Competition laws threaten council deals

Rules to be introduced in December by the Office of Government Commerce will for the first time allow the cancellation of contracts if public bodies fail to tender development deals to the European market. Under current rules, once contracts are signed they cannot be cancelled.

Simon Randall, a consultant at law firm LG, said change would have ‘far-reaching consequences’ for all public bodies involved with regeneration projects.

The new rule only applies to land sales in which the public body selling the land wants to exert control over the development.

But councils are increasingly keen to influence what is built on land they sell, claimed Mr Randall: ‘[The new rule] trips up those who think the rules don’t apply. [It] effects a large number of regeneration schemes being promoted by local authorities,’ he added.

York Council is already embroiled in a case with the European Commission because it awarded the Joseph Rowntree Housing Trust a contract to build the 540-home Derwenthorpe development in Osbaldwick without putting the deal out to tender.

The UK government could be ordered to take action to end the infringement, commission papers state. They add: ‘Furthermore, no sufficient and adequate measures have been introduced to ensure that the award of future land development agreements will be compliant with applicable EU rules.’

Andrew Millross, a partner at law firm Anthony Collins, said the December rule change will particularly affect local authorities entering development deals with housing associations or developers.

Under Office of Government Commerce proposals, developers will be given a six-month window to challenge an authority’s decision to award a particular contract.

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