Public sector landlords and QLTAs

The Upper Tribunal has clarified whether councils and other public sector landlords can use framework agreements to appoint building contractors. Assad Maqbool considers the significance of the ruling.

Framework Agreements are qualifying long term agreements for the purposes of residential service charges consultation – The Royal Borough of Kensington and Chelsea v the Lessees of Pond House and Others [2015] UKUT 395

The case was heard by Siobhan McGrath, the president of the First Tier Tribunal (Property Chamber) sitting as a judge in the Upper Tribunal and so its reasoning is likely to bind the decision-making of future First Tier Tribunals, which deal with the majority of service charges cases.

It concerned the procurement by Kensington and Chelsea of framework agreements under which contractors would provide repairs and maintenance and improvement works to the entirety of its housing stock. The works and services are intended to be of a value in the region of £90m to £130m.

A large proportion of that is intended to be funded by services charges recharged to leaseholders of properties where the right-to-buy has been exercised. Kensington and Chelsea, like the majority of councils, include in their leases an obligation for leaseholders to pay service charges for these types of works, the amount of such services to vary depending on the costs of works and services provided.

The statutory limits on the amount of service charges payable include the obligation of the landlord to consult leaseholders on the agreements to be entered into. The obligation is set out in section 20 of the Landlord and Tenant Act 1985 and the Service Charges (Consultation Requirements) (England) Regulations 2003 (and the Welsh regulations of 2004), which set out a proscribed method of consultation.

This area has held some significant uncertainty since the 2007 decision of the old Leasehold Valuation Tribunal (LVT) in the case of the London Area Procurement Network (LAPN). The London Area Procurement Network was a consortium of Brent, Ealing, Hillingdon, Hounslow, Kensington and Chelsea, Newham, Sutton and Westminster.

That case suggested that the "umbrella" framework agreements were not the agreements upon which leaseholders ought to be consulted because costs were not incurred under the framework agreements. Instead, the LVT said that costs were incurred under call-off contracts (contracts entered into for specific works pursuant to the framework agreements).

Public sector landlords procuring high value agreements of this nature are bound by the terms of the Public Contracts Regulations 2015 which require that framework agreements over a certain value are publicly advertised.

The LAPN case therefore left public sector landlords without a clear route for service charges consultation if they were procuring framework agreements. The decision of the LVT in the LAPN case left a conflict between the procurement regulations and the service charges regulations.

Kensington and Chelsea has finally cleared up the point.

The case concerned an application by Kensington and Chelsea under s.27A(3) of the Landlord and Tenant Act 1985 for determination of the liability of certain lessees to pay residential service charges.

The judgment makes clear that the framework agreements can be the "qualifying long term agreement" (the agreements on which the leaseholders must be consulted) if there is "sufficient factual nexus between the subject matter of the agreement and the works themselves" and if the framework agreements "identify the works with sufficient particularity".

This is significant because it means that public sector landlords can now enter into long-term framework arrangements with contractors and service providers with some certainty as to the consultation of leaseholders that is required and therefore some certainty of recovering service charges.

This may well affect procurement practices in public sector housing where value for money arguments for the use of long term arrangements have up to now been overruled by a concern about the ability to recover service charges.

Assad Maqbool is a projects and construction partner at law firm Trowers & Hamlins. He can be contacted on 020 7423 8605 or This email address is being protected from spambots. You need JavaScript enabled to view it..