Sarah Punshon
Legal Director
Article
6
Developers have sought to vary development agreements with local authorities for town centre schemes to restore viability ever since the 2008 property crash. Even in more benign times changes are inevitable as occupier requirements change during the lengthy period needed to secure planning permission and complete site assembly often following a compulsory purchase order. What is the risk such changes will lead to the need for another developer competition?
In R (on the application of Gottlieb) v Winchester City Council [2015] EWHC 231 (Admin) Mrs Justice Lang considered this issue in relation to a development agreement entered into by Winchester City Council and Thornfield Properties (Winchester) Limited. The agreement was made on 22 December 2004 for a mixed-use development comprising residential, retail, car parking, a replacement bus station, a civic square, a CCTV office, shop mobility and Dial-a-Ride service, and a market store.
On 9 February 2009, the Council granted planning permission for the redevelopment scheme. The proposals included approximately 95,000 sq ft of retail space (of which 25,000 sq ft was a food store), 287 residential units with 122 car spaces, 20 live work units with car parking, 330 public car parking spaces, a new bus station, a small quantity of office space and extensive proposals for public realm improvements.
An accompanying section 106 agreement dated 28 January 2008 secured affordable housing of 35% - 40% of housing units (or an equivalent financial contribution) to be provided. Thornfield Properties entered administration in early 2010 and the developer was acquired from the administrator.
Variations to the agreement had already been made on 22 October 2009, on 10 December 2010 and on 30 January 2014 before the Council approved further variations on 6 August 2014. These variations were successfully challenged in judicial review proceedings by a member of the Council who is also a chartered surveyor and a director of a small private property company.
Mrs Justice Lang held that the variations amounted to the award of a new public contract being "materially different in character from the original contract and, therefore, such as to demonstrate the intention of the parties to renegotiate the essential terms of that contract" as explained in the leading case before the Court of Justice of the European Union of Pressetext Nachrichtenagentur GmbH v. Republik Österreich [2008] ECR I-4401. The Council was therefore required advertise the development contract with the proposed variations under the Public Contracts Regulations 2006.
The changes proposed in August 2014 included:
The outcome may be unsurprising on the particular circumstances of the case but observations made by Mrs Justice Lang in the course of the judgement have wider implications:
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