The rationale for rationalising housing stock - post-pandemic
The COVID-19 pandemic has perpetuated many challenges faced by organisations across the globe, and now the looming energy crisis, coupled with the ‘Green’ agenda, and an increased focus on customer service is placing further pressure on already stretched resources in the social housing sector.
As these financial and performance pressures continue to mount up, registered providers (“RPs”) are increasingly needing to find greater efficiency within their portfolio and services. One approach which is becoming more commonplace among RPs, is stock rationalisation.
What is a stock rationalisation?
Stock rationalisation is, for the most part, a cost management tool. It involves a strategic restructuring of the ownership and/or management of a stock portfolio in order to raise finance and/ or to reduce outgoings, which consequently improve the RP’s ability to deliver on performance and its financial objectives.
Ultimately, the core brief for RPs has always been to invest in the sustainability of communities and there are often easy and tangible gains to be made by embracing rationalisation.
How is rationalisation implemented?
There are various ways to implement rationalisation and these include stock transfers, stock swaps and sales on the open market. As with all projects, proper planning is essential to ensure material considerations are explored and the correct structures or mechanisms used. For example, the value of the portfolio in question is typically the key driver and negotiating tool in a rationalisation project. It is therefore important to ensure the correct valuation methodology is applied, as there are various independent valuation methodologies that can be used to calculate the net worth of the stock and each with potentially differing outcomes.
Additionally, the requirement for tenant consultation is sometimes viewed by RPs with a degree of trepidation, but it needn’t be prohibitive to rationalisation. Addressing concerns from both the residents and providers’ perspectives are key to engagement and a smooth process, and many rationalisation deals simply include a condition for consultations to be completed prior to completion.
Why should RPs consider rationalising their stock?
The benefits are many and registered providers typically consider rationalisation in order to improve their ability to meet financial and/or performance objectives. Reasons will vary from RP to RP, depending on both the condition of their stock and its geographic location, and this will likely reflect the RPs overall strategy.
A rationalisation programme will sit within the RP’s asset management strategy (and may in some cases form a specific aim within the overarching corporate plan), but the overriding aim is usually one or more of the following:
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An RP may find that it has inherited ageing or underperforming stock. This is especially true of many RPs whose portfolio consists of a large number of units inherited from a large scale voluntary transfer from a local authority. This can result in the RP experiencing escalating repair and service costs, especially in the current carbon reduction push. It may be that it is much more effective for the RP to sell these assets in order to improve the reporting of its carbon mitigations, as well as reduce the costs of periodic maintenance and repairs.
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The terms and conditions in lenders’ finance packages are not always necessarily appealing to the balance sheet. Rationalisation can help raise finance outside the standard lenders’ requirements and process, and this is of course desirable when a certain part of the registered provider's stock is underperforming due to a variety of factors which might include, for example, increased management and service costs.
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Concentrating stock to a specific geographical area brings numerous benefits, through boosting the RP’s footprint in an area it wishes to gain or extend visibility and presence. Invariably, the main drive for this is due to cost efficiencies as it costs more to manage a dispersed stock portfolio and by concentrating the housing stock to a smaller (and perhaps more strategic) geographical location, RPs are able to reduce maintenance expenses while also improving service response times by reducing travel time and distance.
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A strategically reviewed portfolio can also go a long way towards improving tenant and community engagement, resulting in empowered and involved residents - an especially important focus area for the regulator currently.
The cost efficiencies brought by rationalisation are often experienced within a relatively short period of time, and so the effectiveness of using rationalisation as a tool toward a healthier balance sheet is not to be underestimated.
It is of course not just the selling RP who may look to rationalisation to assist with wider issues. Many providers can find real value for money in gaining additional stock in their area if they identify an opportunity with a selling provider. This can be a real boon for the purchasing RP looking to increase their housing provision in a local area, especially given the current high levels of competition for section 106 sites (which is the usual source of new properties for many smaller RPs).
The rationalisation process isn’t necessarily complex, but there are numerous considerations to address, ranging from the structure of the proposed acquisition and/or disposal programme to avoiding the many pitfalls rationalisation can bring.
There are various predictable surprises in a rationalisation project which can be avoided through careful planning. These include the examples mentioned above, as well as operational, tax and accounting issues that can occur as a result of the rationalisation programme, as well as TUPE and data protection considerations.
At Shakespeare Martineau, our advisors will engage with you and your team at the outset to ensure the appropriate structure is established and material considerations properly explored. We will work collaboratively with your intermediaries and professional team through every step of the rationalisation journey, and by sharing our experience from previous transactions, we will ensure that you benefit from the strength and breadth of our expertise.
If your organisation is interested in pursuing a rationalisation programme or would like further information regarding the above, please call any of our advisors for an informal chat.
Joanna’s expertise encompasses advising on social housing development transactions, from site assemblies to larger scale phased sales and purchases.
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Nutrient neutrality - how might it affect development
Nutrient pollution is a big environmental issue for many of our most important river catchments and waterbodies. In freshwater habitats and estuaries, excessive levels of nutrients can cause the rapid growth of certain plants through the process of eutrophication. This is damaging to wildlife.
The sources of nutrients generally include sewage treatment works, septic tanks, livestock, arable farming, industrial processes and urban runoff. Where sites are already in unfavourable (poor) condition new development can make matters worse.
Nutrient neutrality is one approach to ensuring that new housing development does not lead to an increase in the levels of nutrients flowing from the development to the receptor (the protected river and its catchment). In the affected areas developers must prove their schemes would be nutrient neutral by demonstrating how they would remove or offset the full amount of nutrients anticipated. At its simplest level this could be through demonstrating through the use of a ‘calculator’ that after development a scheme would generate the same or less nutrient outputs than the site was already contributing before development. However in many, if not most developments, additional interventions may be required to ensure that development does not increase nutrient levels added to sensitive sites.
In practice, this could mean that developers may need to identify, fund and in some cases deliver additional offsite and onsite mitigation measures. Onsite mitigation measures, such as the adoption of water efficiency measures and the appropriate use of sustainable drainage could help, especially if your site is large, previously developed (and in particular already discharges wastewater), or offers the potential to include measures to reduce the levels of nutrient in the watercourse or one of its tributaries directly (for example through the construction of reed beds, silt traps or other measures). If mitigation has to be offsite these can take time to identify and deliver, meaning development could be delayed. It is expected off site measures would be identified and coordinated by local authorities. Clearly, these could take time to identify, although the government has made some funding available to councils, presumably to help address the need for offsite measures to be identified.
Additionally, wherever you are planning for development, which is caught by this requirement, it is likely that you will need to include mitigation to specifically deal with the impact on a sensitive site. Wherever you include measures specifically to do this, there is a requirement for the council to prepare a Habitat Regulation Assessment (HRA), sometimes called an Appropriate Assessment. In practice, many councils will not be geared up, or have the expertise to do this so developers may be asked to submit a shadow HRA to assist the council in discharging their obligations in respect of the Habitat Regulations.
Finally, it’s always worth checking the areas affected. Catchments rarely cover the whole district, though given the way the government has published recent announcements you may think that whole districts are affected. In practice, it may only be a small or localised part of the council area subject to this additional requirement. It is also worth being mindful of where any foul flows from your new development go. If your site is on the edge of the catchment it is always worth checking which treatment works will receive any foul water. In some instances, the foul water from a development that sits inside a sensitive catchment is taken out of the catchment to treatment works that discharge to watercourses unaffected by nutrient neutrality requirements. Where this is the case it significantly reduces the potential for development to affect water quality in the sensitive site.
How is Nutrient Neutrality impacting developments and housing supply?
On 16 March 2022, the Government announced that an additional 27 catchment areas, affecting an additional 42 planning authorities, may now be subject to the requirement for nutrient neutrality. ...
Kevin works with clients on a wide range of real estate maters to facilitate the delivery of their affordable housing developments.
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The nationally significant infrastructure project regime and development consent orders - how to have your say
I have been served with a formal notice concerning a proposed DCO - what does this mean, what do I need to do and how can we help?
Q. What is a Nationally Significant Infrastructure Project and who decides them?
A: Nationally Significant Infrastructure Projects (“NSIPs”) are major infrastructure developments in England and Wales. These include projects such as power plants, large renewable energy projects, new airports, airport extensions and major road projects. A Development Consent Order (“DCO”) is the means for obtaining planning permission and a range of other consents for developments categorised as NSIPs – note this can include the use of compulsory purchase powers to acquire any land and rights required for the project. Instead of applying to the local authority, the developer must apply to the Planning Inspectorate who will consider the application and make a recommendation to the Secretary of State. The relevant Secretary of State will then decide whether a DCO is granted. The notices served as part of the DCO process are different to those you will see for straightforward planning applications and compulsory purchase orders.
Q. How does the NSIP process work?
A. The process comprises six key stages with statutory timescales, including pre-application, acceptance, pre-examination, examination, decision and post-decision stages. From accepting an application to making a decision, the whole process should take approximately 15 months. Previously, the average time taken for major applications was around 2 years.
Q. How can a social housing provider get involved and have a say on a project?
A. The best chance to influence, for example the design, layout, or location of a NSIP takes place during the pre-application stage before the applicant finalises its application and submits it. The opportunity for this is during the public consultation period. The applicant must formally consult on its proposed application before it is submitted. If you wish to be involved, you should take part in the applicant’s pre-application consultation. Once the application is submitted you can be involved by making a relevant representation and then registering and participating in the examination.
Q. We have been identified as a statutory consultee - what does this mean?
A. Statutory consultees are organisations or individuals that are legally required to be consulted on NSIPs. If you have been consulted on a proposed application, is it likely that you either have an interest in the land subject to the DCO or could be affected by a project in such a way that you may be able to make a claim for compensation.
Q. Our land/interest has been identified as land which is subject to proposed compulsory acquisition or land as being affected by a project in such a way that means compensation may be payable– what should we do?
A. Often a social housing provider will not be aware of a proposal for a NSIP until it receives notice of the formal statutory consultation. While a DCO can authorise the compulsory acquisition of land, various rigorous policy tests must be met before compulsory purchase will be authorised. Objections which relate solely to compensation values for compulsory acquisition will be disregarded, however, it may be that you are able to argue that the various tests are not met. It is crucial that you engage in the process as early as possible to secure your position. With this in mind, you should consider making an objection or relevant representation so as to put a marker down and alert the applicant that it will need to proactively engage with you and/or that you are challenging their grounds for taking powers of compulsory acquisition. We can advise you on how best to deal with the compulsory acquisition negotiations, the split of compensation for shared ownership properties and also how to deal with similarly affected tenants or leaseholders whilst also protecting your own interests.
Julie Russell has vast experience working on all aspects of legal planning, development and infrastructure work.
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Orbit Homes plants pear tree at Daventry development to mark Queen’s Platinum Jubilee
In celebration of the Queen’s Platinum Jubilee, a pear tree has been planted at Orbit Homes’ flagship development in Daventry, Micklewell Park.
In celebration of the Queen’s Platinum Jubilee, a pear tree has been planted at Orbit Homes’ flagship development in Daventry, Micklewell Park.
