Walk the line
Social landlords at last have guidance on when EU rules apply, says Andrew Harbourne
The Office of Government Commerce has at last advised when property development agreements between developers and public authorities, such as councils and housing associations, may be caught by the Public Contracts Regulations as public works contracts.
Where they are, and the price exceeds the threshold of £3.5 million, an association normally cannot deal direct with a developer but should first advertise its requirements in the Official Journal of the European Union and invite several developers to bid.
The OGC says the presence of one or more of the following suggests an agreement may be bound by the Regulations:
- it imposes a specification on the developer;
- it obliges the developer to do the works;
- payment.
A development agreement might not be caught if, instead of obliging the developer to do the works or to a particular specification, it merely says the association will buy the site if the works are done in that way. Arguing that a developer has ‘exclusive rights’ to a site and the rules therefore don’t apply, seems unlikely to find favour.
Failure to comply with the regulations could lead to regulatory sanctions, damages claims, annulment of the agreement and, perhaps, breach of loan and insurance covenants.
The new remedies directive should lead to more challenges from disappointed contractors who discover breaches of the regulations. Associations must take specific and expert procurement advice on every occasion.
Andrew Harbourne is partner at Dawsons LLP.
a.harbourne@dawsonsllp.com
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