Landlord and Tenant Act 1985 – Service charge – Framework agreements – Service Charges (Consultation Requirements) (England) Regulations 2003 – Applicant local authority proposing to enter into framework agreements with contractors under Public Contracts Regulations 2006 for proposed maintenance works to housing stock – Extent of obligation to consult with respondent lessees – Whether framework agreements amounting to “qualifying long-term agreements” to which restricted consultation process under Schedule 3 to Consultation Regulations applying – Whether applicants entitle to determination under section 27A(3) of 1985 Act – Application dismissed
In 2013, the applicant local authority, though its tenant management organisation, proposed to enter into a number of framework agreements with contractors setting out the terms on which contracts would be awarded for maintenance works to their housing stock over the next four to six years. The value of the works was anticipated to reach up to £130m.
The applicants’ housing stock included properties let to secure tenants and others let on long leases under which a service charge was payable. The applicants gave notice to all lessees of their intention to enter into the framework agreements and followed the restricted procedure for such agreements laid down by regulation 16 of the Public Contracts Regulations 2006.
Before entering into the framework agreements, the applicants applied for a determination, under section 27A(3) of the Landlord and Tenant Act 1985, as to the liability of the lessees to contribute through the service charge to the cost of works carried out in accordance with those agreements. All the respondents to the application were lessees of properties in the applicants’ ownership. Most of them were lessees of flats on one estate in London SW3 which comprised six blocks of residential apartments containing a total of 124 flats.
The central issue was whether, as the applicants contended, the framework agreements were “qualifying long term agreements” (QLTAs) for the purposes of the consultation requirements of section 20 of the Landlord and Tenant Act 1985 and the Service Charges (Consultation Requirements) (England) Regulations 2003 (the Consultation Regulations), such that the applicants were entitled to follow a restricted form of consultation with lessees, pursuant to Schedule 3 to the Consultation Regulations, before embarking on specified works of repair. The lessees contended that the framework agreements were not QLTAs and that the applicants’ consultation was therefore inadequate. The first-tier tribunal transferred the case to the Upper Tribunal pursuant to r 25 of the Tribunal Procedure (First-tier Tribunal)(Property Chamber) Rules 2013.
Held: The application was dismissed.
An application under section 27A(3) of the 1985 Act was an appropriate way to secure a determination on the consultation issue.
A QLTA, as defined in sections 20 and 20ZA of the 1985 Act and regulation 4 of the Consultation Regulations, was an agreement entered into by or on behalf of a landlord or superior landlord for a term of more than 12 months where the relevant costs incurred under the agreement for any tenant exceeded £100 in any accounting period. In order to attract the consultation requirements, it was sufficient that a QLTA might result in more than £100 being payable in any period; it was not necessary for a landlord to establish that costs in excess of £100 would definitely be incurred, nor was it necessary for it to demonstrate within which accounting period such costs might fall. The framework agreements proposed by the applicants were long-term since they would be for a period of four years and the relevant costs might well exceed £100 for a tenant in any one accounting period.
The relevant costs were also incurred “under” the framework agreement for the purposes of the statutory provisions. The word “under” should be given its simple, plain meaning in that context. In order for costs to be incurred “under” an agreement, there had to be a sufficient factual nexus between the subject matter of the agreement and the works themselves. That did not mean that the only agreements contemplated by section 20 of the 1985 Act were contracts for works to be carried out, whether subject to public notice under the 2006 Regulations or not. There was a sufficient nexus where works were carried out by one of the contractors identified under the terms of the framework agreements. The framework agreements identified the works to be carried out with sufficient particularity that the costs could be said to be incurred in carrying out those works “under” the agreement. That conclusion was reinforced not only by the terms of the agreements themselves but also by the requirement, in regulation 19(4) of the 2006 Regulations, that when awarding a specific contract on the basis of a framework agreement neither the contracting authority nor the economic operator could include terms that were substantially amended from the terms laid down in the framework agreement. In that context, the framework agreement and the specific contract could not be viewed in isolation from each other. Moreover, there was no doubt that the proposed works were “the subject” of the framework agreements for the purposes of regulation 7 of the Consultation Regulations.
It made no difference that the applicants were not obliged to use any of the identified contractors. It simply meant that if the applicants used another contractor, or carried out works which went beyond the works contemplated by the framework agreements, then they could not rely on the consultation already commenced.
It followed that the Consultation Regulations applied, with the result that if works were carried out under a contract falling under the auspices of the framework agreements then consultation would be limited to that required by Schedule 3 to those regulations. While acknowledging the lessees’ real concerns in that respect, regarding the abrogation of their right to be consulted in respect of works which might cost as much as £130m, it was notable that the vehicle contained in the amended section 20 of the 1985 Act, and the process set out in Schedules 2 and 3 to the Consultation Regulations, were introduced at a time when public procurement both by partnering and by using framework agreements was well established. The introduction of Schedules 2 and 3 meant that public bodies, which previously were unable to comply with section 20 when they had entered into large-scale arrangements for works, were now able to do so. A Schedule 3 consultation was still consultation. It remained the case that section 20 had to be complied with, or dispensed with on an application under section 20ZA, if a landlord was to recoup relevant costs.
The applicants had complied with the consultation requirements on the facts of the case. The tribunal was nonetheless unable to find for the applicants on their substantive application. Although a schedule of proposed works was provided with the application, it had been significantly undermined in the evidence. Section 27A(3) required a tribunal to make a specific determination of payability. Since a determination under section 27A(3) was made before works are carried out, it could not be determinative of the standard of the work when finally completed. However, precision as to the extent of the works, the duration of the works and the terms of the lease which supported the obligation to carry out the work was still required to support a section 27A(3) determination. There was insufficient information before the tribunal on which to be satisfied of any of those matters.
Ranjit Bhose QC (instructed by the legal department of Kensington and Chelsea Royal London Borough Council) appeared for the applicants; the second, third, fifth, and seventh respondents appeared in person; the other respondents did not appear and were not represented.
Sally Dobson, barrister
