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Transcript
———— Pioneering ———— London ———— Construction ———— Public sector ———— Energy ———— Real estate ———— Bahrain ———— Tax ———— IT ———— Dubai ———— Manchester ———— Infrastructure ———— Diverse ———— Regeneration ———— Spirited ————Connecting ———— Knowledge ———— Pragmatic ———— Malaysia ———— Exeter ———— Thought leadership ———— Housing ———— Agile ———— Creative ———— Connecting ———— Private equity ———— Funding ———— Housing ———— Islamic finance ———— Charities ———— — Local government ———— Manchester ———— Environment ———— Focused ———— Islamic finance ———— Projects ———— Abu Dhabi ———— Corporate finance ———— Passionate ———— Team work ———— Technology ———— Development ———— Oman ———— Innovative—— Employment ———— Regulation ———— Procurement ———— Expertise ———— Specialist ———— Planning ———— Investment ———— Committed ———— Delivery ———— IT ———— Governance ———— Experience ———— Pensions ———— Focused ———— Care ——————— IP ———— Corporate ———— Infrastructure ———— Value ———— Development ———— Private wealth ———— Oman ———— Governance ———— Birmingham ———— Corporate finance ———— Connecting ———— Pragmatic ———— Charities ———— Dispute resolution ———— Tax —————— Dynamic ———— Pensions ———— Dispute resolution ———— Insight ———— Banking and finance ———— Arbitration ———— Diverse ———— Regeneration ———— Care ———— Commuication ———— Public sector ———— Specialist ———— Projects ———— Talented ————
Publications � Summer 2016
Quarterly Housing UpdateHousing and Planning Act 2016 edition
Quarterly Housing Update
Contents
1 ———— Foreword2 ———— Goodbye to disposal consents4 ———— Deregulation of social housing and the Governance and Financial Viability Standard6 ———— Planning aspects of the Act 8 ———— Housing administration – Act puts the big picture in place, but still work to be done 10 ———— Looking at the Act from a local authority perspective11 ———— Being a community benefit society is the solution to a looming problem12 ———— The first of many – the HCA consultation document on revisions to its registration criteria and its intervention and enforcement powers13 ———— Exit payments in the public sector
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ForewordIt seems slightly surreal to be writing this on the morning of 23 June. By the time we publish, the result will be in and we'll know whether it's "in" or "out". Either way there will still be plenty of challenges around in terms of the housing market and just as many people looking for somewhere to live on 24 June as there are today. The outcome of the referendum and the "what now" question will no doubt be the subject of much debate at next week's CIH conference in Manchester. I'm sure I will see many of you there.
In this edition we are concentrating on the measures in the Housing and Planning Act. You will see from many of the articles that we still have some way to go before all the detail emerges. The deregulation measures affecting Registered Providers are, we understand, not going to be brought into force until the Autumn which is rather later than originally planned.
Whilst we have all, no doubt, been very focussed on the passage of the Housing and Planning Bill through Parliament and more recently the EU referendum, there are of course plenty of other important things to consider. What will Sadiq Khan's housing policies mean for London for example? How will the various devolution proposals play out around the country and where will they have the most impact on housing?
I have said before that interest in the sector from investors remains strong. Although benefit changes and rent reductions are clearly negatives from an investor's point of view, the appetite is still there to talk to housing providers be they local authorities or housing associations, with a view to providing affordable housing and generating long term relatively predictable cashflows.
An area that I see as crying out for some more structured response involving long term investors, is the provision of temporary housing. A recent article in Inside Housing
highlighted the hundreds of millions of pounds being spent annually by London boroughs on this type of accommodation. We know that the standard of much of the housing used is far from ideal and there is little or no long term benefit gained by the relevant local authorities in terms of the underlying assets which are typically owned by private landlords.
