New model barmy

The blockbuster is the Joint Contracts Tribunal major projects form, applauded – by contractors, at least – for its clarity, brevity, innovation and level of risk assumption. However, this hot ticket is strictly big ticket, because only experienced and well-resourced contractors will have the capacity to take on the risks involved: the restricted extension of time provisions; wider responsibility for site conditions and reduced grounds for loss and expense claims.

In this model, the employer tells the contractor what it wants (although it has to accept liability for its design requirements), then stands back and lets it deliver. The contractor has an incentive to deliver ahead of programme, and gets a slice of any cost savings that it conceives and the employer accepts. Housing associations, though, are not noted for their hands-off attitude to procurement, so it will be interesting to see if they are bold enough to use the major projects form on big projects to shift risk and save costs.

In general, associations prefer partnering and, although the recently amended PPC2000 partnering contract still has ambiguities in some areas, so far there have been no reported problems. There's also the new Be Collaborative Contract. Supporters say it moves partnering forward by placing risk management and allocation centre stage on a pre-assessed, cooperative basis.

But housing associations may soon count themselves lucky to get any choice in the area of contracts – particularly in planning gain deals, where associations are seen as a necessary evil. Increasingly, developers want to impose their own agreements to cut costs and reduce RSL involvement in schemes that predominantly involve housing for sale.

So RSLs can expect something resembling design and build, but:

• there will be no liquidated and ascertained damages for late handover or, at the most, meagre and illusory damages
  
• completion dates will be subject to elastic extensions of time provisions that, as the housing association is usually asked to pay money upfront, can represent a serious cost
  
• there will be no end date by which the developer has to deliver the homes or else the association can terminate and get its money back with interest. An association with social housing grant is on the hook as long as the developer wants, because if the housing market downturns, the latter can freeze the development until the market bounces back, then sell its flats
  
• the developer will be able to change specifications with minimal approval from the association and sign off practical completion itself, leaving structural problems to defects liability
  
• the developer will also be able to resist the usual requirements for practical completion such as sensible phase handovers, secure amenities and access. The developer will want minimal, if any, retention requirements, with no right to spend if it doesn't remedy defects
  
• it will want the RSL to have termination rights on insolvency only, not serious breach or lack of progress
  
• the contracting developer will be a special-purpose company that will aim to end its responsibilities for the development on practical completion, leaving the association with recourse only to the National House Builders' Council cover and consultants' warranties.

Associations prefer partnering, but soon they may be lucky to get any choice, particularly in planning gain deals

Some of these requirements are, in context, understandable but all involve risk for the housing association. The Housing Corporation should be applauded for its refusal to let developers divide and rule registered social landlords on planning gain, so giving the latter some bargaining strength.

Non-binding … or are they?
Remember the anxiety of being 14, with no date for the school disco? Nowadays, if you are a housing association with development ambitions and no strategic agreement with a developer, you're the wallflower.

These agreements are crafted to give the appearance of commitment, but actually avoid any legally binding obligations.

Some lawyers worry that these "non-binding" agreements, with their partnering vocabulary, will influence the courts' interpretation of subsequent agreements between the parties. Even where there is no subsequent agreement, if the parties are working up a project and one does work that could benefit the other, there could be a quantum meruit claim for payment for said work if the scheme aborts.

How will the courts view an agreement full of references to "long-term", "partnership", "trust" and "commitment", if one partner wants out as soon as, say, the association gets an amber light or the developer is taken over by Mr Evil plc?