The Upper Tribunal has provided some clarification about exactly what consultation requirements will apply when a landlord enters into a Framework Agreement for works required to properties.
Under s20 Landlord and Tenant Act 1985, service charges are only payable to the extent that they are reasonably incurred and the work to which they relate has been done to a reasonable standard. In addition, Landlords must follow the consultation procedures where qualifying works exceed £250 per tenant, or where the Landlord enters into a qualifying long term agreement (a “QLTA”) under which any tenant may pay more than £100 in one accounting period.
Many local authorities and RSLs/PRPs now award contracts for works under the terms of a Framework Agreement, and where the works envisaged under the Framework Agreement exceed the relevant figure (currently £4.322 million) then public notice is also required.
The difficult question is whether the Framework Agreement is itself a QLTA requiring consultation, or whether it is only the call-off contracts awarded under it which require consultation under s20. The question is an important one, as the consultation requirements are quite different depending on whether they are for a one-off contract for works, or a contract awarded under a QLTA (with the latter being much less onerous).
The issue has been in doubt since a 2007 decision involving a network of public authority landlords who were looking to jointly enter into framework agreements. The Leasehold Valuation Tribunal held in that case that the Framework Agreements were not QLTAs, with the result that a full consultation would be required in respect of any contract awarded under them.
This week, the Upper Tribunal has distinguished the 2007 decision partly on the basis that the agency relationship between the Network and each local authority meant that there was not a sufficient nexus between the framework agreement and the call-off contracts.
It therefore held that the Framework Agreement was a QLTA because the agreement as drafted and the call-off contracts could not be seen in isolation to each other. The relevance of this is that it is now clear that in this situation, if public notice is required then the consultation required is that set out in schedule 2 of the Service Charges (Consultation Requirements) (England) Regulations 2003, or the Service Charges (Consultation Requirements) (Wales) Regulations 2004. (Where no public notice is required then schedule 1 applies). When a contract is awarded under the Framework Agreement, then the schedule 3 consultation (which is limited in scope) must be carried out.
If, however, a contract is awarded out of the framework agreement then a full consultation (schedule 4) is required.
If landlords are working with other landlords on a framework agreement then the arrangements will need to be looked at carefully.
The Royal Borough of Kensington and Chelsea v Lessees of 1-124 Pond House and others (2015) UKUT 0395