Harnessing the investors' wish to secure a long term income and the needs of the local authorities to access good quality accommodation at a reasonable cost doesn't sound like it should be too difficult. The fact is though that precious little has happened in this area. There are no doubt lots of reasons for that. A large concentration of temporary housing is not going to be desirable so dispersed stock is more likely to be required. That makes scale hard to achieve. Some underwriting by the local authority may be needed in relation to voids and/or bad debts. Views will need to be taken as to future benefit levels to support the rents being charged. If it was easy we'd have done it. That said, the sums currently being spent are eye watering. With ever increasing budgetary pressures, perhaps the time has come for this to be given a closer examination.
Ian GrahamPartner � Head of Housing and Regeneration
Goodbye to disposal consentsWill any of us miss the statutory disposal consents regime (under section 172 Housing and Regeneration Act 2008 and section 133 Housing Act 1988)? Possibly more than you might think!
Once the relevant parts of the Housing and Planning Act 2016 (the Act) come in to force (probably in the Autumn), private registered providers (RPs) will no longer need a section 172 consent to dispose of a social housing dwelling or a former social housing dwelling or a section 133 consent where the social housing dwelling was once owned by a local authority.
Will this mean that an RP can do what it likes with its land?
Compliance with existing obligations
The abolition of the need to comply with the disposal consents regimes does not change anything else. So, if there is a covenant on the title, a contractual obligation not to dispose without a third party's consent or a planning obligation restricting disposal, then those consents still will need to be obtained as they do now.
Charity law and the Charity Commission dimension
Most RPs are charitable. Whether an exempt charity registered with the FCA or a Charity Commission registered charity, any charitable body disposing of land must be disposing of it to further its charitable objects, or be receiving a proper value for it, or potentially investing the land perhaps into a joint venture as an equity investment in accordance with a proper investment policy. Some transactions may be a mixture of these.
In the past, both senior officers and boards have gained some comfort from the fact that
a disposal was covered by either a general or a specific consent. Taking the consents out of the picture, RPs need to make sure that they are left with a proper decision-making process, and that they make proper provision for obtaining relevant valuations.
The Charity Commission dimension
Charity Commission registered RPs will have to comply with the Charities Act 2011 provisions on all land disposals. RPs which are registered charities will be familiar with the process, as it already applies where no statutory disposal consent applies, for example, land which is not and never has been a social housing dwelling.
For most transactions, this means obtaining a surveyor's report which meets specific Charities Act related requirements. For some complex transactions (for example where land is being put into a joint venture for redevelopment with profit sharing through the joint venture mechanism rather than necessarily receipt of a land price), it can be challenging to obtain an appropriate report. RPs intending to undertake voluntary right to buy will have to comply with these provisions on every sale. On any right to buy sale, there must be a valuation but it will have to come accompanied by the specific information which is required under the charities legislation. Clearly, there is a cost involved. We know some RPs are considering converting to community benefit society status to simplify their land disposals and this is addressed in a separate article on page 11.
Sales of tenanted homes?
Once the consents regime is abolished, RPs could sell tenanted properties into the private sector. Some boards will consider they would not want to do this as there may be reputational risk. If a private sector landlord was offering significantly more for a tenanted block of flats which the RP had decided they no longer wished to own, there needs to be a good reason for turning
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down that offer. Would a board look at ways of protecting existing tenants through enforceable deeds of covenant?
Market renting
As a number of our clients have discovered, the HCA is not keen to allow RPs to change social rented dwellings into market rented dwellings, even where there is good reason for this. The advice on the HCA's website is that if you make that change, you need to dispose of that land or those dwellings into a subsidiary that can then let at market rents. The abolition of the disposal consents regime will make that much easier but the board will still need to be clear how that delivers value for the RP as a whole and take specialist tax advice where necessary.
Notifying the HCA
The Act provides for RPs to notify the HCA of land disposals, with provision for the HCA to give directions dispensing with the need for notification. We are expecting that there will be a direction so that "normal disposals" do not have to be notified. What is a normal disposal? We do not know yet, but it may be one that currently either does not need a consent or is covered by a general consent.
