A well-written contract is crucial to the success of a partnering relationship, says Joanna Rees, partner at Morgan Cole
Social housing providers have never faced such challenges. The economic downturn and diminishing social housing grant means that many need to be flexible and take advantage of their relative stability and attractiveness to financiers.
Indeed, many providers are beginning to look to house builders and developers to see how they can work together to use their complementary skills. But, as with any partnership, both parties must clearly appreciate the delineation of risk and understand each other’s strengths.
Drawing up the agreement
Importantly, both must make sure their risks and competing interests are identified and managed in a joint venture agreement based upon a strong partnering ethos. Any partnering agreement should set out project-specific risks and identify accountabilities for:
- project scope, nature of build, numbers and tenure;
- responsibility for liaising with the local authority and other statutory bodies;
- management arrangements for delivery;
- land assembly, including responsibility for contamination issues;
- master planning that considers issues of design standards, environmental standards and community development and longevity;
- construction procurement - nature of risk sharing and profit sharing;
- planning, including section 106 agreements, community benefits and highways agreements;
- funding and tax efficiency;
- performance standards, time period and termination.
Once the risks are identified they should be incorporated into a joint venture agreement which is the legal contractual basis for the relationship.
While the prospect of opening your doors to a developer might be intimidating, there are clear benefits for providers prepared to take the plunge. These include the knowledge transfer to your estates teams and their exposure to greater innovation, along with the opportunity to work together to deliver exacting standards of housing - particularly where schemes involve aspects of health, such as housing for people with dementia or autism, or ‘wet houses’ for recovering alcoholics. This offers the potential for continuous improvement in the provision of services to tenants.
However, the best partnering relationships are based upon strong contractual relationships, so it is important to make sure that the contract documents are in good order in case you ever need to rely on them.
Potential challenges along the way include any disputed increase in costs or issues such as developers needing to accept the rigorous standards of building and emphasis upon community engagement that social housing providers require.
There may also be issues of flexibility given the need for binding commitments involving project content, timing and the division of costs and rewards.
In a stagnant market where social housing providers receive less and less support from the state, the trade-off may well be worth it.