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Housing & Regeneration

A quarterly newsletter keeping the social housing sector informed of the latest legal news and developments.

Latest Issue

In our latest issue of Housing and Regeneration News Alistair Fletcher looks ahead with his predictions for what 2017 has to offer, whilst we also look back at the success of the recent North West Housing Conference plus other news which we hope you will find of interest.

Season's Greetings: The Housing and Regeneration team would like to take this opportunity to extend our thanks to all our clients and contacts who have worked with us over the last year. We hope that we have helped to guide you through the issues that matter to you and that you will allow us to help you realise your ambitions in 2017 and beyond.

To stay up to date with this bulletin and see others - sign up to any of our free newsletters.

Planning for rent reductions

Friday 18th December 2015

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Housing and Regeneration News - December 2015

The Summer budget announced legislation to reduce social rents by 1% in four consecutive years, starting in April 2016. The legislation is in clauses 21-28 of the Welfare Reform and Work Bill, currently working its way through Parliament.

This was a bolt out of the blue for the sector, reversing the 10 year rent regime introduced by the April 2015 Rent Standard and making every Registered Provider’s (RP) business plan redundant. It appears that the Government may struggle to get the Bill on the Statute Book before it is due to be implemented in April 2016, let alone make regulations setting out exceptions to these measures (more on this below). This presents practical issues for the sector regarding next April’s rent review and re-lets in the meantime.

A quick tour of the Bill

As anyone who has read the Bill will testify, its language is opaque and the best aid to interpretation is probably a wet towel wrapped around the head.

Rent reductions apply to “social housing”, which has the definition given in the Housing and Regeneration Act 2008. That is lettings with sub-market rent and allocation rules based on financial means. So rent reductions do not apply to market rent lettings.

The starting point for the calculation is the rent at 8 July 2015 (budget day). This is to prevent landlords from hiking up the rent before the measures take effect in April 2016.

The only exceptions set out in the Bill are shared ownership accommodation and where a lender is in possession (following loan default). The Bill gives the Secretary of State the power to make regulations setting out further exceptions.  The Government’s Impact Assessment says that these further exceptions “may” include the current exemptions to the Rent Standard, which include intermediate rent lettings, some supported housing and care homes. The National Housing Federation (NHF) is lobbying for a general exception is respect of supported housing.

The Bill allows the Secretary of State to exempt (in whole or in part) individual RPs, but currently only on grounds of financial viability.

The Homes and Communities Agency (HCA) will police these measures and can take enforcement action against RPs that do not comply. As the Bill is inconsistent with the April 2015 Rent Standard, presumably the HCA will issue a new Rent Standard in due course.

Review dates

The default position is for the rent reductions to take effect in “relevant years” beginning on 1 April in 2016-19. However, the Bill allows a RP to use a different date if its “practice as regards the greater number of its tenancies” is to review rent “no more than once a year and with effect from a single date other than 1 April”.  This begs a number of questions:

  • Does “practice” mean established practice or could a landlord change its review date (if its tenancy agreements allow) before April 2016?

  • Is the first Monday in April a “single date” or a formula for determining a variable date? It falls on 6 April in 2015 and 4 April in 2016.

So the sector may be stuck with 1 April as a reduction date.  The Government seems to have overlooked that most of the sector have weekly rather than monthly tenancies.

The April 2016 rent review

If the Bill has not become law by April 2016, there are various options:

  • Carry on regardless.Serve notices increasing the rent by CPI +1%. Sort it out if it happens (and it probably will).

  • Anticipate the reductions. Serve notices reducing rents by 1% with effect from the April review date.

  • Sit on your hands. Wait to see if it happens and the extent of the exceptions allowed by the Government. If the Bill goes through in its current form, the rent reductions will have to be backdated.

  • Put off the evil day. If your tenancy agreements allow and you interpret “practice” as meaning what you do now (see above), change your rent review date to a later date. This could lead to complications after the end of the rent reduction period (2020 onwards).