The Williams pear tree was planted on Wednesday, 30 March, having been provided by and planted in collaboration with leading law firm Shakespeare Martineau as part of the Queen’s Green Canopy (QGC) – a unique initiative created to mark Her Majesty’s Platinum Jubilee this year.
Colin Dean, sales and marketing director at Orbit Homes, said: “We are proud to plant this pear tree to celebrate the Queen’s Platinum Jubilee and add to the biodiversity we are creating at Micklewell Park. We consider a home’s surroundings to be just as important as the living spaces inside and know that sustainability and wellbeing go hand-in-hand for an improved quality of life for our residents.
“Micklewell Park will be surrounded by beautiful green spaces and will include 20 allotments, newly-constructed cycle paths and newly-planted woodland. We know our new pear tree, which we planted in collaboration with our partners at Shakespeare Martineau, will be appreciated by the new neighbourhood and will be flourishing once the first phase of the development is completed in spring 2023.”
With a focus on planting sustainably, the QGC initiative aims to encourage the planting of trees to create a legacy in honour of The Queen’s leadership, while benefitting future generations.
Shakespeare Martineau is pending B Corporation status – where organisations are legally required to consider the impact of business decisions on their people, customers, suppliers, communities and the environment – and has committed to 30 ambitious responsible business pledges, including becoming carbon negative by 2030 and is on this journey already with all registered office hubs using 100% renewable energy.
Rachel Gwynne, partner and head of social housing at Shakespeare Martineau, said: “We are delighted to have partnered with Orbit Homes to plant a tree in honour of the Queen’s Platinum Jubilee.
“While this is a small contribution in terms of biodiversity, it will have a positive impact on the community once the development has completed – nourishing the neighbourhood with greenery and fruit, while helping to add to the nationwide drive to mark the Queen’s 70 years of service.
“We look forward to residents enjoying the fruits of their efforts, quite literally, for decades to come.”
Micklewell Park comprises 450 homes – featuring one and two-bedroom apartments and two, three, four and five-bedroom houses – which will be a mixture of rented, shared ownership and market sale properties. The development will be embraced by nature and green spaces, including eight acres of woodland, and has been designed for a desirable quality of life today and a sustainable future.
The first phase in the Micklewell Park development – comprising 108 homes – is scheduled to complete in March 2023 and will include 20 allotment spaces, electric vehicle charging points, two bus stops and land allocated for a new primary school. Two further phases will commence thereafter.
Rachel provides strategic advice and support to housing associations, charities and other not-for-profit organisations.
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Registered Providers Response to the “Homes for Ukraine" Initiative
On 14 March 2022, the Department for Levelling Up, Housing and Communities (DLUHC) announced the launch of its Homes for Ukraine scheme for those fleeing the war in Ukraine. The scheme is open to Ukrainian nationals and their immediate family members who were resident in Ukraine prior to 1 January 2022.
From 18 March 2022 UK residents were able to express an interest to act as a sponsor for Ukrainians (including families) to stay in their home.
The sponsors will be asked by DLUHC to provide homes or a spare room rent free for as long as they are able to, with a minimum stay of six months. In return, the sponsor will receive £350 per month from the Government.
It is anticipated that customers of registered providers, whether they are leaseholders, shared owners or tenants may wish to apply to be a sponsor and the question will arise whether becoming a sponsor could potentially be a breach of a term of the customer’s lease or tenancy agreement. Whether the lease or tenancy agreement is breached will depend on the specific terms of that agreement. However, there are some general points that we will address below, which will help registered providers answer queries from their customers.
Customers with a Right to Buy/Right to Acquire Lease
Q1 - Are they allowed to take in lodgers?
Answer
Lodging usually occurs when a customer shares their home with another person (the lodger) but the lodger does not have any exclusive right to any part of that home. They will be allocated their own bedroom.
There is nothing within the standard right to buy or right to acquire lease that would prevent the customer to taking in a lodger to occupy a spare room at their home.
Q2 - Are customers allowed to sub-let their property?
Answer
Subletting occurs when the customer relinquishes occupation of their home and allows somebody else or another family to live there, usually for payment.
A standard right to buy/right to acquire lease would usually allow the customer to sublet the property with the consent of the landlord, not to be unreasonably withheld.
It is usually the case that the customer is able to sublet the property without consent if the customer is proposing to sublet the property to a tenant using an assured shorthold tenancy agreement. However, we do not believe it is the Government’s intention that Ukrainian refugees become parties to assured shorthold tenancy agreements because their accommodation involves no payment from them to the customer. It is not anticipated that the payment from the Government to the customer is intended to be classed as rent.
In any event, in order to avoid this complication, the Registered Provider is usually able to provide consent to a customer in the absence of an assured shorthold tenancy.
Answer
Most right to buy leases allow a payment to the registered provider for giving consent to a sublet. The registered provider is at liberty to waive this fee if they choose.
Customers with a Shared Ownership Lease
Q1 - Are they allowed to take in lodgers?
Answer
A shared ownership lease based on Homes England’s model lease does not prevent - customers from taking in lodgers to share the accommodation.
Q2 - Are customers allowed to sub-let their property?
Answer
It is a fundamental clause of all shared ownership leases that forbids customers from subletting their home. The Homes for Ukraine scheme does not allow sponsors to charge rent to the Ukrainian national. Therefore, it could be argued that the customer is not subletting the property due to the absence of rent. However, it is felt that because the Ukraine national is still occupying the whole of the property, that is sufficient to meet the requirements for subletting which in the case of a shared owner is not allowed.
Answer
No further issues.
Assured/ Assured Shorthold Tenants
The terms of a tenancy will vary between landlords but it is anticipated that the position of the assured tenant will be the same as that referred to above for shared owners.
Customers who own the freehold of their home
When a shared owner buys additional shares to their home (known as stair casing) so as to eventually own 100% of the property, they may also be entitled to have the freehold transferred to them. That freehold transfer might also include terms regulating in some limited circumstances how the property is used.
In those cases, it is not anticipated that there will be any restrictions on the customer applying for the Homes for Ukraine scheme.
Where the freehold of a property is owned by another corporate entity with the registered provider owning a head lease, allowing them to grant leases and tenancies to their customers, then the registered provider should check the terms of the head lease to ensure that there are no terms in it that might conflict with the Homes for Ukraine scheme.
Gary is a social housing specialist who engages with all stakeholders to ensure landlords and property managers achieve their goals for their housing stock.
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First Homes – A new form of discounted housing: the pros and cons
Executive Summary | Residential Development
On June 28 2021 a new type of affordable housing product known as “First Homes” was launched on to the UK market. First Homes is the latest government initiative to help more people make the move into home ownership.
First Homes are new homes to be sold to first time buyers with a minimum 30% discount off the market value. There are various qualifying criteria including a requirement to be a first time buyer, have an income of no greater than £80,000 per annum (£90,000 in London) and the home value may not exceed £250,000 (£420,000 in London) once the discount has been applied. Local Authorities are also free to set additional “local” criteria (such as residency criteria) if they wish, and may increase the level of discount if they can demonstrate a need.
First Homes will be secured via Section 106 obligations on new schemes being brought forward for planning and should be reflected in local and neighbourhood plans. However, there will be exemptions for schemes where planning is already in place or under consideration, and for local and neighbourhood plans which are already at certain stages of preparation and publication. In addition, 100% affordable schemes will be exempt.
So what do registered providers need to know about First Homes?
In very basic terms, First Homes will need to be provided on all new schemes where the above exemptions do not apply and there is an expectation and requirement that 25% of affordable homes will be First Homes. This will form the government’s new preferred tenure over and above social rent. Social rent proportions are required to remain unchanged, however, meaning that the remaining tenures (for example affordable rent or shared ownership) will have their comparative proportional share of the development reduced as a result. This is likely to have a significant impact on the availability and viability of schemes for registered providers, due to the priority being given to it in the proportions of housing tenures required.
Therefore the big concern for registered providers is the reduction in the number of shared ownership properties that have long been used by providers to cross subsidise the provision of new social rent and affordable rent properties. There is the distinct possibility that this initiative could result in some developments becoming financially unviable to many registered providers. It is also likely that this could pose particular problems for smaller providers who concentrate on smaller s106 schemes and do not self-develop.
Further concerns include the negative impact on the desirability of shared ownership (reducing demand and returns accordingly) and the fact that this product is less affordable than the standard shared ownership model (which only requires a mortgage for the initial share while First Homes require a mortgage of at least 50%).
What should registered providers do now?
Read our summary Q & A and talk to us. We’re here to guide you through this new initiative, including all the planning and policy implications via our experienced planners in our planning team. It could and should be good news for buyers – let’s make sure it works for registered providers too.
In this webinar we discuss the opportunities building close to a town or city centre can offer the retirement living sector.
Kevin works with clients on a wide range of real estate maters to facilitate the delivery of their affordable housing developments.
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What do RPs need to know about the Leasehold Reform (Ground Rent) Bill?
The new Leasehold Reform (Ground Rent) Bill means that new long residential leases will be free from ground rent and leaseholders will no longer be subject to unexpectedly high costs payable annually. However, its implementation has the potential to impact on registered providers (RPs) guaranteed income streams.
Who will the Bill affect?
As the Bill currently stands, existing leases with ground rent included in the contract will remain unchanged. However, new leases, including those on existing developments, will have to be sold with a lease that has zero ground rent.
At present, only shared ownership leases are exempt. However, landlords and leaseholders should bear in mind that this could be subject to change as the House of Lords wants to include measures to protect shared ownership leaseholders. This will now be considered at the Committee stage.
Financial considerations
While not all RPs charge ground rent, it can be a vital source of income for those that do and helps to fund future social housing projects. However, once the reforms have been implemented, major changes to the way RPs fund developments may need to be considered. Currently, if an RP has sold off every flat in a building with a ground rent, the freehold land can then be sold onto a third party who can continue to generate an annual return from the rent.
Moving forward, with no ground rent to be included in new leases, the value of the freehold will be substantially reduced, and RPs will receive no ongoing revenue from the land, other than from the delivery of the management services. Once the flats have been sold to the tenants, they will no longer serve a social purpose and may become a drain on the RP’s resources, where these could be focused on their newer social housing stock.
The impact on social housing
The later living sector is also likely to be impacted. Currently, ground rent charges in retirement developments fund communal areas and additional services. Without them, funding will have to be found elsewhere. While the Government initially agreed that retirement homes would be exempt from the Bill, they have only instead chosen to delay implementation until April 2023 for this sector.
However, not all is doom and gloom. RPs that acquired flats in blocks from developers in the future, would most likely have found themselves owning properties with doubling ground rents, which they would have to pass on to their tenants, creating a further barrier to affordable housing. As a result, for RPs buying housing under Section 106 agreements following implementation, the Bill is a positive.
Moving forward
As existing leases aren’t impacted, RPs will still be able to collect ground rent to some extent, but they will need to factor in this loss of revenue with any future housing projects.
