Published: 22 September 2017
Area of Law: Social Housing Litigation
Deregulation of social housing
The Government has now published draft regulations to reduce the amount of local authority influence over private registered providers (“PRPs”). The Regulation of Social Housing (Influence of Local Authorities) (England) Regulations 2017 (the Regulations) are the latest in a number of measures aimed at reversing the Office of National Statistics’ decision in 2015 to reclassify registered providers as ‘public non-financial corporations’.
Here we outline the five key provisions from the regulations that PRPs need to be aware of.
It is worth noting that the Regulations only apply in relation to English PRPs and do not apply to non-profit PRPs that are wholly-controlled by the local authority, for example arms length management organisations. In addition, the Regulations apply regardless of any inconsistent provision in a PRP’s constitution or in a contractual arrangement to which a PRP is a party.
1. Local authority board members
From the appointed day, a PRP’s board must not include more than 24% local authority officers.
The local authority must nominate the local authority officers to be removed to ensure the 24% maximum is not exceeded. If the local authority fails to make such a nomination by the appointed day, the rest of the board can select who to remove by majority decision. Any appointment of a new local authority officer will not have effect if the 24% cap would be exceeded.
2. Board quorum requirements
Any provision in a PRP’s constitution that requires the presence of one of more local authority officers for a board meeting to be quorate will have no effect from the appointed day.
3. The local authority as member or shareholder
From the appointed day, a local authority will no longer be able to hold or exercise any voting rights as a member or shareholder of a PRP. This provision only applies in relation to voting rights of the local authority itself (i.e. as a ‘corporate’ member or shareholder). Local authority nominees or appointees who are also individual members or shareholder are not caught by these Regulations.
The Regulations require a PRP to amend its constitution to re-assign the local authorities voting rights pro-rata amongst the remaining voting membership. This will be deemed to have happened if the constitutional document has not been amended by the appointed day.
4. Unanimous decision making by boards
The Regulations provide that where the board of a PRP includes local authority officers, unanimous decision making provisions are no longer possible. Any provision requiring a resolution of the board to be approved other than by a majority of board members will be amended from the appointed day so the provision has effect to require a majority of no more than 75% of the eligible votes cast. The constitution can provide for a lower percentage.
5. Local authority consent to constitutional changes
Finally, the Regulations state that any constitutional provision requiring the consent of the local authority to constitutional amendments will have no effect from the appointed day.
The explanatory notes confirm the Regulations apply regardless of any contractual arrangement a PRP has in relation to its constitutional arrangements. Therefore, it is likely any contractual provision requiring a PRP to obtain the consent of the local authority to any constitutional amendment will also no longer apply (e.g. provisions contained in the transfer agreement requiring local authority consent to a change of objects or name etc.).
As yet there is no firm timetable in place for the Regulations to be formally approved by Parliament or for their implementation but we anticipate this is likely to be in spring 2018. A transitional period of six months has been built into the Regulations so they will take effect six months after the day the Regulations come into force (the “appointed day”). However PRPs shouldn’t delay, they need to start reviewing their constitutions and start discussions with their local authorities regarding these Regulations immediately.