This is a commercial decision for each RP, based on balancing the administrative inconvenience of backdating rent reductions and possible regulatory risk against the (probably remote) opportunity of being able to hang on to a bit more revenue.  

Re-lets

Schedule 2 of the Bill sets out rules about how to calculate rent reductions for re-lets after 8 July 2015. They will be based on the actual rent passing (under a previous tenancy) or formula rent (the new term for target rent, but without the +5% tolerance) as at 8 July 2015 for the property, whichever is the higher.

A couple of examples illustrate the position:

  • Property let at 8 July 2015 at £95pw with formula rent then £100pw. Subsequently re-let at £105pw (105% of formula rent). In April 2016, the rent will be reduced to £99pw (1% less than formula rent at 8 July 2015).

  • As above, except the rent at 8 July 2015 was £105pw. In April 2016, the rent will be reduced to £103.95pw (1% less than the actual rent at 8 July 2015).

A landlord seeking to maximise income up to the first rent reduction can re-let at 105% of formula rent but will have to reduce rent to 99% of the higher of the passing rent or formula rent as at 8 July 2015. A landlord seeking to minimise the administrative burden of implementing the reductions will re-let at the higher of passing or formula rent as at 8 July 2015.

These comments are based on the current draft of the Bill. It has already been substantially amended and may be amended again by the House of Lords. So every RP needs to monitor its progress until it reaches the statute book.

If you would like to discuss any issues regarding the rent reductions please contact:


Ian Alderson

Partner
Tel: 0151 600 3317
Email: ian.alderson@brabners.com

 


New public procurement thresholds for 2016

Friday 18th December 2015

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Housing and Regeneration News - December 2015

On 24 November 2015, the European Commission set out the new minimum financial thresholds for contracts caught by the application of EU public procurement law.

The new thresholds apply from 1 January 2016 and will remain fixed for the next two years.

The Public Contracts Regulations 2015 (the “Regulations”) regulate the procurement activities of “contracting authorities” in England and Wales which includes registered providers. The Regulations implement the EU Directives on public procurement law.

Every two years, the European Commission updates the minimum financial thresholds to which the EU Directives, and therefore the Regulations, apply. Where registered providers or other contracting authorities procure contracts for goods, works or services which are of a value that exceeds the minimum financial thresholds, the full regime of the Regulations applies. This is often known as an “OJEU procurement” because of the need to advertise the requirement in the Official Journal of the European Union (OJEU).

The European Commission has once again increased the threshold, as measured in Euros. However, due to the increasing strength of sterling against the Euro, the impact for registered providers and other contracting authorities is that, despite the increase, sterling thresholds have actually decreased.

Set out below in bold text are the new sterling threshold rates which apply from 1 January 2016. The current (i.e. pre-2016) threshold rates are set out in brackets.  

Public Contracts Regulations 2015 (PCR 2015)

 

Supplies

Services

Works

Central Government bodies

£106,047

(£111,676)

£106,047

(£111,676)

£4,104,394

(£4,322,012)

Registered providers and other contracting authorities

£164,176

(£172,514)

£164,176

(£172,514)

£4,104,394

(£4,322,012)


The threshold for light touch (social and similar) services procured under PCR 2015 remains unaltered. However, the European Commission has confirmed from 1 January 2016 that the new sterling threshold shall be £589,148.

It will be disappointing news that the minimum thresholds have again decreased, the effect of which is that more (not less as the European Commission had intended) contracts will be subject to the requirements of EU public procurement law. Registered providers should be aware that the thresholds are fixed both in euros and sterling for the next two years.

There remains the possibility that the European Commission will recommend a significant increase in the thresholds for 2018. If not, there is still the possibility of changes being implemented following the European Commission’s legally mandated review of procurement law, which is to be undertaken by no later than April 2019.

If you would like more information about this or to discuss any issues regarding public procurement please contact:


Michael Winder

Associate, Commercial team
Tel: 0151 600 3085
Email: michael.winder@brabners.com



Michael is a member of the Procurement Lawyers' Association

 


My day at the North West Housing Conference

Friday 18th December 2015

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Housing and Regeneration News - December 2015

By Sarah Howe, Solicitor, Housing and Regeneration team

On 15 October this year’s North West Housing Conference took place at Liverpool’s BT Convention Centre. This was my third year attending the Conference, for which Brabners is proud to be a Conference Partner.