The changes mean that it is essential for RPs to review the viability of their current housing models. Purchasing or building flats with a view to selling on the freehold asset for a capital sum may no longer be a practicable option, so further innovation to generate revenue will need considering.
Although a welcome step for leaseholders, these reforms are yet another hurdle to jump for providers of affordable housing, removing an income stream that has historically not been crippling for its residents, but instead has provided a regular income stream to help in the delivery of their affordable housing products..
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Build to rent and retirement living – better together
Challenges faced by the retirement living sector over the last year have highlighted that a change in approach is needed in order to improve its reputation and services. One option is to collaborate with the ‘build to rent’ market, creating a new type of community that can benefit both young and old.
What is build to rent?
Simply speaking, a build to rent property is a private, residential property that has been built and designed specifically for the rental market. These homes are typically owned and managed by a company, rather than a private landlord, and are based in dedicated complexes that come with a variety of perks such as a concierge service and leisure facilities.
Finding common ground
Although aimed at different target audiences, both the build to rent and retirement living sectors have relatively similar goals and offerings. Aiming to provide high-quality housing that people aspire to live in, there may be lessons that each can learn from the other.
It is not uncommon for both build to rent and retirement living complexes to provide a range of facilities and leisure offerings to residents, from gyms and swimming pools to cinemas and games rooms. By providing access to onsite care and health facilities, as well as leisure facilities, build to rent complexes could open themselves up to a wider, multi-generational demographic of residents with inclusivity at the core.
Building a community
The benefits of a multi-generational approach are clear for residents. Older people often gain a new lease of life when interacting with those younger than them, and a mixed-generation complex will facilitate those interactions.
Fostering a sense of energy amongst residents, those that have retired will want to keep up rather than slow down. However, any healthcare needs can still be met, with the same high-quality care services they’d receive in a traditional retirement home setting provided, alongside other amenities such as security or concierge services which can make life more secure and easier.
By building a complex that caters to all generations, developers can foster a diverse community, ultimately benefiting residents of any age.
Commercial advantages
There are also a number of commercial benefits to the collaboration of the two sectors. These are:
- Potential for growth – by catering to more people, there is a higher likelihood of financial growth and income security.
- Streamlined planning – having a multi-generational community means developers don’t have to ask for two separate planning permissions (one for traditional renting and one for retirement housing).
- More accessible design – by thinking beyond a specific target audience, developers can attract more people through improved inclusivity and, as a result, achieve longer-lasting desirability. Examples of accessible design include wider door frames, ramps and lifts.
With both sectors ultimately having the same goal, build to rent and retirement living developers should look at how they can more closely collaborate in future. From direct financial gains to building a thriving and inclusive community, the two sectors can create homes that everyone wants to live in if they work together.
Download and watch our free webinar, where we explore the fundamental similarities and challenges across the build to rent and retirement living both markets.
We’re here to help
If you’re planning a new development or looking to develop an existing complex, our dedicated later living team can support you - contact Louise Drew for guidance and advice.
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Case law update - landlord and tenant | Section 20 consultations
Tribunals may impose conditions upon a landlord when granting dispensation from consultation requirements under section 20ZA Landlord and Tenant Act 1985 (Aster Communities v Chapman & Ors [2021] EWCA Civ 660)
Background to the case
Where a landlord is planning “qualifying works”, which will result in a spend of more than £250 per leaseholder, it must enter into a legal consultation process as required under Section 20 of the Landlord and Tenant Act 1985.
This case dates back to March 2016 when Aster Communities (Aster), the freeholder of Kingsway Gardens (a development comprising of 5 blocks of flats with 114 flats in total), sent its long leaseholders a notice of its intention to carry out works on the development and subsequent estimates of the works.
The notice detailed numerous proposed works including works to concrete, windows and doors. However, balcony works were not mentioned in the notice or referenced in the original cost estimates sent to leaseholders - although there was provision for this work included in the price specifications which were available for inspection at the time.
(The balcony asphalt replacement works were completed as a result of two flats suffering water ingress caused by the asphalt on their balconies. Aster therefore decided to complete asphalt replacement works on all balconies of the flats.)
In January 2017, Aster made an application to the First Tier Tribunal (FTT) under section 27A Landlord and Tenant Act 1985 for a determination, in relation to on account service charges required from the leaseholders. The FTT found the balcony asphalt works were unnecessary and, in any event, were not part of the section 20 consultation.
As a result of the FTT’s decision, Aster made an application for dispensation from the section 20 consultation requirements in February 2019. Several leaseholders objected to the application, stating that the lack of consultation prevented them from being able to obtain expert advice in relation to the necessity of the works, and they had therefore been prejudiced.
What are the key points from the case?
The FTT applied the principles from earlier case law - Daejan Investments Ltd v Benson [2013] - which tested whether the lessees would suffer any relevant prejudice as a result of the landlord’s failure to comply with the consultation requirements.
The FTT held that the asphalt works had already been found to be unnecessary and therefore there was a relevant prejudice. As a result, the FTT granted dispensation, but this was conditional on the landlord paying the costs of the lessees in obtaining a report to advise on the necessity of replacing all of the balcony asphalt. The FTT also ordered Aster to pay the respondents' reasonable costs of the application and that the costs of Aster's application should not be recoverable through the service charge.
Aster appealed the conditions imposed upon them to the Upper Tribunal, and then the Court of Appeal. Their appeal was dismissed with the Court of Appeal applying the principles in the Daejan case and the reasoning of the FTT.
What does this recent case highlight for landlords?
This case highlights the importance of completing section 20 consultations correctly from the start, and that landlords need to consider whether their leaseholders are likely to suffer prejudice as a result of the dispensation from consultation requirements prior to any application to the FTT being made.
Dispensation may be an appropriate solution in some circumstances, for example where works need to be completed as a matter of urgency, so there may be no time to consult. However, landlords should be aware of the potential conditions the tribunal may impose when granting dispensation from the consultation requirements. This may be relevant where there is a dispute with leaseholders in relation to the works required.
We’re here to help
If you're a landlord and have any queries or concerns on the outcome of the above case then speak to Danielle Sodhi from our housing management team.
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Retirement housing: from last resort to aspirational living
Research developed by our later living specialists has uncovered a gap between public perception around the retirement housing sector and the reality of what service and provisions are provided. But what’s causing this disconnect?
Our report, Retirement Housing White Paper, highlights a lack of understanding about the services offered by retirement housing schemes, and in turn, a growing raft of misconceptions among the public. Although, later living schemes play an essential role in our society, our report notes that people are often unaware of their benefits. Until these are recognised, retirement housing will continue to be seen as a last resort made out of necessity, rather than something to aspire to.
In order to tackle these issues, we must first demystify the sector. Our research sets out to do this, putting a spotlight on the sector’s main pain points, as well as actionable solutions and next steps. So, where to start and what needs to be overcome for the sector to strive?
On a quest for clarity
After surveying 2,000 UK adults and 100 representatives from retirement housing providers, we found that one third of the public believe retirement housing schemes are synonymous with ‘old people’s homes’. Many also thought that only the ‘lonely, single older person with health issues’ would benefit from these schemes. These common misconceptions are something that the sector must overcome if it is to move forward successfully.
Through our research we discovered that the main hurdles include:
- A lack of awareness – People were unaware of the benefits of retirement housing schemes, such as on-site fitness and leisure facilities and guest rooms, with 78% of the providers surveyed offering additional accommodation for visits.
- Misconceptions about fees – Only 28% of people believed these schemes offered good value for money, naming hidden fees as the number one cause of their wariness.
- Terms such as ‘care homes’ or ‘old people homes’ – These terms have negative connotations and are not representative of many retirement housing schemes, yet they are commonly used.
- Ageism in the sector – Much of the sector has historically relied on ‘dependency models’ to attract new residents. By using labels such as ‘older people’, this perpetuates the misconception that these schemes are a last resort.
The power of positive communication
Fighting misconceptions head-on is a vital step for the sector. Educating the public and key stakeholders including local councils and planning teams by using real-life examples and case studies, positive and appropriate imagery, factual summaries focusing on NHS and Local Authority cost savings made from such specialist housing provision and reports such as ours that highlight the many benefits of this sector from an economic and social standpoint, will bring retirement housing into the public eye for all the right reasons.
Improving public understanding
To bridge the gap between perception and reality, the sector can:
- Start ‘open door’ schemes – Retirement housing schemes shouldn’t be afraid to show off. Allowing people to view the space in person can instantly disprove any myths regarding old-fashioned facilities and décor.
- Highlight the benefits – Instead of focusing on who the schemes are for, promote their benefits, making them an aspirational lifestyle choice, rather than one of necessity.
- Be more cost-transparent – From service charges to upkeep costs, potential residents worry they won’t be able to afford the lifestyle they desire. Providing clear breakdowns of costs will put people’s minds at ease and show that these schemes are more affordable than many think.
- Clarify services – People want to know what they’re signing up for. Providing detailed information on the services offered will help people who are looking at retirement housing to take the next step.
- Pay attention to the language used – Move away from negative, potentially ageist terms and shift towards positive descriptions that reflect people’s wishes rather than worries.
- Move to the digital realm – Digital literacy is rising and moving with the times will capture a wider audience. It will also make information more easily accessible.
Retirement housing schemes will always have an important role in UK society, providing safe and secure residence to those who need it, not to mention the benefits from a new, supportive community. However, our report has shown that to move away from unwanted stereotypes and to appeal to a new type of consumer, the sector must update its image. By improving the public’s understanding through marketing and education, later living schemes can be transformed into aspirational places to live.
Download a copy of our retirement housing white paper
We’re here to help
Whether you’re an established provider, a new market entrant, or a developer looking to diversify, we’re here to support you. Contact Louise Drew to find out how our dedicated later living team can help.
Our updated guide to recovery and resilience covers everything you need to navigate your business out of lockdown, unlock your potential and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.
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Key changes for possession proceedings
Although we are only just approaching the halfway mark into May 2021 it has already been a busy month, with a flurry of information from the government on possession proceedings.
On 12 May 2021 the government confirmed a number of key changes that will come into effect over the next few months. Our blog on the Debt Respite Scheme covers some of the changes previously announced that came in to force on 4 May 2021.
Here we outline the upcoming changes for possession proceedings.
The ban on evictions will come to an end
The government has announced that the ban on evictions, which is currently in place until 31 May 2021, will come to an end on this date. This means that landlords can apply for a warrant from 1 June 2021.
However, the government has stated that bailiffs have been asked not to carry out an eviction if anyone living in the property has COVID-19 symptoms or is self-isolating. A 14 day notice is also required before an eviction can take place.
Reduced notice periods for notice seeking possessions
From 1 June 2021 the notice period is set to change again for notice seeking possessions, and the new notice period will be four months rather than the current six months’ notice period. Although the current exceptions will still be applicable, below is a summary of the key changes;
- anti-social behaviour (immediate to four weeks’ notice)
- domestic abuse in the social sector (two to four weeks’ notice)
- false statement (two to four weeks’ notice)
- four months’ or more accumulated rent arrears (four weeks’ notice)
- breach of immigration rules ‘Right to Rent’ (two weeks’ notice)
- death of a tenant (two months’ notice)
It is key to note that, from 1 August 2021, where a tenant is in rent arrears of less than four months, the notice period will reduce to two months’ notice.
