Local Authority Wins Judicial Review of Using LLP Structure for a Housing Joint Venture



In the recent case of Peters v Haringey LBC, the Queen's Bench Division decided that Haringey London Borough Council was acting within its powers by entering into an LLP development vehicle with its development partner, Lendlease Europe Ltd.

The vehicle, called the Haringey Development vehicle, had the stated aim of securing private sector experience and funding for the regeneration of the borough. The venture was politically controversial, and against this backdrop a Haringey resident, Mr Peters brought a claim for judicial review on a number of grounds. One of these was that the council was ultra vires in using an LLP structure under the Localism Act 2011, which requires that a Local Authority use a company when it does things for a commercial purpose.

Considering this issue, the court found that, although some of the purposes of the Joint Venture vehicle may have been commercial, in particular those of Lendlease, the Council’s aims in entering into the partnership were to develop and manage its land to achieve its housing, aims, which were not commercial. The possibility of the council achieving a return on investment was found to be ancillary and a consequence of obtaining best consideration and acting in a financially prudent way. Interestingly, the court found that even acquisition outside of the borough would not necessarily imply a commercial purpose and that the aims of both parties should be considered in that event.

This decision has some benefits for Local Authorities. LLPs have the benefits of being a body corporate but, unlike company structures, are largely tax transparent. The governance requirements around LLPs may also be less onerous on Local Authorities than those of a company structure. Local Authorities looking to enter into similar partnerships in future may, therefore, benefit from using an LLP structure. Mr Peters has announced his intention to appeal the judgment and the results of any such appeal will be of interest to Local Authorities.

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