The theme of this year’s Conference was Foundations for the Future. With over 200 delegates in attendance and 22 exhibitors offering bespoke products and services specifically to the housing sector, the hall was a buzz of activity with people meeting up with colleagues and contacts both new and old; tackling a treasure hunt around the stands and even experiencing the photo booth! 

The programme began with an introduction by the Conference Chair Derek Long of arc4, followed by keynote addresses which dealt with the challenges facing the housing sector and the need to promote the role of housing associations in society and promote better links between health and housing.

After a networking lunch there was a panel session entitled ‘Foundations for the Future’ which featured five impressive young professionals (photo to the right) sharing their ideas for the future of social housing and how best to react to the changes facing the sector.

The programme also offered workshops on a variety of topics with a number dealing in detail with the impact of the summer Budget. Topics included development; financial and accounting issues; and anti-social behaviour litigation and current issues before the Courts.

I chose to attend a workshop by Mick Warner of the Homes and Communities Agency who spoke about the main changes to Regulatory Framework and gave a useful insight into the Regulator’s thoughts on a variety of points including the importance of assets and liabilities registers and stress testing and a run through of the sector’s global accounts for 2014. 

I also attended ‘Section 106 Agreements: Terms, Tips and Traps’ presented by Claire Petricca-Riding, head of the planning and environmental team here at Brabners. Claire spoke about the use of planning obligations to make proposed development acceptable in planning terms and to fund affordable housing and residential development. The presentation included an update on the recent Government consultation on speeding up the process.

All for a good cause, profits from the Conference went to the chosen charity House of Memories and Carol Rogers MBE of National Museums Liverpool gave a fantastic presentation on their excellent work.

A drinks reception concluded a thoroughly enjoyable and informative day and I am looking forward to next year’s Conference already!

You can read more about the Conference in our press release about the day here

If you would like to discuss any housing issues please do not hesitate to contact me on 0151 600 3063 or by email to sarah.howe@brabners.com 

Here’s some photographs from the day

Organisers with keynote speakers - photo l-r: Derek Long – arc4, Deborah McLaughlin – Manchester Place, Alistair Fletcher – Brabners, Gill Payne – National Housing Federation, Matt Jones – ForViva, Paul Wainwright – Mitchell Charlesworth

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

And finally - the photo booth!

 


Obligations under Section 11 of the Landlord & Tenant Act

Friday 18th December 2015

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Housing and Regeneration News - December 2015

Clients have recently been asking if they can scale down their repairing obligations under Section 11 (S11) of the Landlord and Tenant Act 1985 (LTA 1985). The reason seemed to stem from the 1% cut in rent which is having an impact on budgets and clients are thinking of ways in which to cut costs.

Under LTA 1985 you cannot opt out, as a Registered Provider you have a statutory right to carry out certain repairs the dwelling-house.

The dwelling-house

This will cover all that is demised to the tenant under the terms of the tenancy agreement.

Landlords need to be aware of what’s included in their agreement with the tenant. For example, if you let a property with a cellar to a tenant, and the cellar is not a prohibited area, the tenant stores belongings in the cellar, or uses the cellar as part of the dwelling and you don’t define the dwelling under the tenancy, this may be arguably part of the dwelling.

If the cellar is damp and the tenant complains they may have a legitimate argument that the cellar is part of the dwelling. It is in disrepair and ought to be repaired under your statutory repairing obligation.

Also consider S11(1A) LTA 1985; this advises that if the Landlord  has an interest in land causing a repair to part of the dwelling i.e. a cellar’s condition impacting on the dwelling you will too be caught by S11.

S11 – what are your obligations?

  1. You will be responsible to keep in repair the structure and exterior of the dwelling-house (drains, gutters and external pipes).

