In addition to the list above, there will be different considerations depending on whether the housing PFI is a Housing Revenue Account (HRA), meaning council housing, or a non-HRA contract.
Irrespective of the ‘type’ of PFI, as stated above, the survey provisions will warrant close attention so that all steps are taken at the right time to understand the physical condition of the properties and that the responsibilities up to and following expiry are clearly identified and actioned. Given the quantity of individual surveys needed, they are of more logistical complexity in comparison to single-asset PFI contracts (eg than building a hospital).
“Once you start to read through the guidance, it becomes evident how much work needs to be done before a successful exit can be achieved and the seven-year figure proposed by the IPA becomes a sensible starting point”
Further, how residual land value is dealt with requires careful analysis because derogations from the standardised drafting were often granted by the secretary of state. The effect of this is that parties should not make assumptions based on the standard PFI drafting because it may have been amended.
In a non-HRA PFI contract, if the public authority is not retaining the assets after expiry, it would be sensible to review the nominations agreement given so many years have passed since it was originally negotiated. The nominations agreement provides the public authority with the right to nominate the tenants of the PFI properties. Consideration will need to be given to tenant and leaseholder consultation (statutory and informal) and notification arrangements arising from changes to, among other things, management arrangements at the expiry of the housing PFI contract.
Once you start to read through the guidance, it becomes evident how much work needs to be done before a successful exit can be achieved and the seven-year figure proposed by the IPA becomes a sensible starting point.
Early engagement, an understanding of what is actually happening on the ground and a firm comprehension of the contract are paramount. Although it is important for the parties to ascertain their own contractual and commercial positions so that they can best be protected, experience demonstrates that early collaboration can reduce time and costs for all involved and reduce the likelihood of acrimonious relations.
The IPA recommends a working group is established to focus on managing the contract during the last seven years and ensuring that obligations are complied with, while another group focuses on exit and another on service continuity.
While there is a wealth of guidance now available for public authorities that are approaching the end of their housing PFIs, it is important to not forget that each authority will be subject to its own constraints and agendas – and that such guidance is only the foundation of a successful exit, the remainder will be contextual to that authority.
Amardeep Gill and Lucy Doran, partners, Trowers & Hamlins
