An Upper Tribunal (Lands Chamber) decision over a £130m works programme planned by the Royal Borough of Kensington and Chelsea has been described as clearing up a grey area in the law.
The UT held that framework agreements – under which Kensington and Chelsea proposes to carry out its major programme of repairs – could, in this case, be considered to be “qualifying long-term agreements” (QLTAs) for the purposes of service charges consultation under section 20 of the Landlord and Tenant Act 1985.
Judge Siobhan McGrath said: “The consultation issue is important. In this case the value of the contracts for the works may reach £130m over the next four to six years. Also, since procurement through framework agreements is a practice already adopted by a number of local authorities, clear guidance on what consultation is required is much needed.
“For the applicant it is said that the works of repair will be carried out under QLTAs and that therefore the consultation requirements are limited. However, the respondents contend that the framework agreements are not QLTAs and therefore the applicant’s consultation has been and will be inadequate.
“The framework agreements relate to works whose total cost may be as much as £130m. The works for which lessees in the borough might have to contribute amount to some £50m of that total sum.”
However, while the UT ruled that the framework agreements in this case are QLTAs for the purposes of section 20, it dismissed Kensington and Chelsea’s application under section 27A(3) of the Landlord and Tenant Act 1985 for determination of the liability of lessees of 1-124 Pond House, Pond Place, London SW3 to pay residential service charges in relation to its major works programme.
It said that an application under section 27A(3) requires precision as to the extent of the works, the duration of the works and the terms of the lease which support the obligation to carry out the work, but that “the tribunal cannot be satisfied of any of those matters”.
Assad Maqbool, projects and construction partner at Trowers & Hamlins, welcomed the clarification to the law on the section 20 point, following uncertainty in the wake of the 2007 decision in London Area Procurement Network v All Right to Buy Lessees.
He said: “The judgment makes clear that the framework agreements we drafted on behalf of RBKC create ‘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 to conclude that the framework agreement is a QLTA.
“This significantly simplifies the picture in relation to the service charges consultation requirements when contracting authorities are procuring framework agreements. The clearing up of this grey area in the law opens the door for contracting authorities to procure more works and services under framework agreements in the knowledge that they can properly consult on and therefore recover service charges.”
The Royal Borough of Kensington and Chelsea v Lessees of 1-124 Pond House and ors [2015] UKUT 395
Ranjit Bhose QC (instructed by Miss C Vachino RBKC Legal Services) for the applicant
Nicholas Hoexter in person
Brian Lanaghan in person
Norman Dunne in person
Elizabeth Edema in person
