’s 2007 decision in the case of the London Area Procurement Network, contracting authorities have been subject to uncertainty about how to consult in compliance with the Service Charges (Consultation Requirements) (England) Regulations 2003 (and the Welsh regulations of 2004) when procuring framework agreements.

The Leasehold Valuation Tribunal suggested that framework agreements could not be qualifying long-term agreements because costs were not incurred under them.

“The judgment gives some guidance to employers and contractors as to what needs to be included in their framework agreements to ensure they are effective”

Instead, the LVT said costs were incurred under call-off contracts.

That left public sector landlords such as local authorities and registered social landlords without a clear route for consultation of tenants and leaseholders.

The LVT decision in the London Area Procurement Network case left a conflict between the procurement regulations and the service charges regulations.

The Kensington and Chelsea case has finally cleared up the point.

Assurance for contractors

The judgment states that the framework agreements drafted on behalf of the council created “sufficient factual nexus between the subject matter of the agreement and the works themselves” and “identify the works with sufficient particularity” to conclude that the costs are incurred under the framework agreements and that the framework agreement is the agreement on which to consult.   

The judgment therefore gives some guidance to employers and contractors as to what needs to be included in their framework agreements to ensure they are effective.

The decision is an encouragement to public sector landlords wanting to create long-term relationships with their contractors, as it allows them to enter into framework agreements with some certainty that funding from leaseholders will be forthcoming.

It also gives some assurance to contractors when they tender for long-term housing works agreements that the public sector landlord will be able to commit to the relationship without fear of losing funding from leaseholders.

Assad Maqbool is a projects and construction partner at law firm Trowers & Hamlins

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