What if we get it wrong?
RPs need to be aware that if they complete a very significant disposal in a way which does not accord with charity law or with their own policies there must be a risk that they could end up in breach of the Governance and Financial Viability Standard.
Will we be able to borrow more?
There has been much discussion amongst valuers as to the impact of the abolition of the disposal consents and particularly the abolition of section 133 consent because that consent has always bound funders as well as the RP. Most valuers are saying that the abolition of disposal consents will enable more RPs to obtain valuations for security purposes at the MV-T basis rather than EUV-SH. Equally we may see funders, knowing that RPs are freer to dispose of their properties than they were, asking for more information about disposals of non-charged assets in the future.
The impact on local authorities
What of local authorities which have been disposing of land to RPs, perhaps at less than market value or indeed at nil value? For them, the abolition of the consents regime removes a significant comfort factor. It seems likely that local authorities will want more covenants on the title and potentially, a requirement to obtain their consent if there is a disposal in the future.
Deregulation of social housing and the Governance and Financial Viability StandardThe reduction of regulation in the Housing and Planning Act 2016 removes the property disposal consent regime and this is addressed in the previous article on page 2. In addition, it removes the consent requirements for constitutional amendments, restructurings and mergers. This includes changes to articles of association or rules, ranging from simple administrative changes to the rule changes required to become a subsidiary of another RP or a non RP, conversion of a company into a registered society or from a registered society into a company, transfers of engagement by an RP (whether to another RP or to a non RP) and amalgamations of registered societies.
All of these consents are replaced by a notification regime but at the time of writing, we are still awaiting consultation on the HCA's proposals. The legislation does, however, set out parameters. In particular, for most of these actions, notification must be after the resolution to effect the changes being passed. This will be the shareholders' or members' resolution passed at the relevant general meetings. For amendments to rules or to articles, the notification can only be after the relevant change becomes effective, so for a registered society this will be after the FCA has registered the amendment.
For conversions, transfers of engagements or amalgamations, the HCA has an obligation to consider whether the resulting vehicle is suitable for registration as an RP. The HCA has already issued a consultation on this and is proposing a very simple
regime based on the principle that if the original bodies were RPs, then the resulting body will also be suitable for registration, provided it meets some very basic tests: that it has as an object the provision of social housing, that its status as a subsidiary or not is clearly specified and (where relevant) non profit status is embedded in the rules. It is clear from this consultation that the HCA is not seeking to use this process to undertake any qualitative assessment as to the outcome of the restructuring or of any merger.
In particular, it is clear from this that there will be nothing in the formal HCA processes which replicates any of the current scrutiny of the RPs' business case. This includes the financial impact assessment and risk management, the consultation undertaken with residents and with relevant local authorities, the governance of the resulting body and its detailed constitutional provisions including both the pre clearance and formal consent processes.
Although all of this formal process is being swept away, the HCA as regulator will still actively regulate RPs' continued compliance with the Governance and Financial Viability Standard and will also have a responsibility to keep regulatory judgments under review and to update them as appropriate. It will continue to have to regulate actively value for money within RPs. In recent weeks, it has signalled that VFM will have a significantly increased role in relation to ongoing engagement with RPs and, in particular, that this will form a much bigger part of the in depth assessment regime.
RPs should also recall that the Governance and Financial Viability Standard incorporates a duty to communicate with the Regulator in a timely manner in relation to material issues. Nearly all significant restructuring or merger activities are likely to be material for these purposes. A formal notification received afterwards without any prior warning is likely to raise some significant questions for the RPs to answer.
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This means that RPs should keep the HCA informed as to significant proposals and that once informed, the HCA will need to keep governance and financial viability under review both during the process and after completion. The HCA will need to decide whether a major change or merger is one where an updated stability check is all it requires or whether the changes would merit a new in depth assessment. It will also need to decide whether the timing of that in depth assessment should be close to the event or after a period of months allowing for the organisation(s) to bed in the necessary changes.
