A number of local authorities and social landlords award contracts for work under framework agreements negotiated with their suppliers. A framework agreement is not an agreement under which goods will be supplied, or services rendered, or works undertaken. Instead, it sets out the terms on which individual contracts for the supply of goods or services, or for work, may be awarded while the framework agreement subsists.
Section 20 of the Landlord and Tenant Act 1985 requires landlords to consult tenants before undertaking work above a certain value, or entering into agreements for terms of more than 12 months for the provision of goods or services. In addition, the Service Charges (Consultation Requirements)(England) Regulations 2003 restrict the amount that tenants can be required to pay for work about which they have not been properly consulted to £250, while the cap in respect of qualifying long-term agreements is £100 in any 12-month period.
Is a framework agreement a qualifying long-term agreement for the purposes of the legislation? Or must a landlord consult with its tenants before awarding individual contracts under a framework agreement? The consultation requirements for qualifying works and qualifying long-term agreements that are both subject to, and exempt from, EU procurement regulations are set out in four schedules to the 2003 Regulations, each dealing with different consultation scenarios. Suffice it to say that the rules are all different and the consultation requirements in relation to individual contracts are more onerous.
In The Royal Borough of Kensington and Chelsea v Lessees of 1-124 Pond House [2015] UKUT 395 the anticipated value of the contracts that the landlord was intending to award under framework agreements with different suppliers was £130m over four to six years. The landlord considered that any work done under the framework agreements would be carried out under qualifying long-term agreements. The tenants claimed that this would “drive a Trojan Horse … straight through the protections for lessees for which section 20 was intended” and cited a Leasehold Valuation Tribunal decision, London Area Procurement Network v All Right to Buy Lessees [2007] (LON/OOBF/LDC/2006/0078 & others), as authority for the proposition that framework agreements were not qualifying long-term agreements.
In a decision that will delight local authorities and social landlords, the Upper Tribunal distinguished the previous decision on two grounds. The agreements in that case were in draft and there was an insufficient nexus between the framework agreements and the individual contracts under which works were to be carried out because the framework agreements involved a consortium of authorities. This was not the case here and the framework agreements were long-term qualifying agreements for the purposes of section 20.
The landlord was required to give public notice before entering into the framework agreements to comply with public sector procurement rules due to the value of the work covered by the agreements. As a result, the landlord needed to follow the requirements laid down in Schedule 2 of the 2003 Regulations before entering into the framework agreements, and to follow the requirements laid down in Schedule 3 when ordering qualifying works from framework contractors. However, if the charges for the work were to be unreasonable, or the works were to be of a poor standard, then the costs would not be recoverable by virtue of section 19 of the Landlord and Tenant Act 1985.
Allyson Colby is a property law consultant