  2. The supply of water, electricity and sanitation (basins, sinks, baths and sanitary).

  3. Installation for space heating and water.

This is the minimum you need to undertake to a dwelling-house in order to ensure you are not in breach of S11.

Contractual obligations

Otherwise known as the tenancy.  RPs usually have a number of different tenancy agreements following stock transfers or acquired properties over the years.  You need to ensure that you have regard for the tenancy because this may extend your obligations under S11.

  • In Welsh v Greenwich LBC (2001) 33H.L.R 40, CA a covenant by the landlord to maintain the property in “good condition” was held to include liability for severe condensation dampness.

So where you wouldn’t normally be liable for condensation, if your tenancy places your obligation higher, you may well be liable.

  • Under the case of Grant v Gill [2011] EWCA Civ 554 plasterwork is now part of the structure and exterior so although not specifically mentioned in the LTA 1985 it is part of the structure.

Normally a landlord would not be liable unless they had actual notice of the defect and also if they had no interest in the land.  However this was not the case in Edwards v Kumarasamy.

  • In that case the landlord was a leasehold owner of one flat in a block of flats and was liable for a defective paving stone at the front of the property even though it had been retained by the freehold owner of the block. Steps leading to the front door of the property were part of the exterior and the landlord, under his own lease with the freeholder, had retained a right of access over the paving stones. He therefore had an interest over the paving stones and had the right to carry out the required repairs.

Conclusion

  • You have an obligation under S11 LTA 1985 which must be met.

  • The obligation is a continuing one throughout the duration of the tenancy

  • You must check your tenancy agreement to ensure this does not put the rights higher than S11 LTA 1985.

  • Look at the demised premises to the tenant – can you refuse to do works or are you caught by statute?

  • Do you need to remove plaster – if you do you may be caught under S11 LTA 1985.

If you like to discuss any issues you may have with regards to your obligations please do not hesitate to contact:


Catherine Fearon

Associate
Tel: 0151 600 3184
Email: catherline.fearon@brabners.com  


Proposed raising of the small claims limit and potential consequences for the housing sector

Friday 18th December 2015

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Housing and Regeneration News - December 2015

The Autumn Statement saw the Chancellor George Osbourne pledge to raise the small claims limit for personal injury claims from £1,000 to £5,000. Whilst the target of these changes has been touted as ‘minor whiplash claims’ as a result of road traffic accidents, the change will effect victims of clinical negligence, industrial disease and slip/trip accidents.

Why does it matter?

Presently, if a claimant suffers an injury where they recover £1,000 or more (in respect of their injury excluding any claim for consequential loss e.g. medical expenses) they are entitled to recover their legal fees from the defendant. For a claimant to be awarded damages over £1,000 a GP would need to confirm that they suffered with an injury caused by negligence for a period of 3-4 weeks.  

For a claimant to receive an award of £5,000 or more they will have suffered a much more serious injury and usually have been examined by a specialist as well as a GP. The majority of personal injury (“PI”) claims do not reach this threshold.

The future

The proposed change will see a significant drop in the number of PI claims being pursued as the legal costs will no longer be recoverable from the negligent party. People will continue to suffer personal injury, and some could attempt to bring claims themselves as litigants in person. This presents its own challengers to solicitors and the judiciary as their lack of expertise can result in a slowing down of the system with deadlines missed and cases over running.

It is likely that some firms will enter into damages based agreements with their clients. These allow claimants to contribute up to 25% of their damages to cover their solicitor’s costs. These will be attractive to solicitors where the client has a more severe injury which does not reach the £5,000 threshold and liability is not disputed. In more complex cases, for example where liability or causation may be disputed, it is likely that claimants will now go unrepresented.

The impact for the Housing Sector

Landlords should notice a decrease in the number of PI claims and may also notice a decrease in PI claims allegedly caused by defects to the property (as a common trend in these cases is for the claimant to bring a claim for disrepair and personal injury in a combined action).

A current example: a tenant who has damp and who alleges suffers with chest problems as a result. If the court agrees that the personal injury was caused by the damp and that the damages for injury would be £1,000 or over, the claimant will be successful in recovering their legal costs from the defendant.