What do these changes mean for landlords?
The changes will be welcomed by many landlords, however, it is key to ensure that the correct forms and correct notice periods are given in line the up and coming changes.
We’re here to help
If you’re a landlord and need advice regarding possession proceedings then contact Habib Khan in our housing management team, who can guide, help and support you and your teams to deal with any housing management and litigation issues you may face during these evolving times.
Our updated guide to recovery and resilience covers everything you need to navigate your way out of lockdown, unlock your potential and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.
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Housing update - May 2021 | Debt Respite Scheme
On 4 May 2021, new changes were introduced that will impact landlords who are considering possession proceedings based on rent arrears. In addition, there is also a change to the notice used to seek possession of a property.
What are the changes?
The government has introduced a new Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020, also known as Breathing Space Moratorium, which gives someone who is in problem with debt the right to legal protection from their creditors.
What is a Breathing Space and who can apply for one?
The scheme sets out two types of Breathing Spaces;
- Standard Breathing Space
This is available to anyone with problem debt and provides a person with legal protection from creditor action for up to 60 days. The protection includes pausing most enforcement action and contact from creditors and freezing most interest charges on the debt.
- Mental Health Crisis Breathing Space
This is only available to someone who is receiving mental health crisis treatment. The protection that is offered here lasts as long as the person’s mental health crisis treatment lasts, plus 30 days after the treatment ends. There is no limit to how long the crisis treatment lasts.
A Breathing Space can only be started by a debt advice provider who is authorised by the Financial Conduct Authority to offer debt counselling or a local authority, where they provide debt advice to residents.
Who is eligible for a Breathing Space?
To be eligible for a Breathing Space, the person must be:
- an individual;
- owe a qualifying debt to a creditor;
- live or usually reside in England or Wales;
- not have a debt relief order or an individual voluntary arrangement, an interim order or be an undischarged bankrupt at the same time they apply; or
- not already have a Breathing Space or have had a standard Breathing Space in the last 12 months at the time they apply.
There are also a further two conditions which must be met which are:
- the debtor cannot, or is unlikely to be able to, repay all or some of the their debt; and
- a Breathing Space is appropriate for the person.
When dealing with a Mental Health Crisis Breathing Space, the above criteria applies and the person must also be receiving mental health crisis treatment at the time that an application is made. Therefore, if a debtor has had a Standard or Mental Health Crisis Breathing Space in the last 12 months, they may not be eligible for another Mental Health Crisis Breathing Space.
How does the Breathing Spaces Scheme impact landlords?
The aim of a Breathing Space is to offer protection to a debtor for at least 60 days, depending on the type of Breathing Space they may have. The qualifying debt for a Breathing Space includes mortgage or rent arrears.
If a tenant, who is in rent arrears, seeks any one of the two Breathing Spaces and it is granted, a landlord would not be able to:
- serve a Notice Seeking Possession;
- purse a possession order which includes holding a hearing;
- apply for a warrant for possession;
- obtain a money judgment; or
- enforce a money judgement
In addition, if a Breathing Space is granted, a landlord is not able to contact the tenant to request any payment(s) towards the debts or make any attempts to apply for third party deductions from any benefits the tenant may be receiving (unless the landlord has permission from the court).
In circumstances where the legal proceedings have already been commenced and the tenant applies for Breathing Space, those proceedings cannot be enforced until the Breathing Space ends, unless the landlord has permission from the court or tribunal to continue. If the Breathing Space means there is a pause in those proceedings and the time limit for enforcement or new claims relating to the claim runs out during the Breathing Space, this time is extended to eight weeks after the Breathing Space ends.
What about current rent owed by a tenant?
Not all debts can be considered for a Breathing Space and these are known as ongoing liabilities which include current rent, but not rent arrears.
If a Breathing Space is in force and the tenant fails to continue paying their current rent, the Standard Breathing Space could be cancelled by a debt advisor unless, the debt advisor believes that the tenant does not have the financial means to pay the current rent. As part of the Standard Breathing Space the debt advisor must also complete a midway review between 25 and 35 days. This is to ensure that the tenant is complying with their obligations.
There is no midway review for a Mental Health Crisis Breathing Space as this continues as long as the treatment continues.
What can a landlord do?
The Debt Respite Scheme will impact many landlords who will need to put in to place additional steps to recognise if a tenant has a Breathing Space in place, and to ensure no contact is made with the tenant to chase any debt or no court orders are enforced or new proceedings are commenced.
Should a Breathing Space be applied for and granted during ongoing legal proceedings, landlords will also need to be put measures into place to ensure that such proceedings are put on hold and the courts are also properly notified, as well as key dates being noted should they need to rely on the eight week extension period.
A landlord can also challenge a Breathing Space that has been granted by requesting a review of the Breathing Space, or of specific debts being included, if a landlord considers the Breathing Space unfairly prejudices its interests or material irregularity. For example, the tenant is not eligible for a Breathing Space.
Step one
The first step for a landlord would be to make an application to review the Breathing Space, which must be made within 20 days from when the Breathing Space was granted. The application must be made in writing and supporting evidence must also be provided to demonstrate why the Breathing Space should be cancelled.
Step two
If the grounds are made out, the debt advisor must consult with the tenant, unless the debt advisor finds the grounds for cancelling the Breathing Space make it unfair or unreasonable to cancel based on a tenants personal circumstances
What if the challenge to review is unsuccessful?
Should the challenge to review not be successful a landlord does have the option to make an application to the county court for cancellation of the Breathing Space. Again the application has to be made in writing with supporting evidence and the application has to be made within 50 days from the start of the Breathing Space. It is important to note that this step can only be taken if the challenge to review has been carried out and the landlord was unsuccessful.
When seeking to challenge a Breathing Space a landlord would need to balance out the prospect of being successful in challenging, versus the costs and time involved in making an application to challenge.
Changes to Form 3 – Notice Seeking Possession
As a result of the new Debt Respite Scheme there have been changes to Form 3 – Notice Seeking Possession to reflect the above. Landlords who issue a Notice Seeking Possession from 4 May 2021 will now need to ensure that they are using the most up to date Form 3 regardless of what ground(s) they are using to seek possession of the property.
Contact us
For further information contact Habib Khan in our housing management team, who can guide, help support and you and your teams to deal with any housing management and litigation issues you face during these evolving times.
Our updated guide to recovery and resilience covers everything you need to navigate your way out of lockdown, unlock your potential and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.
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Budget 2021: Our thoughts
Budget 2021: Our thoughts
It’s safe to say that the 2021 Budget was a mixed bag, offering relief in some areas, but a feeling of disappointment in others.
The announcement showed continued dedication to UK businesses, extending support packages and introducing a number of schemes to help with growth and recovery after the pandemic. While this has given SMEs room to breathe, larger companies now have a corporation tax increase in 2023 to contend with.
Another major focus for the Budget was property. The extension of the stamp duty holiday and the new mortgage guarantee scheme was welcome news for many house buyers and for the property market in general. On the other hand, affordable housing was overlooked, causing concern for the social housing sector.
Green energy also received a mention, looking particularly at technology and R&D activity. However, questions remain over whether this Budget does enough to facilitate the genuinely green recovery that the UK is striving for.
Our experts provide their views on these key topics, exploring the hits and the misses of this landmark Budget.
Taking a regional perspective
A win for the West Midlands
Joanna Deffley, our West Midlands regional head, said:
“Although we heard some eye watering numbers on current UK borrowing, the Budget focused on a package of continued support, with phasing out later in the year. Businesses and individuals in the West Midlands may well be relieved to hear that there will be continued support, but if the chancellor does not intend to put up taxes in the near future, he’s banking on the economy bouncing back rapidly, and businesses growing and investing. That will all depend on the continued success of the vaccine roll-out, and the bounce back being as successful and rapid as the forecasts predict."
“Nevertheless, it’s good to hear the Chancellor talking about levelling up the economy across the country and having a different economic geography. He referred to both Rowley Regis and Wolverhampton in the West Midlands being two of a number of towns that would benefit from a £1 billion investment in 45 new towns deals. These funds can help boost local economies, and it’s great that the Midlands will benefit from some of that investment.”
Driving innovation in the East Midlands
Alex Smith, partner in the Nottingham office and managing director of infrastructure & specialist markets, said:
“It’s fantastic news that the East Midlands bid for Freeport status, based around East Midlands Airport and Gateway Industrial Cluster (EMAGIC), Uniper’s Ratcliffe-on-Soar Power Station site and the East Midlands Intermodal Park (EMIP) has been successful. We look forward to the delivery of such a unique inland Freeport, which will bring significant investment to develop and drive innovation, alternative energy sources and green technologies, as well as significant employment opportunities to the region.”
Thoughts from across our sectors
Continued funding for businesses
Kavita Patel, our head of investment funds, said:
“The venture capital industry will need to play its role in funding businesses as we come out of the COVID-19 pandemic, especially as the government inevitably starts to turn the tap off on emergency support."
“The venture capital schemes have been, and will continue to be, an important source of funding for early-stage businesses and SMEs, and so it’s pleasing to see that the chancellor is not proposing any further adverse restrictions on the schemes.”
A boost for property and the economy
Paul Wakefield, partner in our planning team, said:
“The mortgage guarantee should be good for first-time buyers and obviously will also be welcomed by housebuilders, albeit telling that the focus remains on buying market housing, rather than delivering affordable housing."
“The Freeport proposals and Infrastructure Bank should support the delivery and investment infrastructure, which in turn should drive the delivery of jobs and thus deliver a significant boost to the economies of those regions where the Freeports are to be located.”
More needed for social housing
Rachel Gwynne, our head of social housing, said:
“The budget provided an opportunity for the government to reinforce the Conservative policy of supporting home ownership through the extension of the Stamp Duty Land tax holiday and the mortgage guarantee scheme. A particular relief for registered providers and buyers that were at risk of not meeting the previous deadline of 31 March."
“The extension of the uplift in Universal Credit of £20 a week was also welcome news for the many thousands of people who need this financial support now more than ever. However, it was a missed opportunity not to make this uplift permanent, given people are still facing exceptionally difficult choices between paying for rent, food or essential utilities."
“Homeownership remained a focus, increasing the potential for the ‘levelling up’ agenda to miss a significant minority in society who cannot afford to buy their own home and for whom it is critical we continue to build and provide good quality social and affordable rented housing. Perhaps one green shoot in this regard is the establishment of the MMC Taskforce, which will hopefully boost housing supply."
“It is great news that the MHCLG is to establish a MMC Taskforce to accelerate the delivery of MMC homes in the UK. Along with some of the other targets already in place, we will hopefully see not only a boost to housing delivery but also the lowering of emissions from the country’s housing stock.”
Falling short of a green recovery
Andrew Whitehead, head of our energy team, said:
“Certainly, the budget had something for new green tech and R&D, with a highlight being £1bn of funding via the new Net Zero Innovation Portfolio, which will be allocated on a competitive basis for low carbon technology development including long-duration energy storage, floating offshore wind, biomass and regenerative agriculture."