It might be said that the HCA checklist of actions and considerations has had varying degrees of applicability to different transactions. It is true that, in some cases, RPs have considered the process to be somewhat bureaucratic and to have added significantly to timing pressures on the transaction. It is also true that many of the requirements of that checklist simply reflect what a well governed RP (and any counterpart) would take into consideration as part of the process of undertaking a major restructuring transaction or a merger. In our view, well governed RPs will need to consider the processes for these procedures carefully and should retain careful records to demonstrate that good governance procedures have been followed throughout so that the RPs can provide relevant assurance to the HCA that both the procedures followed and the outcomes achieved represent good governance and demonstrate their continued ability to meet the Governance and Financial Viability and the Value for Money Standards.
Planning aspects of the Act The Housing and Planning Act 2016 (the Act) has been described by one local authority's senior planning solicitor as an act "by entrepreneurs for entrepreneurs". There is a common thread running through the planning aspects of the Act of promoting means of 'unblocking' a planning system which is perceived as acting as a brake on building homes.
This article is an overview of the main planning provisions of the Act.
Starter homes
The Act has provided further clarification on what exactly the Government's 'starter home' initiative will look like. A starter home will be available to purchase by first time buyers between the age of 23 and 40, to be sold at a discount of at least 20% of the market value, for less than £250,000 outside Greater London and £450,000 in Greater London. Full details are not yet clear, but starter homes will be restricted in terms of future lettings or sales at full market value for a period of time.
Local planning authorities (LPAs) will be obliged to promote the supply of starter homes with a 'starter homes requirement' test. A concern is whether this will 'cannibalise' other forms of social housing such as affordable rented, given the limited level of affordable housing which can be provided. Developers may also be concerned that entry level dwellings will now be forced to compete with units benefitting from Government enforced discounts.
Neighbourhood planning
The Act requires local planning authorities to make both Neighbourhood Development Plans and Neighbourhood Development Orders 'as soon as reasonably practicable after the referendum is held'. What will constitute 'as soon as reasonably practicable' will be defined
in regulations but these provisions are clearly intended to prevent LPAs dragging their feet.
A Neighbourhood Development Order can grant planning permission for specific types of development in a specific neighbourhood area. While these are intended to be a means of promoting appropriate development, it will remain to be seen whether neighbourhood planning will be a means of authorising, rather than preventing, development.
The Act also gives powers to Government to intervene in the neighbourhood planning process. Neighbourhood planning has been used more extensively in areas where there are well organised local groups. These powers were exercised almost immediately in respect of the Birmingham plan – specifically in relation to proposals to build 6,000 homes on green belt land in the suburb of Sutton Coldfield.
Permission in principle
Permission in Principle (PIP) comes into force on 12 July 2016 and is a means of speeding up the planning process by having automatic approval (similar in effect to a permitted development right) for 'housing-led' developments. The idea is that such zoning will give developers greater certainty about planning for major schemes and that brownfield sites could be unlocked for rapid development.
The Act requires local authorities to keep a register of brownfield sites within their area, and a number of authorities are already doing so. Importantly, such PIP can be given directly by the Secretary of State, taking decisions out of the hands of authorities and centralising a key decision- making power.
Self-build
The Act makes it easier for individuals to build their own homes. Since the Self-Build and Custom Housebuilding Act 2015, local authorities have had a duty to keep a register of people seeking to fulfil their own 'Grand Design' dreams. The Act goes further than this, requiring local authorities to grant enough planning
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permissions to meet demand within their area as evidenced by the register.
Processing of planning obligations
For the first time since its inception, an element of competition has been introduced into the planning system allowing for pilots to test introducing competition in the processing (but not determination) of planning applications. In the current austerity climate, a lack of resources at LPAs often leads to delays in the planning process. Additional funding, perhaps through increased fees, may be more of a priority for house-builders than increased competition.
