As the UK enters a critical phase of PFI contract expiries, the handback process presents a complex legal and operational challenge, particularly in the realms of defects and statutory compliance.

With many PFI contracts involving vital public infrastructure such as hospitals, schools and housing, assets must be returned in a condition that is safe, legally compliant and fit for continued use. Authorities must allow sufficient time to assess asset condition, identify gaps in compliance and implement remediation strategies.

One particularly challenging area of compliance will be fire and building safety. This area has seen increasing scrutiny and attention in recent years – particularly in terms of residential buildings, schools and health and social care settings. 

All those involved in delivering PFI arrangements must understand where the legal and practical responsibilities for compliance lie. Noting that where this is not addressed within the contract, it will be determined through the application of the relevant legislation. 

Under traditional PFI models, the Special Purpose Vehicle (SPV) is a shell entity with limited operational capacity, often described as a ‘Teflon tube’ that passes risk to subcontractors. However, many duties under fire safety legislation cannot be delegated and so may fall legally on the SPV due to its contractual position and operational responsibilities. It is essential that the SPV can demonstrate compliance with its duties and that, where compliance is secured via contractors, robust assurance and monitoring processes are in place.  

Many PFI contracts predate major legislative changes, including the Building Safety Act 2022 (BSA). Most PFI contracts include provisions for changes in law, but whether legislation, such as the BSA, qualifies as a ‘qualifying change in law’ depends on the specific drafting. This affects whether the contracting authority or the private sector bears the cost of compliance.

Below, we have highlighted some of the common pitfalls we see and anticipate seeing on handback. 

• Incomplete or inaccurate documentation - Authorities often discover late in the process that essential safety and compliance documentation is missing, out of date, or inconsistent, including risk assessments, test certificates and maintenance logs. This can expose the public sector to legal and regulatory risks.
   
• Latent defects and asset condition disputes -Disagreements over the physical condition of assets are frequent and a real challenge for lengthy and older PFI contracts. Without robust surveys and clear benchmarks, assets may be returned in a worse condition than expected, potentially breaching safety and compliance requirements.
   
• Legacy compliance systems - Systems used to record and manage compliance data may no longer meet current regulatory standards. Upgrading or transitioning these systems to the authority’s platform can be resource-intensive and disruptive if not planned early.
   
• Skills and governance gaps - Authorities must ensure internal teams and contractors are adequately trained and equipped to manage safety and compliance post-handback. Policies and procedures should be reviewed to reflect new responsibilities and ensure continued compliance.

How can we help?

Safety and compliance obligations at handback are multifaceted. A failure to meet these standards can expose public authorities to legal risk and compromise public safety.

Our expert team at Anthony Collins can support with:

• Interpreting complex health and safety clauses;
• resolving ambiguities and disputes;
• supporting negotiations to agree next steps; and
• advising on regulatory compliance and risk mitigation post-handback.

Early engagement between stakeholders, supported by legal advice, helps to ensure clarity, reduce disputes, and maintain continuity of service. While challenging, handback also presents an opportunity to modernise systems, embed sustainability and improve long-term asset management.

A proactive, legally informed approach can transform a complex transition into a strategic success.