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Reflections on the Housing & Planning Act

22 June 2016 • Jo Loake

With the controversial Housing and Planning Bill now officially an Act, Croftons’ Head of Governance & Regulatory, Jo Savage, reflects on some of the key elements that will impact RPs.

Reducing regulation for RPs

The Act contains provisions to enable the reclassification of RPs back to private, such as reducing local authority influence and allowing regulations to be made to remove or limit such influence through appointing or removing officers of RPs and exercising or controlling voting rights. The regulations may, for example, limit the number of officers a local authority may appoint or prohibit such appointments, or require the local authority to take steps to reduce or get rid of any voting rights that it is has in an RP.

Housing administration orders

Housing administration orders are introduced, which would be made by the court where an RP is a company, a community benefit society or a CIO. The objectives of housing administrators are to retain normal administration and keep social housing in the regulated sector. The objective of normal administration is to rescue the RP as a going concern and achieve a better result than would be achieved by winding the RP up, as well as release property to make distributions creditors. The court may make a housing administration order only if it is satisfied that the RP is unable, or likely to be unable, to pay its debts or (on a petition by the secretary of state under insolvency law) it would be just and equitable to wind the RP up in the public interest.

A housing administrator may dispose of land subject to planning obligations that contain ‘relevant terms’ (this being restrictions or requirements imposed by planning obligations that are expressed not to apply in the event that the land is disposed of by a mortgagee) with those relevant terms not binding on the person to whom the land is disposed, or any successors. An application for a housing administration order could only be made by the secretary of state or the HCA (with the consent of the secretary of state).

The Act further details amendments in relation to winding up orders and voluntary winding up, as well as dealing with enforcing security. It sets out that the steps may not be taken to do so unless notice of intention has been served on the HCA and a notice period of 28 days has elapsed.

It is also worth noting that where a housing administration order has been made, the secretary of state may make grants or loans to the RP, in order to achieve the objective above, on terms and conditions they see fit, including repayment and interest terms. The secretary of state may also indemnify persons in respect of liabilities and loss or damage incurred or sustained in connection with carrying out the functions by the housing administrator, however, where sums are paid out under such indemnities the RP must repay those amounts, with interest.

The secretary of state may also guarantee monies borrowed by an RP, including interest and the discharge of any other financial obligation (connected to the borrowing of the RP); again where any sum is paid out, the RP must repay such sum, with interest.

Consents regime

The consents regime will no longer apply and will be removed from previous legislation. There will therefore be no requirement for an RP to apply to the HCA for consent to dispose.

 

Amendments to the Housing and Regeneration Act 2008, include a new section 74A which states that a dwelling will cease to be social housing if an RP (owning the freehold or leasehold) transfers it to a person who is not an RP. This will not apply if the RP has any right to buy back the property or to properties sold under shared equity or shared ownership terms.

 

However, whilst the consent of the HCA is no longer required, the HCA must be notified if an RP disposes of a social housing dwelling and, in the case of non-profit RPs, disposes of land other than a dwelling.

Restructures

If an RP which is a registered company wishes to convert to a community benefit society, it will not require consent from the HCA, but the HCA must be notified of any resolution for conversion.

Where an RP wishes to restructure, the HCA must be notified of any resolution passed by it for the purposes of restructuring and the FCA can only register the restructure if the HCA confirms to it that it has had such notification, although formal consent will not be required. The HCA will however decide whether the new body created is eligible for registration under s112 of the Co-operative and Community Benefit Societies Act 2014; if it is, the HCA must register it and designate it as a non-profit organisation.

Constitutional changes

  • Where an RP which is a registered community benefit society (CBS) wants to change its rules, it must notify the HCA of the changes.
  • Where a registered charity which is also an RP wishes to change its objects, it must notify the HCA of the changes.
  • An RP which is a registered company and wants to  amend its articles of association, it must notify the HCA of the changes to its articles and to any change of its name or registered address.

What is important to note in respect of the notification system is that although there will be no requirement to obtain consent in advance, the HCA will continue to regulate decisions made and notified through the IDAs.

DPF

The DPF is to be abolished.

Right to Buy

The Act sets out the provisions for funding RTB discounts, with the secretary of state able to make grants to RPs in respect of RTB discounts on terms deemed appropriate, and it includes provisions for payments to the secretary of state by local housing authorities in respect of their high value properties. This is how the RTB discount is to be funded. The Act also confirms that any determinations the secretary of state makes which require local housing authorities to make payments to it, can only be done in respect of local housing authorities which keep a housing revenue account

The HCA may be asked to monitor compliance with the home ownership criteria (i.e. sales to tenants, other than the statutory RTB). The criteria will be published, and information on RPs who have not met the criteria may also be published.

High income social tenants (HISTs)

The Act allows the secretary of state to set rent levels that local housing authorities must charge a HIST, in particular any regulations may require the rent to be equal to a market rent, a proportion of a market rent or to be determined by reference to other factors. It may therefore be different for people with different incomes, or for social housing in different areas.

Rent Regulations will define what is meant by high income and make provision as to how a person’s income is calculated (i.e. geographical area, things not be treated as income, verification of income and household income). Rent regulations may also require a housing authority to charge a maximum rent where the tenant has failed to provide the required information about their income.

In practical terms

The major practical effect on RPs will be in relation to the consents regime and it will allow RPs to make different decisions about their assets, hopefully lending itself to optimal asset management. However, RPs will always need to bear in mind the effect of decisions on financial viability, governance and loan covenants, as well as charitable objects.

 

Matters to consider

RPs should also note that whilst the new freedoms create opportunities, there are other matters to consider too, such as:

  • For LSVT organisations, matters contained in the transfer agreement, in particular any covenants and promises to tenants
  • Funders’ requirements and impact on the loan portfolio, covenant breaches and re-pricing
  • The ongoing protection of social housing assets
  • Charitable objects and status – those RPs which are also registered charities will need to comply with the Charity Act 2011 and its provisions relating to disposals
  • Any possible repayment of grant on disposal, or other financial consequences, such as overage
  • Tenant consultation
  • Local area and local authority housing needs
  • Local authority appointments and voting rights
  • Decision making processes

 To discuss any of these issue further, please contact Jo Savage.


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