“Another focus was the need to find serious amounts of money to fund the necessary infrastructure for the net-zero transition. We had more detail on the Treasury’s previously announced plans to set up a National Infrastructure Bank, which will benefit from £12bn of government money plus £10bn of government guarantees. This should “de-risk” infrastructure projects and unlock sizeable private sector investment, giving a real stimulus to the construction industry, and replacing some of the funding no longer available from the European Investment Bank post Brexit. What’s not clear right now is how much focus the bank will have on genuinely green projects."
“Further detail was also given on the sovereign green bonds that will be issued from this summer to help finance critical projects to tackle climate change and other environmental challenges and fund key infrastructure investment. In a similar vein, plans were announced for a new NS&I backed green savings bond, again to raise funds for green projects to support the low carbon transition, which will complement other “ethical” savings alternatives in the market."
“However, is this enough to give the UK the green credibility boost that the government has been talking about as we look ahead to the critical COP26 climate talks in November?"
“The transport and heat sectors remain the areas of the economy where more support is needed to get the UK on the net-zero trajectory, yet the ongoing freeze on fuel duty continues. Plus, there was no mention anywhere of energy efficiency or the troubled Green Homes Grant programme."
“With an understandable focus on supporting the economy short term as we come out of lockdown, and with an eye to the public finances medium term, when it comes to net-zero it doesn’t feel like the budget quite delivers.”
"As the chancellor’s plans play out over the coming months and years, only then will we truly see the successes and the failures of what was one of the most important Budgets the UK has ever seen."
Contact us
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Managing Charities post COVID – engagement with staff
Michael Hibbs, Partner | Emma Oliver, Associate | Catherine Rustomji, Partner & Head of Charities
Managing Charities post COVID – engagement with staff
With hybrid working becoming more common place post-pandemic, charities are having to establish new […]
Hybrid working – ask the experts
David Browne, Partner & Head of Employment | Matt McDonald, Partner
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As we all try to grapple with the “new normal” world of work in […]
Keeping court bundles safe from the dark web
Clive Read, Partner & Head of Birmingham
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It is vital that chambers and their barristers have strong cyber security measures in […]
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Shakespeare Martineau supports STOPageism campaign
Shakespeare Martineau is the first law firm to show support for the STOPageism campaign, founded by Guild Living, being one of the first 40 organisations to join the initiative launched in September 2020.
The campaign looks to take positive steps to stop ageism in society, bringing older people back into the heart of communities, improve the lives of older people and change the way society views ageing.
Campaigners at STOPageism said: “Ageism negatively affects all of us. The recent coronavirus pandemic has shone a light on the shocking way that our society and policymakers treat older people. Pushed to the margins and forgotten about, with their needs often thought of last – we have all seen the tragic consequences that this can have.
“More broadly – from derogatory everyday language, to inaccessible cities and poor services – ageism is sadly still a daily reality for many people.”
The campaign is focused on three key areas:
1. Changing language
2. Changing cities
3. Changing services
“We will make cities more accessible and age-friendly. From retrofitting existing buildings to encouraging architects and planners to be more age considerate in future builds, we want our cities to promote independence and inclusivity for all.
“We will promote safety and independence by making services such as financial and technology services easier, safer and fairer to use. People need more confidence and support to take control of their affairs, and we’ll help to provide it.”
Head of Building Communities Louise Drew said: “Our work with social housing, extra care villages, retirement housing and affordable housing providers makes this a campaign close to our hearts. Ensuring inclusivity and accessibility for all is absolutely critical and our specialist planning teams and legal experts are working with clients to improve the future-proofing of new developments and promote independence. We look forward to being part of the STOPageism journey and seeing positive steps we can all make together.”
For more information about the campaign, visit www.stopageism.org
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Law firm appointed to social housing legal panel
Law firm, Shakespeare Martineau, has won a competitive tender to join The Regenda Group’s legal panel framework.
The national firm has secured the opportunity to provide legal support to the North West-based housing group for four years and will be advising on a range of topics from housing management and property, to development and construction.
The Shakespeare Martineau team consists of experts from varied legal backgrounds, including housing management, litigation, social housing and later living. Planning and development support will also be provided by Marrons Planning, a specialist planning consultancy and part of the firm.
With the goal of promoting a healthy, safe, prosperous and sustainable community, the Regenda Group portfolio includes 13,000 units across the North West, and comprises social rented housing, housing for older people, supported housing, private rented property, shared ownership and housing for sale.
Rachel Gwynne, head of social housing at law firm, Shakespeare Martineau, said: “The affordable housing sector is experiencing extraordinary challenges, from the pandemic and climbing unemployment rates to global issues like Brexit and climate change, all while the demand for social housing keeps growing.
“In more ways than one, it’s incredibly rewarding to be working with Regenda, as they continue to support communities in the North West.”
Julie Vincent, director of business assurance at The Regenda Group, said: “We‘re very much looking forward to working with Shakespeare Martineau. Their team has a deep understanding of the issues facing our sector and are excellently-placed to help us navigate challenges, seize opportunities and provide the best service to our customers.”
To see how our team of experts can help create a more sustainable future for your organisation, as well as the wider community, contact a member of our social housing team.
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£50m social housing retrofit programme: An addition needed for the long term
£50m social housing retrofit programme: An addition needed for the long term
During the Chancellor’s summer statement on Wednesday 8 July, plans were announced for a £50m fund for social housing retrofit programme. This comes as part of a wider £3bn fund for green jobs, aiming to kickstart the economy’s road to recovery.
The plan
Heat pumps, insulation and double glazing will be used to improve the energy efficiency of the UK’s social housing offering, potentially reducing people’s annual energy bills by around £200.
Undeniably, this all sounds very positive, but is it that straightforward?
The logistics and engaging with supply chains
The £50m fund for social housing retrofits certainly provides food for thought for registered providers, however, the announcement could throw up numerous logistical difficulties. Many contracting partners will undoubtedly be keen to be involved in these projects given the current economic climate and registered providers should use this opportunity to reflect on how they engage with their supply chains.
How will tenants benefit?
Ensuring value for money is essential, but tenants themselves mustn’t be forgotten either. Registered providers should be looking for construction partners who are willing to enter into collaborative contracts with transparent working agreements, which put tenant engagement and satisfaction at the centre of the retrofit process.
If you’re a construction partner, read more about our team of specialist construction lawyers and how we can help.
Helping you achieve your ambitions
Although a welcome step in the right direction, this £50m funding is just the beginning. A focus on the quality of social housing is needed in the long term, not only now as a way to boost the economy. More than anything, the wellbeing of those who live in social housing must be prioritised.
To see how our team of experts can help create a more sustainable future for your organisation, as well as the wider community, contact a member of our social housing team.
Contact us
We have launched our guide to recovery and resilience, helping to support businesses and individuals unlock their potential, navigate their way out of lockdown and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.
From inspirational SHMA Talks to informative webinars, we also have lots of educational and entertaining content for life and business. Visit SHMA® ON DEMAND.
Our free legal helpline offers bespoke guidance on a range of subjects, from employment and general business matters through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too. Available from 10am-12pm Monday to Friday, call 0800 689 4064.
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No DSS – finally unlawful
No DSS – finally unlawful
A ruling from the county court should be the final nail in the coffin for the practice of landlords and letting agents discriminating against tenants in receipt of housing benefit.
The ruling came from a case heard at York County Court which was brought by a single mother who was on the receiving end of a ‘No DSS ‘ response from a letting agent, when she had inquired about renting a two bedroomed property.
District Judge Victoria Mark, found the claimant to have been indirectly discriminated against on the grounds of sex and disability in contravention of the Equality Act 2010.
This judgment should signal the end to this once common practice and is being hailed as a victory for the millions of home renters in the UK.
Danielle Sodhi, team manager of the housing management team, commented: “This is a landmark case, and after much debate surrounding the issue, landlords are now finally provided with clarity that the statement of ‘No DSS’, ie tenants in receipt of housing benefit, on lettings advertisements is unlawful. However, this does not mean that landlords and letting agents should not carry out their affordability and credit checks to ensure the tenant has sufficient means to afford the rent. In fact, affordability checks are even more important to protect both landlords and tenants from disputes relating to rent during the course of the tenancy”.
Contact us
For further information on your housing management issues please contact Danielle Sodhi or another member of the housing management team.
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Times are changing for UK care homes
Times are changing for UK care homes
COVID-19 has sadly spread through UK care homes at an alarming rate, causing a tragic number of deaths. However, the communal design of standard care homes means this doesn’t come as a surprise.
In normal circumstances, the social layout of care homes is a huge positive, reducing loneliness and creating a sense of community. Unfortunately, it also makes it much easier for COVID-19 to spread quickly throughout the home and as a result, it may be time to re-assess a number of issues for the care industry.
Embracing change - processes may need to be updated
Undeniably, those who work in care homes are doing the very best they can to provide outstanding care to residents. However, as the struggles of care homes show, the operation workings of the industry may be in need of an update.
Many businesses had already introduced flexible working for people who were not feeling well enough to travel to work, even before the pandemic. By allowing people to work from home when they feel ill, but when feeling well enough to work, the spread of disease throughout the workforce is slowed and sometimes halted. Granted, carers may not be able to work from home in the same way office workers can, but there are similar alternatives. For example, staff could take on non-contact jobs, such as administration, while they are ill to protect their colleagues and the vulnerable residents.
How technology is used also needs to change in care homes. As we have seen with COVID-19, isolation is an essential part of keeping people safe. Therefore, investing in technology, such as tablet computers, to help people who are isolating feel less alone, is vital.
For modern care homes, which often already have some form of tablet in each room, the embracing of technology should be fairly straightforward. However, for older homes, it could be a more challenging task. Improving WiFi speeds and the purchase of inexpensive tablets for resident to use for entertainment and communication would be a step in the right direction.
Consider altering layouts, where possible
COVID-19 has demonstrated the importance of being able to social distance, and there are several ways this could be facilitated:
- One-way-systems in corridors
- Using fire exits as temporary exits to avoid people passing each other at the entrance
- Introducing a ‘one at a time’ arrangement where a one-way-system isn’t possible
- Widening corridors if money or building structure allows
- Repositioning furniture in communal areas
- The creation of roof terraces where there is a shortage of communal space
As well as protecting people during COVID-19, these layout changes could also be a potential lifesaver during flu season.
When it comes to the wellbeing of residents, adapting care homes for social distancing and isolation will provide numerous benefits long into the future.
Contact us
For further guidance surrounding COVID-19 and how it may affect UK care homes, speak to a member of our real estate team.
We have launched our guide to recovery and resilience, helping to support businesses and individuals unlock their potential, navigate their way out of lockdown and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.
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If you are a contracting authority, the document contains updated guidance on providing relief to construction suppliers together with some frequently asked questions. This part of the document is helpful but the model variation agreements to the NEC3 ECC and JCT D&B 2016 are contradictory and inadequate. If you wish to or need to vary your contracts be aware of these limitations and seek further advice.
