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New court judgment determines Framework Agreements are qualifying long term agreements for the purpo

New court judgment determines Framework Agreements are qualifying long term agreements for the purposes of s.20 service charges consultation

The Royal Borough of Kensington and Chelsea v Various Lessees [2015] UKUT 395

This Upper Tribunal case finally gives clarity on the question of whether framework agreements can be considered to be "qualifying long term agreements" (QLTAs) for the purposes of service charges consultation under s.20 of the Landlord and Tenant Act 1985 (as amended).
This is a very significant step forwards for contracting authorities procuring frameworks in accordance with the public contracts regulations and advertised in the official journal of the European Union (OJEU).

Framework agreements are umbrella arrangements which allow the call-off of works and services by entry into specific call-off contracts.
Since the 2007 decision of the old Leasehold Valuation Tribunal (LVT) in the case of the London ALMO Procurement Network (LAPN), contracting authorities have been subject to uncertainty about how to consult in compliance with the Service Charges (Consultation Requirements) (England) Regulations 2003 (and the Welsh regulations of 2004) when procuring framework agreements.

The LVT in the LAPN case suggested that framework agreements could not be QLTAs because costs were not incurred under the framework agreements. Instead, the LVT said that costs were incurred under call-off contracts.

That left contracting authorities without a clear route for consultation of tenants and leaseholders intended to contribute to the costs of the works by way of variable service charges. The decision of the LVT in the LAPN case left a conflict between the procurement regulations and the service charges regulations.

RBKC has finally cleared up the point.

The case concerned an application by RBKC 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 service charges in question related to RBKC's £130m major works programme.

"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," said Assad Maqbool, Projects and Construction partner at law firm Trowers & Hamlins.  

"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.

"It also clarifies that contracting authorities must be cautious in tapping into existing framework agreements procured by other contracting authorities because it may be difficult to properly consult on those agreements."