To keep this in perspective these provisions expressly exclude the possibility of the determination of an application by anyone but an LPA. Brandon Lewis stated that "this is about competition for the processing of applications, not their determination. The democratic determination of planning applications by local planning authorities is a fundamental pillar of the planning system, and that will remain the case during any pilot schemes … brought forward."
Section 106 dispute resolution
The Act provides for a new dispute resolution procedure and allows for the Government to place a restriction on the level of affordable housing provision. These provisions should be considered in light of the ongoing debate regarding viability appraisals. In what is certainly good news for developers, these provisions will allow for a quick means of resolving deadlocks in the negotiation of planning obligations and will also go some way to replacing the post April 2016 defunct viability reappraisal mechanism under section 106BA.
Planning freedoms
A planning freedom scheme is a scheme that dis-applies or modifies specified planning provisions in order to facilitate an increase in the amount of housing in the planning area concerned. Interestingly, "planning area" means an area of a local planning authority or an area comprising of two or more adjoining areas,
meaning that a planning freedom scheme could have considerable scope and reach in unlocking development across a wide geographic area.
What next?
There are many people who argue the real blockage on UK housebuilding is not the planning system but rather: builders securing long-term bank lending, a housebuilding industry (together with the general public) focused on owner occupation and a government emphasis away from building social housing.
The Act is in effect an enabling piece of legislation with the real substance to come from regulations to be published later. As the regulations are released, it will be interesting whether the Act does indeed lead to more new homes or simply diverts decision making power from local to central government.
Housing administration – Act puts the big picture in place, but still work to be done Whilst not part of the de-regulation agenda as such, the Housing and Planning Act 2016 (the Act) puts into place a new insolvency regime which we expect will soon apply to all RPs.
The statutory moratorium regime which currently applies on any proposed enforcement of security given by an RP will remain an option, but in most cases it is expected that the Regulator will elect to appoint a housing administrator instead.
Background
The putting in place of a special administration regime for the RP sector was one of the key recommendations of the "Cosmopolitan Housing Group Lessons Learned" report, published in June 2014. When fully implemented, it is designed to bring the housing sector more closely into line with the insolvency regime that applies to other corporate sectors.
It is a much quoted fact that no lender has lost money on a loan to a regulated housing association.
Such an unfortunate event is, however, arguably more likely than at any point in the past, for a number of interrelated reasons:
1. the sheer size of some housing association groups may mean that the rescue of a large association by one of its peers is no longer possible;
2. housing associations and their groups comprise more complicated trading businesses, with additional risk in the non-social housing parts of the group;
3. the ever-increasing pressure on housing associations to "sweat their assets", become more commercial and take risks in order to subsidise their core social mission;
4. section 24 of the Welfare Reform and Work Act, which provides for an exception to the 1% rent cut in the event that security over social housing is enforced and as such underpins the existing use – social housing (EUV-SH) valuation basis for loan security. For this exception to apply, an enforcement process must be instituted.
It is against this background that the housing administration regime introduces a number of key changes as compared to the statutory moratorium regime which currently applies.
The most important of these changes are:
Assets covered
A housing administrator would be appointed in relation to all the business and assets of the relevant RP, whereas currently the moratorium applies to social housing assets only.
Time period
The statutory moratorium regime only gives the Regulator a 28 working day period to put together a rescue plan. Whilst this may be extended, this requires the consent of all secured creditors.
Whilst the moratorium procedure remains an option under the new regime, in all but the simplest cases it is expected that a housing administrator will be appointed, who will have a 12 month period to put together and implement their proposals.
All or nothing?
The current regime is essentially an all or nothing solution, which has to be accepted by all secured creditors in order to be implemented. Failing that, each lender may take their own action.
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Under the housing administration regime, the additional time available allows for a more orderly workout with the primary objective of rescuing the RP as a going concern. It should also allow sufficient time to develop a more suitable marketing strategy for the properties, thereby allowing additional value to be realised for the benefit of creditors.