Under the new rules: when the small claims limit is raised claimants will have to satisfy the court that they have sustained a much more severe personal injury (over £5,000) to be able to recover their legal costs. As such the likely consequence is a decrease in these actions being pursued.

If you would like to discuss any issues regarding the proposed increase to the small claims limit please contact either Catherine or Matthew:


Catherine Fearon

Associate
Tel: 0151 600 3184
Email: catherline.fearon@brabners.com 

 


Matthew Ross

Trainee Solicitor
Tel: 0151 600 3144
Email: matthew.ross@brabners.com 

 


The true price of the Right to Buy extension for the North West

Friday 25th September 2015

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Housing & Regeneration News - September 2015

The Conservative Party sent shockwaves through the housing sector earlier this year when they announced plans to extend the Right to Buy (RTB) to housing associations. Here we look at the concerns and issues facing many North West associations.

The option to buy with a discount of up to £77,000 in the North West is currently only available to tenants in a house rented to them by a local authority,  a tenant whose home was previously rented to them by a local authority but was then transferred to a housing association as part of a stock transfer, or a secure tenant of a charitable housing association. The extension will see all other housing association tenants (who, by contrast, are currently only able to claim a maximum discount of up to £9000 in the North West by way of the Right to Acquire), allowed access to the same tantalisingly big discounts.

The plans have provoked many concerns but without much clarification to date. How will Housing Associations be recompensed for the huge discounts to which they will be exposed, in order to fund the replacement of homes they have been forced to sell-off. What are the practical implications of a potential dramatic decrease in available stock?

The Government has said it will fund the Right to Buy extension by forcing councils to sell their ‘high value’ homes as they become empty. The government believes 210,000 council homes fall into this category and 15,000 a year will become vacant, allowing councils to raise £4.5bn of which a proportion will fund the discounts and replacement homes. It is expected that receipts generated from this ‘discount rule’ will be ring-fenced to the region where they are generated with proceeds funding that region’s discount and replacement costs.

What this means for the North West

The North West has the smallest number of residual council homes in England. In 2011, only 3.6% of homes in the North West were still owned by its local authorities. By contrast, London not only has more council-owned stock, it also has higher property values, meaning, under the planned discount rules, London will be disposing of much more stock than the North West and generating much higher receipts.

Why is this a concern for the North West? The key issue here is receipt value. Because of the paucity of local Council stock, North West housing associations will struggle to fund the potential volume of RTB discounts and the cost of replacing stock. This is because of the limited number of lower value local authority receipts that will be available, if these receipts are to be ‘ringfenced’ to the region. Pooling receipts nationally would help address this difficulty, but the idea has already been met with inevitable disdain from the London mayor, Boris Johnson. As an alternative, there is speculation that the government may force stock transfer associations to sell off their high-value stock as part of the discount rule – whilst this may be solution to the financial concerns of covering the costs of the extension, this only exacerbates stock depletion issues, reducing the supply of affordable housing in an already stretched market.

A big RTB uptake will create a significant reduction in the number of affordable homes. The inevitable lead time for developing new homes, even if they can be funded, means it will be many years before lost stock is replaced. The effect of massive stock depletion in a short space of time could also in many cases amount to a breach of an asset cover covenant in housing association’s funding arrangements, causing additional potential difficulty with lenders.

Doom and Gloom?

Yesterday, the National Housing Federation and the Government announced a potential voluntarily extension of the RTB. In adopting the voluntary policy, housing associations will see the extension implemented on more favourable terms than if it were to be implemented by way of legislation. Read more about this here.

The NHF envisages that only 221,000 households will be in a position to exercise the RTB, once affordability has been taken into account, and not the headline figure of 1.3million claimed by the Conservatives pre-election.

Nevertheless, the extension is likely to benefit few, at the expense of many - not least housing associations who will struggle to replace stock, but also those people in desperate need of affordable housing. It is to be hoped that the voluntary extension now proposed or the impending housing bill, expected imminently, will address these issues.