What is the aim of the update?
The aim of the guidance is for public bodies to ensure continuity of service for at risk suppliers during and following the coronavirus disruption with differing payment relief options. The guidance is for construction contracts and will be welcomed by the construction industry as it confirms that contracting authorities should continue to pay suppliers on a “continuity and retention” basis during this period of disruption until the end of June 2020.
The potential forms of relief to supplier cash flow include:
- accelerated payment of invoices
- certification of interim valuations where work has not been undertaken, based on previous valuations
- amendment to existing payment mechanisms to make more regular payments or reorder existing payment schedule
- early release of retentions where the review of completed milestones support such an action
- the provision of advance payment(s) to the supplier
Any relief is to be contingent on an open book basis accompanied with the provision of supporting information by the supplier proving compliance with the commercial principles behind the relief are complied with. These commercial principles include paying employees as well as the supply chain and not enforcing security against a third party once relief is given. Additionally, the guidance requires that claw back provisions accompany any payment relief in the event that the supplier has claimed on a non-transparent basis.
A supplier is unable to claim relief under these provisions if it has accessed another source of government relief, although furloughed staff costs under the Coronavirus Job Retention Scheme are expressly not included.
The Model Forms
So far so good but the model forms provided with the updated guidance then ignore and preclude the relief of time extensions due to supply chain difficulties emphasised in the previous guidance. The worst of the model variation deeds relates to the NEC3 ECC. The problems with this form include:
The definition of “Average Amount”
One of the provisions of the contract allows payments of an average of the three previous payment certificates. In the event that no certificates have been raised by the time relief is sought, the form confusingly states that the amount would be that “reasonably forecast by the Contractor in accordance with the [Shorter Schedule of Cost Components] / [Schedule of Cost Components]. There is a lack of understanding of the role of the Shorter Schedules of Cost Components (“SSCC”).
For an Option A contract (Priced with Activity Schedule), the SSCC is used only for calculation of compensation events and would not support the use asked of it here. It would be easier for the parties simply to agree a payment profile.
Retention
The model form assumes that retention is a default or core provision of the ECC when it is only relevant if Option X16 is utilised.
Prevention, Change in Law and Compensation Events
The form defines COVID Related Hardship as “the Contractor’s inability to meet its contractual obligations pursuant to this contract, having been adversely affected as a result of COVID-19”. The document then expressly states that a COVID event is not an event of prevention (the NEC equivalent to force majeure) and cannot be grounds for a compensation event due either to prevention or to a change in law. In obtaining the potential relief of payments during from the date of the variation deed to 30 June, the contractor is then unable to defend against liquated damages claims or general damages for delay due to an event that would otherwise probably be a compensation event. It should be remembered that the period between now and 30 June is usually the period of the driest weather in Britain and would be programmed as such. Additionally, the coronavirus disruption may well extend in some form beyond 30 June but a compensation event for prevention after that date would still be precluded by the suggested document.
This approach to compensation events is in contradiction with previous guidance issued by the Cabinet Office. A better solution would be to allow the contractor a programme extension but not additional costs under the compensation event provisions.
Style
The model deed of variation ignores the drafting style of the NEC. Whilst this appears to be a very small point to raise, it may well prove to be significant. Where the provisions of the deed will be read in conjunction with the usual core and optional clauses of the NEC it will create ambiguity and confusion.
The objective and aims of the guidance note are laudable but if you wish to vary your JCT or NEC3 contracts to implement its recommendation you would do well to start with a blank sheet of paper.
For further information and advice on any of the issues raised in this update please contact Ian Griffiths.
Shakespeare Martineau has launched a free legal helpline offering bespoke guidance on a range of subjects from employment and general business matters, through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too. Available from 10am-12pm Monday to Friday, call 0800 689 4064.
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During the current coronavirus pandemic over half of the courts and tribunals buildings are temporarily shut and major adjustments have had to be made to how the court service will run. In light of this the courts have issued guidance on their list of priorities during the Covid-19 pandemic which they have divided into two groups;
- Group 1 – is work that must be done; and
- Group 2 – work that could be done
The court has suspended any further action on possession proceedings being taken as a result of the pandemic which could make it very difficult for landlords to manage anti-social behaviour. However, we are pleased to see that action can still be taken during this time via the methods which have been listed within group 1.
As a result landlords, can still seek to obtain an anti-social behaviour injunction order and commence committal proceedings, should the need arise.
A full list of court priorities can be found here.
The Coronavirus Act 2020 and notices seeking possession
The Coronavirus Act 2020 became law on 26 March 2020. The Act provides the police with additional powers and it has also made a significant number of changes to possession proceedings.
Schedule 29 of the new Act outlines these changes which have an impact on landlords when they serve a Section 8 or Section 21 Notice.
Prior to the Act and depending on the grounds used for a Section 8 notice, a landlord could serve a notice and then act upon it the next day. For a Section 21 notice, the notice period would be two months. However, the Act now states that any notice served from 26 March and currently up to 30 September 2020, must provide three months’ notice.
These changes do not prevent you from serving a notice should the need arise.
Practice Direction 51Z (PD) and housing possession
Following the signing of Practice Direction 51Z, all proceedings for housing possession brought under CPR Part 55 and all proceedings seeking to enforce an order for possession by a warrant or writ of possession are stayed for a period of 90 days from 27 March 2020.
Statement of Truth
Please also note the changes which took effect from 6 April 2020 regarding the wording of the Statement of Truth required by CPR Part 22. To find out the correct wording for a document you may be drafting which requires a Statement of Truth, Practice Direction 22 contains the new correct forms for the Statement of Truth and can be found here.
Contact us
For more information about any of these issues, please contact Gary Ekpenyoung in our social housing team.
We are continuing to share our knowledge and expertise online. You can register for one of our learning events or contact the events team for more details or for more general business advice in relation to coronavirus visit our dedicated resource hub.
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Here we look at how organisations can delegate temporary Powers of Attorney to ensure property transactions can continue to move forward, reducing the risk of delay or processes coming to a halt if key staff members are unavailable to provide signatures required to complete.
How could COVID-19 impact my property transactions?
Property transactions by their very nature can involve large amounts of paperwork with frequent signatures required. For organisations who regularly execute a large number of deeds for the transfer, acquisition and disposal of properties, it is often the case that only board members, ‘company’ secretaries and perhaps executive/senior managers have the authority in place to provide handwritten signatures required to complete these transactions.
As workforce disruption grows in light of COVID-19, obtaining signatures from these individuals will inevitably become more problematic, with increasing numbers likely to experience some disruption to work due to illness or caring for others. In particular, organisations with fewer authorised signatories will be vulnerable to these challenges, worsened by often having to have two authorised signatories to sign documents.
In addition, geographical spread of senior staff and social distancing make the transfer of physical documents to be signed even more difficult, potentially slowing processes even further.
How can appointing Powers of Attorney help?
Appointing temporary Powers of Attorney can help ease the burden on your current authorised signatories in these challenging times, delegating authority to others, such as your legal provider to execute certain deeds and documents on your behalf.
These Powers of Attorney do not give us the ability to enter into transactions on your behalf or agree any amendments – it simply broadens your pool of authorised signatories, helping to ensure your transactions continue to complete efficiently and freeing up your board’s and senior employees’ time.
What types of organisation can put this in place?
Assigning this type of temporary Power of Attorney is a good option for a broad variety of organisations progressing property transactions, from residential and commercial developers through to Registered Providers. This includes private companies (limited by shares or guarantee) and public limited companies, as well as registered societies and charitable incorporated organisations*.
(*For non-exempt charities disposing of property or entering into charges/mortgages, there are additional compliance steps that will need to be taken)
Contact us
For more information about assigning temporary Powers of Attorney and how they could benefit your organisation and keep your property transactions moving, please contact Rachel Gwynne or a member of our real estate or corporate team in your local office.
You can register for one of our online webinars or contact the events team for more details or for more general business advice in relation to coronavirus visit our dedicated resource hub.
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Call our dedicated team to chat through any problems or issues you may be facing, we’re here to guide you through.
Things to consider
- With supply chains under pressure, cash flow may become tight so make sure you are talking to your funders…. Funders generally don’t like surprises and won’t know what they’re not told. Stay in detailed contact with them and ensure you have a contingency plan and share it with them.
- Every business will need to update their risk registers. It pays to plan for the reasonable worst case scenario (and hope for the best). Multiple scenario planning is crucial.
- The government is formulating its thinking on assistance plans on a daily basis and there are a wide range of measures being announced to assist businesses – business rates relief, sick pay assistance, loan guarantees. It’s important for all businesses to keep abreast of what’s available.
- Take advice on your contracts on any force majeure provisions. It’s important to understand what rights you have to enforce against suppliers, should you need to.
- Your AGM might well be approaching and we know this is an important time for many organisations. It doesn’t have to be a standard meeting – other options are available such as virtual or hybrid AGMs and participation is usually greater too!
- Being able to make good decisions at the right time has never been more critical, so ensure your Board and senior management teams are set up for electronic decision-making and that you review your delegated authorities to ensure they remain sufficient, should key individuals have to self-isolate.
- This is a time for landlords and residential tenants to work together and support each other. The government has taken emergency steps to augment the landlord and tenant relationship by preventing landlord’s bringing possession proceedings for at least three months. COVID-19 would not in our view be an enforceable reason for either the landlord or tenant to end a tenancy agreement or Lease. The detail in relation to this ban is yet to be published but what is clear is that no tenant in the private or social housing sector should be concerned about the threat of eviction during the pandemic. If a tenant has concerns then they need to speak with their landlord.
- Give employees flexibility where you can – with schools now closing, many will have dependants at home. Try to be as understanding as you can and look at options such as sharing staff with other facilities and discussing different working patterns. Many businesses are allowing real flexibility on hours to fit around child care needs.
- Remember that if a member of staff, following government advice, decides to self-isolate, they are entitled to statutory sick pay as they are considered incapable of work. This doesn’t affect the fact that sick pay will be paid after the third qualifying day, but the government has announced its intention to bring this forward to be payable from the first day of absence. Details are yet to be announced.
- Communicate openly with your residents and their families – it may be necessary to close communal areas in your buildings completely. Social media can be a wonderful thing – explore the options of using technology to ensure your residents can communicate with their families. It will help with isolation and keep spirits up.
- Exercise and fresh air will be a real issue, especially for people living in apartments. Apps such as ‘Zoom’ can be downloaded for free and your residents can join virtual exercise classes such as Yoga and sofa singing is also an option, to keep people’s spirits up.
- A problem shared is a problem halved; collaborating with other organisations in your locality can open the door to a much wider supply chain for the delivery of critical goods and services if your usual suppliers are no longer able to cope. Plus you never know what other opportunities may arise when you work together!
We are pleased to work closely with the Housing LIN (Learning and Improvement Network). The Housing LIN’s Health Intel website contains a dedicated page on coronavirus which captures latest government guidance and a practical briefing for the later living sector on responding to COVID-19. Visit their site here.
