Early last week social-housing maintenance company Connaught called in administrators after government spending cuts pushed the firm into financial difficulties.
Connaught's demise led many to speculate on the future of thousands of social-housing homes left in limbo -- who would step in to perform the maintenance contracts?
Up stepped Lovell, a division of construction company Morgan Sindall, who agreed to assume Connaught's maintenance responsibilities in return for the payment of £28m.
Portrayed in some quarters as knights in shining armour, the deal with described as a win-win for all concerned. The move secured the future of around 2,500 workers and maintenance on social-housing homes would continue with the 'minimum of disruption'.
As Jonathan Parker highlights in the Guardian, however, the law in this area is complex and housing associations could still face challenges ahead.
Public procurement law
When public housing authorities need work done above a certain value, EU law requires they advertise the contracts and conduct an open and transparent competition before selecting a party to do the work.
The objective is to stop public bodies unfairly aiding or subsidising one party over another -- for instance, because of some personal preference or prejudice against a contractor -- and unfairly 'distorting free competition'.
As Parker explains:
'This means that if a contract is simply handed over or sold -- as KPMG has implied it intends to do  -- it is clear that the party who ends up carrying out the works was or may not have been the party who won the contract based on the "fair" and "transparent" criteria required by law.'
The consequences of failing to comply with public procurement laws are that contracts may be terminated and parties may be ordered to pay fines.
Tenants also face being left in the lurch with no maintenance or refuse collection from their homes.
'The more prudent approach would perhaps have been for Connaught's administrator to avoid the temptation to run in and start handing out contracts to whichever contractor shouts loudest.
'Instead, it should take a breath and ensure that the strategies employed by housing associations and local authorities are legally robust enough to insulate against onerous legal, financial and social consequences. As the old maxim goes: act in haste, repent at leisure.'
- Connaught collapse raises legal fears over maintenance contracts (Guardian)
- Public procurement law: the basics (Out-law.com)
- Connaught fate a sign of austerity woes to come? (Reuters UK)
- Connaught's social housing arm survives bankruptcy (LocalGov)
- Property law (Findlaw.co.uk)
- Property law Q&A (Community)
- Property law news (The Solicitor)
- Find solicitors (Contact Law)