If you would like more information about the Right to Buy extension or to discuss any issues you may have please contact:

Bethan Williams
Solicitor
Tel: 0151 600 3402
Email: bethan.williams@brabners.com


Important changes to assured shorthold tenancies and tenancy deposits - the Deregulation Act 2015

Friday 25th September 2015

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Housing and Regeneration News - September 2015

The Deregulation Act (DA), which comes into force on 1 October, makes significant changes to Housing Act 1988 and in particular to s21, which regulates the termination of assured shorthold tenancies (ASTs).

In this article we outline the key changes.

1. Section 35: Notice Requiring Possession (NRP) - s21 notice

A new provision will be inserted in to s21 (after subsection 4):

“(4ZA) In the case of a dwelling-house in England, subsection (4)(a) above has effect with the omission of the requirement for the date specified in the notice to be the last day of a period of the tenancy.”

The current legislation states that the NRP must expire on the last day of the period of the tenancy, now it will simply be a 2 month notice.

2. Section 36 – Time limits serving s21 notices

In the case of ASTs entered in to after 1 October 2015 a landlord cannot serve a s21 notice within four months of the tenancy commencement. This puts a stop to some landlords serving a s21 notice as soon as the tenant enters in to the tenancy.

Proceedings must be issued within four months of the expiry of a notice for a fixed term AST and within six months of the expiry of a notice given for a periodic AST. 

3. Section 37 – new form

The secretary of state may issue a prescribed form of s21 notices – watch this space.

4. Section 38 – Compliance with legal requirements

A s21 notice cannot be served if the landlord is in breach of a prescribed requirement such as:

(i)  The condition of the dwelling house and the common parts

(ii)  The health and safety of the occupiers; or

(iii)  The energy performance of the property.

If the landlord is in breach of its legal obligations (such as under the Landlord & Tenant Act 1985) then it cannot serve a s21 notice.

Deposits

Sections 30-32 amend the tenancy deposit provisions in the Housing Act (HA) 2004.

Statutory periodic tenancies: Deposit received before 6 April 2007

  • Section 32 of the DA 2015 inserts a new section 215A into the HA 2004 dealing with the issue of deposits received before 6 April 2007.
     
  • If the deposit is not protected and the Prescribed Information (PI) was not served by 23 June 2015 then no s21 can be served until the deposit has been returned and any penalty claim by the tenant has been dealt with. 

Deposits taken between 6 April 2007 - 6 April 2012

  • If the deposit was protected late but during the term of the original AST there is no restriction on the service of a s21 notice and no penalty claim.
     
  • If deposit was not protected and PI served during the term of the original AST, a s21 notice cannot be served until the deposit is returned (or PI served if deposit was protected but PI not served). There will be a penalty claim so long as tenancy still exists.

Deposits taken after 6th April 2012

  • If deposit was protected and PI served outside 30 days, a s21 notice may not be served during the initial tenancy until deposit returned and a penalty claim is possible.
     
  • But if protected or served late but during the term of the original AST, and the tenancy has subsequently been renewed or become a statutory periodic, a s21 notice can be served. However, penalty claim can be made on the original default.
     
  • If deposit not protected and PI served during the term of the original AST, a s21 notice cannot be served until the deposit is returned.  Penalty claim applies on first and any subsequent breaches (on new tenancy/statutory periodic).

If you would like more information on these changes or for any housing issue you may have please contact:


Catherine Fearon
Associate
Tel: 0151 600 3184
Email: catherline.fearon@brabners.com

 


The constraints for Registered Providers in funding trading subsidiaries

Friday 25th September 2015

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Housing and Regeneration News - September 2015

Our Registered Provider (RP) clients have recently been paying an even greater focus on what their non-charitable trading subsidiaries might undertake in order to generate further funds for the RP itself.  Whilst in these ever more constrained times that is a natural and sensible course of action, great care must be taken to ensure that those activities do not inadvertently cause a problem for the RP, particularly if it is proposed that the RP will be funding the subsidiary in some way.

In this article we look at some of the issues that arise when funding a subsidiary, particularly in relation to charitable RPs.