Contact Us
To discuss any of the above please contact Louise Drew on 07974 641816 or another member the later living team. We’re here to guide you through this challenging time.
We are continuing to share our knowledge and expertise online. You can register for one of our learning events or contact the events team for more details or for more general business advice in relation to coronavirus visit our dedicated resource hub.
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These include:
- Can the site be sold?
At an early stage, the seller should offer proof of ownership of the site, or a right to acquire it. The ideal scenario would be that the site is registered at the Land Registry and the title register confirms all relevant information, such as:
- Owner
- Rights and restrictions
- Class of title
If the seller is not the owner, they must be able to provide evidence that they are entitled to transfer the site. Should there be any red flags (such as poor class of title, charges or adverse rights) clarification must be gained from the seller.
- Can the site be accessed?
Access to infrastructure is a vital part of any development site, particularly when it comes to roads and sewerage. If the seller’s land does not adjoin public infrastructure this will mean that express rights will need to be granted to the RP. Should these rights be over a third party’s land they must also be evidenced and checked to prove that they are sufficient and capable of being utilized by the RP.
Maintenance liabilities and costs for private accesses and drains are another consideration for RPs. Relevant authorities should also be contacted before taking on any liability to identify whether the site is to be adopted. If adoption is unlikely, it may be wise to bring a management company on board.
- Can the site be used as proposed?
Future use – RPs need to check the type of planning permission that is in place. Ideally, it should be full planning permissions, but outline planning consent can also be acceptable if it is conditional upon suitable planning being gained. Section 106 agreement costs and Community Infrastructure Levy (CIL) liability must also be assessed.
If the site has no planning permission, RPs should find out the stage the planning process is at.
Current use – Some sites can be open to members of the public. If this is the case, RPs should research whether the land is Common Land or has a public right of way over it, as either could seriously hinder or even stop development.
Past use – Certain past uses can lead to contamination of a site, leaving RPs with potential liability for clean-up. If a site is thought to be contaminated, surveys must be carried out prior to the exchange of contracts and any issues found reflected in the price.
Failing to complete these checks can cause future issues for RPs, whether that be not being able to sell units or having to take on additional statutory liabilities. To avoid this and increase the chances of maximising their returns, RPs should seek legal advice early on in the process.
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Gary Ekpenyoung, our partner in the social housing team, explains what the Act will mean and how landlords must prepare:
Tenant savings
Excessive fees placed upon tenants in the past have left those considering renting with unrealistic ideas surrounding the true cost of their rentals – many thinking that they need more money than they actually require. Once the Act is introduced, there is the potential for a combined total saving of £240 million a year on rental fees, which equates to up to £70 per household. Although this may seem like good news for tenants, this is not a guaranteed saving as letting agents may increase their fees and force landlords to increase rental costs as a way to recoup these funds.
Self-managing
Landlords with a limited number of properties may consider self-managing in order to avoid the potential hike in letting agent charges altogether. For those with a larger portfolio, assessing whether the increased responsibility is sustainable is important. Tenants need to be sure they can rely on their landlords to support them as agreed, with no dip in service or security experienced.
Social housing
The Act is unlikely to affect social housing landlords in the same way as the private market. Social housing uses primarily assured tenancy agreements that are not marketed using letting agents.
However, the Act may create hurdles for intergenerational living schemes, such as Homeshare UK – part of Shared Lives Plus – due to the money exchanged during homeshare agreements to cover admin and matching costs. Fortunately, if the homeshare organisation is registered as a charity or a community interest company, they are exempt from such utility costs and will largely be unaffected by the changes.
Tenants will largely benefit from the Tenant Fees Act, but landlords and letting agents must fully understand what the new legislation means for them, so they can handle the shifting marketplace without issue.
Estate maintenance fees would be capped by the Bill, as well as ensuring shared facilities are adequately maintained and providing the means for self-management of communal areas. Although positive news for freeholders, there could be implications felt more widely throughout this currently unregulated area.
Rachel Gwynne, our head of social housing, explains how the Freehold Properties Bill can help freeholders:
Private housing developments often charge homeowners for the upkeep of communal spaces, such as roads, grass verges, electric gates, and playgrounds. In fact, approximately 1.3 million households pay these estate fees.
Land, of course, needs to be maintained to keep communal areas usable. However, the fees charged for these services are considered disproportionate by many. They vary between location, developer and management company, but on average they are between £100-£450 per household, per annum. Residents also have no voice when it comes to the work undertaken or the service provider selected, as there is no obligation for companies to lower costs or prove they have completed their services.
Councils used to manage the roads and public areas of housing developments, but funding-cuts in recent years have limited local authorities’ abilities to do so. This has made developers wary of asking councils to fund these services, in case planning permission is not granted. Therefore, a growing number of new-build estates are adopting the private estate model.
Transparency is needed in the sector and that is what the Freehold Properties Bill aims to provide. Giving homeowners access to information such as how fees are calculated, why they are increased, and who to contact if they have concerns. Lack of regulation in this area leaves homeowners without the right to raise any issues they have.
As well as this, purchasers should receive greater transparency to ensure fees do not come as a surprise. Although they are contained within the transfer deeds as covenants, many homeowners are not fully aware of them. This can lead to financial issues for those who did not factor these additional fees into the cost of their home.
Now that leaseholders have an amount of statutory protection from the Government’s proposals to ban sales of new leasehold houses and impose a £10 statutory cap on ground rents for residential long leases, it is time for freeholders to gain protection too. The Bill has been introduced to help do this by regulating fees, ensuring standards of communal facilities are upheld, and allowing freeholders to self-manage communal areas.
Brexit has caused uncertainty in the market and this is only increased by the unresolved challenges of UK housing sector. The change involved must be understood by buyers, developers and investors before plans can be agreed upon successfully and fairly.
The Bill is due to have its second reading on Friday 22 March 2019.
Contrastingly, there are a lot of people desperate for affordable and suitable accommodation. Intergenerational living could be the answer to both problems.
Our partner in the social housing team, Gary Ekpenyoung, discusses the intergenerational living model and the benefits it holds:
Homeshare is an intergenerational living model that has established itself as an alternative to residential care and home visits. An agreement is made between an older person and another party, that gives the latter rent-free accommodation as long as the former is provided with companionship and support.
Loneliness, and the mental health issues associated with it, puts a large amount of strain on the NHS. The Homeshare approach could lessen this strain, through reducing loneliness and isolation, and allowing people to stay out of residential care for longer.
There is also no need for concerns surrounding the generational gap, as an interviewing and vetting process matches people based on personality, so that the relationship is mutually beneficial.
Almost 500 UK households are now embracing intergenerational living, but the Tenant Fees Act 2019, which received Royal Assent on 12 February 2019 could potentially cause a few hurdles. The legislation stops lettings agents charging excessive fees to their tenants, a positive goal, but one that could put Homeshare agreements in danger, as money is exchanged to cover admin and matching costs. This could lead to income drying up for Homeshare UK – part of Shared Lives Plus – the network managers for Homeshare.
Thankfully, Homeshare has secured Government support and recent amendments to the Tenant Fees Act have limited the impact of the Act on Homeshare schemes.
The combination of an aging population and ever-increasing rental costs has brought the value of Homeshare to the forefront. Intergenerational living is a solution to a multi-generational problem.
There are multiple reasons a business owner might want to sell. For example, a wish to develop other ventures, or most commonly, wanting to retire. Regardless of the reason, ensuring the best sale structure for both the individual and the business is of highest importance.
Our corporate partner, Keith Spedding, explores what you need to consider when structuring for a sale:
The 2008 financial crash halted many businesses’ plans to sell. Those that had aimed to retire are, therefore, still working and are unable to move on until their business is sold.
SMEs were hit hard by the financial crisis, with organisations having to cut back their second-tier management to lower costs. Owners were left to run businesses directly, keeping them afloat in the short term, but limiting their future exit options.
There are four main exit options for SMEs:
Private equity sale
An external investor purchases the business with the aim of increasing profitability and selling it on again.
Trade sale
The company is bought by a competitor who wishes to use the existing connections and customers of the acquired business to advance their own.
Employee ownership (EO):
EO involves employees becoming shareholders, the most famous example being the John Lewis Partnership. This model is becoming more popular, with a sense of equality being created due to staff having more of a voice. Solid second tier management is needed for this type of sale and is usually undertaken by businesses who want to continue independently, while also rewarding loyal employees.
Management buyouts (MBO) and vendor-assisted management buyouts (VAMBO):
If a management team approaches the business owner for a sale, with either private equity or bank backing, this is known as an MBO. A VAMBO involves the seller deferring payment for the business and approaching management for a sale themselves. Experienced second tier management is required to undertake either of these options successfully.
The form of sale chosen depends largely on the structure of the business. If there is credible second tier management, an MBO, VAMBO, or EO sale is possible. If not, options could be limited to private equity and trade sales.
However, if an immediate sale is not necessary, and there are people within the company who have the potential to become second-tier management, then other options can be opened up. Training staff to have the knowledge and skillset for second-tier management is not a quick process, but it will allow the company to remain independent.
When considering options, assessing long-term goals and results is vital. If a private equity sale is opted for, then owners must be able to accept that the business will likely be quickly sold on again. Equally, with trade sales, the idea that the company could be run differently to gain greater income, or even closed to remove competition, is something that must be come to terms with. For MBOs, VAMBOs and EO structure, being sure that successors are willing and capable is very important if the company is to have continued success.
Choosing an unsuitable sale option can cause multiple issues. For instance, if second-tier management is not solid enough to be involved in an MBO scenario, both staff and management can be left feeling disgruntled and under-pressure to recover the business themselves. An unpleasant environment could spring from this, causing a potential loss of staff.
Trade sales are also not without risk. A level of vulnerability comes from allowing competitors access to the information needed for an acquisition, as it could be used to their advantage. Loyal customers may also become wary of the business, as trust is lost.
Exiting your business is not a simple decision. Many aspects need to be taken into consideration and it is not something to be rushed. The priority must be the future success of your business.
Social housing tenants in the Midlands will now have the chance to enter a lottery for a unique reference number (URN), which would let them purchase their property at a discounted rate as long as their housing association landlord agrees to sell. The discount deducted from the full open market price of the property will then be paid back to the housing association by Central Government, on the condition that they replace the sold property with new stock, giving registered providers (RPs) an opportunity to renew their portfolios.
This will not be a process without challenges and RPs will certainly find themselves on something of a learning curve. Here are three ways they can ensure that they are fully prepared to make the most out of the scheme:
Prepare for an increased workload
Any RPs taking part in the scheme are likely to experience an increase in workload, especially for those providers who are allocated a large number of URNs. The pilot scheme has set out requirements for extensive checks which must be completed to definitive timescales, and carrying these out will certainly require additional resource.
Additionally, RP’s will need to review/analyse the S106 Agreements which may affect their stock and ensure that the specific planning conditions are assessed ahead of time, to make sure that they allow for sale at an undervalue and the release of properties allocated as rented stock. All of this means that RPs may need to recruit or reorganise staff and acquire additional resources to cope with the immediate workload increase.
