201609.05

Regeneration Project Survives Public Procurement Challenge

In a case which raised important issues in relation to public procurement, the High Court has refused to strike down a development agreement entered into by a local authority with the objective of comprehensively regenerating a run-down industrial estate.

The council owned the freehold of most of the estate, in which there had been little new investment in the past 40 years. It entered into the agreement with a developer with a view to mixed-use regeneration of the area and increasing its ground rent receipts. A company which held long leases over parts of the estate, and had its own development plans for the site, launched a judicial review challenge to the move.

In dismissing the company’s complaints, the Court rejected arguments that the council had failed in its duty under Section 123 of the Local Government Act 1972 to obtain the best consideration reasonably obtainable for its interest in the estate. The agreement was a rational means of achieving the council’s twin objectives of securing improvement of the area and enhancing its rental income.

Arguments that the agreement was a public contract, subject to the full rigour of the competitive tendering requirements of the Public Contracts Regulations 2015, also fell on fallow ground. It was not a public contract, whether for services or works, in that it merely facilitated the council’s objectives and did not impose upon the developer any enforceable obligation to carry out the redevelopment.

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