Governance issues

A review should be undertaken of your Rules to ensure that there is nothing within them that would prevent the RP from investing its money in its subsidiary whether by way of share subscription or by way of loan. The National Housing Federation (NHF) Model Rules 2015 will allow this but older Rules may not.

Even if the investment is permitted under the RP’s objects then appropriate stress testing will need to be undertaken, paying particular regard to the effect on the RP of the monies not being repaid in whole or in part.

Charity law issues

A charitable RP is likely to be more constrained in what it can and cannot do than a non-charitable RP. As trustees of the charity the board members need to have particular regard to the following:

  • Can such investment be objectively justified as being a prudent investment having due regard to portfolio diversification?
     
  • Whether any lending will be regarded as being a trade which may well be the case if the RP is proposing to borrow to lend onto the subsidiary; if it is then there may be taxation consequences not to mention it being a possible breach of the trustees’ duties.
     
  • Lending is likely to be more permissible than on-lending but again regard needs to be had to the issues concerning prudence and portfolio diversification. In addition, any loan needs to be made on a commercial basis, having a suitable rate of interest with appropriate security and a repayment schedule.
     
  • Can the lending be regarded as being primary purpose, particularly if it is proposed that the money that is to be lent to the subsidiary has been borrowed by the RP from a third party having granted security to that third party over the primary purpose assets of the RP?
     
  • Charity Commission guidance is that equity investments in subsidiaries should be nominal only. Whilst we are aware of equity investment of greater sums, that should only be undertaken having taken appropriate legal and accounting advice.

Funding issues

Any lending or equity investment should only be undertaken having first ensured that doing so will not be in breach of the RP’s facility agreements with its funders or, where necessary, having got their consent to do so. We have also seen instances where the agreed terms with the RP’s funders restricts the borrowing powers of a trading subsidiary (e.g. if the trading subsidiary were to propose to borrow money from a third party rather than the RP itself). Regard should also be had as to whether the default of the trading subsidiary will constitute a default of the RP.

Regulatory issues

A loan made by an RP to a trading subsidiary is caught by category 6 of the general consent meaning that it is permitted by the relevant legislation so long as the conditions of category 6 are complied with. Those conditions include (i) consent from the HCA (ii) the loan to be on reasonable arm’s length terms (by which we would expect the loan to be at a preferential rate of interest to the RP and to be secured over the assets of the subsidiary).

Any equity investment is likely to be of higher risk than a loan and therefore of greater interest to the regulator.

We would also anticipate that there is a risk that significant lending or investment in a subsidiary may result in the RP having its viability grading considered by the HCA, regardless of the strength of risk mitigation/stress testing that is undertaken in respect of the proposed activities.

If you would like more information about any of issues raised in this article please contact:


Rupert Gill

Partner
Tel: 0151 600 3106
Email: rupert.gill@brabners.com

 


Changes to CPR: New protocol for Disrepair Claims & new powers for Part 36 (offers to settle)

Friday 5th June 2015

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Housing & Regeneration News - June 2015

A look at the latest changes to the Civil Procedure Rules.

New Protocol for disrepair claims

On 6 April 2015 a new Pre-Action Protocol for Housing Disrepair Cases was released. 

The changes are:

  • The removal of the need to send the “Early Notification Letter” (“ENF”).  This was supposed to be sent before the Letter of Claim but in practice very few people send the ENF so this has been removed to simplify the procedure.
     
  • Taking Stock:  Where the protocol has been followed and has not resolved the dispute between the landlord and the tenant, both parties are encouraged to review their positons with a view to avoiding proceedings or narrow the issues in dispute.
     
  • The Glossary has been amended so unrepresented tenants can find unfamiliar terms on Google.
     
  • The specimen costs schedule now refers to the court form to simplify the procedure, particularly for unrepresented tenants.
     
  • The Guidance notes and the Protocol have been merged to make it easier to follow for tenants representing themselves.
     