Be open to collaboration
RPs will need to have accurate records and documents on hand for all of their properties. If they discover from these that they don’t have sufficient unit stock to service all the URNs they have been allocated, they could then establish a Memorandum of Understanding with other RPs and housing associations. By establishing a framework of cooperation and working collaboratively to address the issue, interested parties can make sure that the most efficient and effective practices are in place to deliver the pilot’s objectives.
Communicate effectively with the buyer
It is important to get the buyer fully involved with the process. RPs should make sure that interested parties are informed of the conveyancing process from the outset and are actively considering how they will fund the purchase. Buyers should also be issued with a comprehensive information sheet, detailing the timescales and requirements of the process, and a Land Registry-compliant plan, showing an accurate representation of the property’s boundaries. One common delay associated with Right to Buy occurs when RPs do not own all of the land they are proposing to sell, so any attempt to ensure accuracy from the outset is essential in preventing holdups.
Final thoughts
At this stage the success of the pilot scheme remains uncertain. It will only become clear with time exactly how the scheme will work and whether RPs will be able to build new properties quickly enough to cover their sales. To make sure this isn’t a problem, it is crucial that all RPs prepare thoroughly ahead of time and communicate clearly with all parties. Putting themselves in the best position possible when engaging with the scheme, will help avoid creating an even greater supply shortfall and hopefully give the social housing sector the shot in the arm that it so sorely needs.
The scheme, which has been in the pipeline for some time, will offer housing association tenants the opportunity to purchase their homes for a discounted price. Social housing is a drastically underfunded and often neglected market, so this could potentially be the boost that the sector desperately needs.
The arrival of the social housing green paper saw a major piece of proposed funding for VRtB being put in jeopardy, with plans to allow councils to sell off properties in high-value areas being scrapped. While this has raised a question regarding the viability of future schemes, the Midlands pilot is definitely now up and running.
This should be welcome news for both housing associations and their tenants. For families who have been living in affordable rented accommodation for a number of years, the scheme offers a previously unobtainable route to ownership. Furthermore, the opportunity secures greater financial security, and the necessary support to make long-term plans for themselves and their families.
Similarly, housing associations will also benefit from VRtB, with the sale of their properties providing them with the opportunity to improve their housing stock. The VRtB agreement stipulates that housing associations must be prepared to replace their properties once sold, whether that be with more housing in the same area or in another location where there is additional need. The older properties sold off will be replaced by new stock offering better homes with improved efficiencies.
The scheme also aims to account for any potential time lags between the sale of one property and the building of its replacement. As soon as a sale is completed housing associations will be able to apply for a refund of any money they lost by offering the discount, allowing construction on new homes to begin.
The later living market will surely be one to watch as the scheme progresses. Challenges surrounding accessibility mean that there is already a shortfall in the availability of suitable homes for this market and they are more difficult to replace. Considering this, providers may choose not to sell off any of these properties and their involvement with the scheme might only extend to their ‘general needs stock’.
The scheme guidelines clearly state that it will not be compulsory, any housing associations that do not wish to participate will not have to. However, if providers do decide to unite and engage with the scheme en masse, it could potentially improve the lives of many tenants, allowing them ownership of their homes and giving the desperately under-funded sector a push in the right direction.
Overwhelmingly our cross-sector research shows concern has grown about the UK’s strength after Brexit – signalling that prolonged uncertainty has dented business confidence. But confidence has dipped less for social housing providers: to 68% compared to 60% for businesses overall, down from 73% last year. Over half of providers (58%) expect Brexit to create a fall in inward investment and two-thirds (63%) expect the flow of skilled workers to drop.
Yet compared to businesses generally, social housing providers are more likely to think Brexit will have no impact on their organisation (52% compared to 34%). They are similarly understated about the impact of Brexit on demand for social housing, with 75% expecting no change. As a result, few have taken steps to communicate with their workforce over Brexit; fewer still to consider the impact of immigration changes. Yet concerns are evident for the sector overall, with 56% predicting Brexit having a detrimental impact and just 6% expecting a positive effect.
This sentiment is perhaps not surprising given the sector’s operations are almost exclusively UK-based – although scrutiny of supply chains might reveal otherwise. The sector has long experienced an unpredictable environment. But the turbulence of Brexit will be unlike anything else. Underestimating its impact could leave social housing providers exposed to greater risk – as well as missing out on potential opportunities.
The positives lie in the ability of social housing providers to walk the tightrope between austerity and prosperity with assurance. In the face of rent reduction and welfare reform, many providers have restructured their businesses to have their figurative houses in order. There’s recognition across the private and public sector that providers are key partners in solving the housing crisis, easing pressure on the NHS, and delivering local devolution plans.
On the flipside, Brexit risks hardening the housing crisis. Our research shows providers are concerned about it being harder to deliver new housing post-Brexit if the cost of materials rise (cited by 73%) and if labour supply for construction falls (69%). These limitations, along with higher interest rates, would thwart capabilities for new build and refurbishment work. The squeeze on people’s income will impact too, with providers already warning that rent arrears due to universal credit could affect housebuilding plans.
In this sea of uncertainty, one thing is definite: social housing providers know how to tackle society’s challenges head on. As Brexit edges closer, it’s time to confront the risks and seize the opportunities.
Firstly, development contracts. To reduce problems, like the ever increasing longstop dates of the last property crash, it pays to make sure contracts with developers and suppliers are as flexible as possible. Long term large contracts are not helpful in a dynamic climate where rising costs and delays are likely to fall at your doorstep. So consider buying plots over a larger number of sites to spread the risk, as well as allowing for market fluctuations in costs, regular reviews of supply arrangements, and exit clauses.
Secondly, collaboration. Relationships are essential for exploring new partnering and risk-sharing opportunities. For example, modular construction is central to innovative thinking about smarter ways to build new homes, with some housing associations and investors already embracing the government’s drive for it. Opportunities are ripe for making modular more mainstream by brokering ways to jointly tackle the hurdles around financing, contractual risk transfer and local planning.
And thirdly, driving value from community-focused diversification. Social housing providers offer more than just a set of keys to a home. Many are delivering services that create huge social value such as money advice, apprenticeships and employability training. Vulnerable households will be the hardest hit by any cost of living rise from Brexit. Maximising the return on these services, and widening access to those on the threshold of being affected by economic downturn, is mutually beneficial.
Being actively robust, visible and engaged will only strengthen social housing providers in the face of whatever change Brexit brings.
Of the changes proposed in the NPPF consultation draft, the following three are of particular significance:
Affordable housing
The big shift here is a clear push towards housing for sale rather than rent. The definitions of “Social rented housing” and “Affordable rented housing” have gone to be replaced by “Affordable housing for rent”. Similarly, where previously it was stipulated that “low cost market housing may not be considered as affordable housing for planning purposes” now “Starter homes” and “Discounted market sales housing” are not just included, but separately defined. Similarly, the catch all description of “Other affordable routes to home ownership” includes “shared ownership, relevant equity loans, other low cost homes for sale and rent to buy”.
What does this mean?
Whilst this is reflective of government policy in the Osbourne and Cameron years, and I suspect will be welcomed by developers, the shift away from affordable rental properties to starter homes is unlikely to provide comfort for those people currently without the means to afford to buy a property reliant on diminishing supplies of social rented housing. It also represents a challenge to existing registered providers who face the prospect of fewer rental properties being provided by major housebuilders.
Deliverable
Under the proposed changes, to be considered, deliverable sites “should be available now, offer a suitable location for development now, and be achievable with a realistic prospect that housing will be delivered on the site within five years” which echoes the old footnote 11.
However, the new definition continues that “Small sites, and sites with detailed planning permission, should be considered deliverable until permission expires unless there is clear evidence that homes will not be delivered within five years…” This represents a subtle shift in the old footnote 11, because it specifically refers to small sites and sites with detailed planning permission rather than “sites with planning permission”.
The new definition then proceeds to state that “Sites with outline planning permission, permission in principle, allocated in the development plan or identified on a brownfield register should only be considered deliverable where there is clear evidence that housing completions will begin on site within five years.”
What does this mean?
This appears to change the position set out by the Court of Appeal in St Modwen Developments Ltd v Secretary of State for Communities and Local Government and means that local authorities will no longer be able to automatically conclude that sites with an outline permission are “deliverable”. I suspect this will mean there are a few local authorities who suddenly find they no longer have a five year housing land supply.
Planning obligation
The proposed change to the definition of “planning obligation” removes the reference to a “legally enforceable obligation” and instead replaces it with a “legal agreement”.
What does this mean?
Whilst both definitions continue to refer to section 106 of the Town and Country Planning Act 1990, the express reference to “agreement” would appear to exclude the use of unilateral undertakings, which runs contrary to the express wording of section 106 (1). This muddies the waters as to whether local planning authorities can and should seek unilateral undertakings as a means to secure mitigation for development.
What should you be doing now?
It is, of course, important to remember that the document is currently out for consultation, and therefore the definitions may yet change.
If you are likely to be affected by the proposed measures then I’d strongly encourage you to engage with the consultation process. The consultation closes at 23.45 on 10 May 2018 and can be accessed here.
The announcement was well received, with many seeing it as a positive step towards fixing the housing shortage. However, without more radical reform, current restrictions could scupper the chances of any real progress being made by the public sector.
The announcement lacked detail, meaning that at this point it is impossible to gauge how ambitious the Government is prepared to be. The decision to involve councils directly is a smart move, however. In fact, it is essential – the last time 250,000 new homes were built in a single year was in 1978 and then over 40 per cent of these were built by local authorities. Tackling a crisis on this scale clearly requires all hands on deck.
The early indications are that the Government’s proposals won’t be enough to make a significant difference. The funding currently proposed would only be enough to create around 25,000 extra homes by 2021. The UK’s population is set to exceed 70 million before the end of the next decade, according to the Office for National Statistics. Given that there is already a dramatic lack of social and affordable housing, something more drastic will be needed. It isn’t only about funding, though. Current restrictions will need to be relaxed, so as to allow local authorities to borrow and spend their own money more freely on house building. Council’s should be able to retain 100 per cent of the proceeds from Right to Buy sales so that they can be reinvested in more housing. Councils will need more certainty about the level of future rents to help guide their investment plans. They may also need to work collaboratively with housing associations and private sector developers, so as to fill skills gaps in their teams.
It may also be time for a rethink of a number of planning restrictions. For instance, green belt land is highly protected across the board, despite the fact that a significant amount of it is of low environmental value. There is a popular misconception that equates green belt with open countryside, but this is often far from the case. If the plots of land most suitable for development could be released from the green belt, councils could deliver vital new housing for local people in some of the most sustainable areas in the UK.
All of this could help facilitate more council house building – which would make a significant contribution to boosting housing supply.
The Government has made a positive move in calling for councils to once again start building. However, it must now match this with commitment and action. More funding will be needed and restrictions on local authorities’ finances and planning capabilities will need to be relaxed. Council planners will need to be ready. Their support and guidance will be fundamental in getting this “new generation” of council homes very much on the ground.