  • Experts:  Reference has been made to the relevant part in the Civil Procedure (Part 35) about experts) and the protocol stipulates that where a single expert cannot be agreed and a joint inspection occurs, it will be for the court to decide if the parties have acted reasonably and whether the cost of more than one expert should be recoverable. 
     
  • The new protocol also makes reference to the Guidance for Experts (formally called Experts Protocol) which experts need to follow when compiling their reports.

Conclusion:

  • There is not a great deal of change.
     
  • The changes are around simplifying for unrepresented tenants.
     
  • The courts are trying to encourage early settlement through “taking stock” (new) and alternative dispute resolution (existing).
     
  • Landlords and tenants may be forced to explain why they have been unable to agree one expert and the court will decide if costs should be recoverable.  This is a concern where solicitors are using poor independent surveyors and the landlord wishes to use a different surveyor the courts could criticise or penalise both parties for this approach.
     
  • It also makes responding to the letter of claim properly, and instructing an independent expert at the earliest opportunity very important.


New powers under Part 36 (offers to settle)

Summary of the changes are:

  • The Civil Procedure (Amendment No. 8) Rules 2014 (SI2014/3299) applies to Part 36 offers made after 6 April 2015 and trials which are heard after 6 April 2015.
     
  • Under the old rules you could not make a time limited Part 36 offer.  The relevant period (21 days) indicated when an offer was capable of being withdrawn and under the old rules you had to serve a notice of withdrawal after that period.
     
  • The new Rule ((36.9 (4) (b)) states that where no notice of acceptance has been served the offer may automatically be withdrawn in accordance with the timeframe in the offer.
     
  • Under this new rule there is no need for a written withdrawal of the offer, if it was always the intention to make the offer time limited.
     
  • The advantages may be that it puts more pressure on the offeree to accept but on the flip side, if the offeror makes a time limited offer and it automatically expires at the end of the timeframe the offeror will lose the protection on costs under Part 36.
     
  • The cost protection is that the offering party will be entitled to their costs at the end of the relevant period (21 days after the offer is received) until trial or the offer is accepted.  If the offer is time limited that protection on costs will be lost.
     

If you would like more information on these changes or for any housing issue you may have, please contact:


Catherine Fearon

Solicitor
Tel: 0151 600 3184
Email Catherine

 


Disposing of social housing assets - HCA consent

Friday 5th June 2015

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Housing & Regeneration News - June 2015

Introduction

Recent changes made by the HCA, which took effect on 1 April 2015, have had a significant impact on the rules governing consents to disposals.

The General Consent 2015 covers consents required under section 172 of the Housing and Regeneration Act 2008 and section 133 of the Housing Act 1988. 

In accordance with their policy of protecting social housing assets, the HCA has slightly reduced the number of categories of general consent, resulting in an expected increase in the number of applications for specific consent.

There are now 34 separate categories for general consent and each notes the section to which it can apply. In addition, it is worth noting that not all of the categories of general consent are available to be used by for profit providers.  In those situations for profit organisations will be required to make an application for specific consent.

All change…

New application forms have been produced and are available on the HCA website.  In addition, the HCA’s invaluable booklet ‘Disposing of Land’ has been updated and is also available from the website.

Ask yourself…

As previously, there are four questions to consider:

  1. Does section 172 of the Housing and Regeneration Act 2008 / section 133 of the Housing Act 1988 apply?
  2. If so, is the disposal exempt?
  3. If not, is general consent available?
  4. If not, is specific consent available?

Using the General Consent…

For those using the General Consent, it is important to remember the General Conditions which are set out in Part II and which must be complied with in each case. 

The Conditions require, inter alia, the need for the disposal to comply with the RP’s governing document and all regulatory requirements and to have ‘governing body authority’, allowing for proper delegation to a sub-committee or two or more officers. The Conditions also highlight the need, if appropriate, for mortgagee consent and for a valuation prepared by an independent valuer and dated within three months of completion to confirm that the disposal is at the ‘best consideration.’

If you need any assistance with the new framework and procedures, please contact:


Sarah Howe

Solicitor
Tel: 0151 600 3063
Email Sarah


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