Lender's ability to act independently?
Currently, if any lender wishes to enforce their security they need simply sit out the moratorium period and, after that, veto any proposed extension of the moratorium or any proposals from the Regulator.
Under the housing administration regime, individual lenders are not able to dictate the method and timing of any disposal of their security – it is the administrator that decides this. However, lenders can take comfort that the administrator has duties which protect their interests and, as part of this, the administrator must achieve the best price reasonably obtainable for any properties sold.
Lenders' view
Early indications are that these changes should be at worst "credit neutral" for the RP sector. Sector lenders will be familiar with how administration works in other industry sectors and should derive comfort from a similar regime applying to the RP sector, which is more adaptable to dealing with the complexities of a modern housing association and its group.
To date, however, lenders' reaction to the new regime has been lukewarm, at best. They were critical of some key aspects of the original proposals and had to work intensively with the HCA and others in order to make the final wording of the Act broadly acceptable to them in the limited time offered by the parliamentary timetable. In particular, they have warned (through their trade body, the Council of Mortgage Lenders) that, despite being successful in achieving significant changes to the regime as originally proposed, "…the practical operation of the regime might give rise to consequences that could still impact future private funding and investment decisions in the sector".
This comment references the fact that much of the detail of how the regime is to work in practice remains to be set out in regulations, which we understand remain a work in progress. Until this work is completed, it is difficult to see how a housing administrator could be appointed, even at a point where the relevant provisions of the Act have been brought into force.
Looking at the Act from a local authority perspectiveThe Housing and Planning Act 2016 (the Act) marks the beginning of an era of profound transformation for local authority landlords, and one which has the potential to change the face of council housing as we know it.
There are two key changes introduced by the Act.
The first is the introduction (in Chapter 2 of the Act) of the requirement to make payments to Treasury in respect of “Vacant Higher Value” housing and a duty to consider selling vacant higher value housing.
Whist much of the detail of the regime will be in regulations issued by the Secretary of State, the following issues are important to note from the Act:
● there is a subtle change in phraseology (since policy development) in the Act from “high value” to “higher value”. Our expectation, therefore, is that (unlike the policy when first mooted) each and every stock owning authority will be required to make a payment to Treasury;
● the payment will be determined by Government based on a set of assumptions so there is no linkage to actual sales by an authority. If an authority can make the payment without selling properties, then that is permissible, although authorities will still have the duty to consider selling stock (s76 of the Act);
● sales made to RPs will be ignored for the purposes of calculating future payments. This is disappointing news for councils who may have wished to sell stock in the regulated sector (but is this an opportunity for councils to sell to unregulated RP subsidiaries?);
● the Act makes provision for agreements to be reached with authorities to retain some of the monies that would otherwise be paid to Treasury, on the basis that they are applied to new affordable housing (on a one for one basis or two for one basis in London). This will not mitigate the obligation to raise the cash in the first place and, as many authorities have discovered under the Right to Buy retention arrangements, actually spending these monies on new supply can be a real challenge.
The second key change is the introduction of the “pay to stay” regime introducing higher rents for “Higher Income Local Authority Tenants” (Chapter 3 of the Act). Again much of the detail will be in forthcoming regulations, but at this stage, there are two key things for authorities to note:-
● first and critically different from the scheme as it applies to the RP sector, is that implementation of the scheme will be mandatory for local authorities and that income raised from the policy will have to be passed to Treasury;
● secondly as with the higher value sales “levy”, the payment to Treasury will be calculated on the revenue that will be assumed to be generated by the scheme, irrespective of what rents are actually collected by the council.
One final thing to note from the Act concerns local authorities who have undertaken an LSVT- Section 93 makes provision for the Secretary of State to reduce local authority involvement in the governance of RPs. We are likely to see a mandatory reduction in council involvement in “their” LSVT at both a board and general membership level.
Being a community benefit society is the solution to a looming problemMany RPs are already community benefit societies (CBS), which were formerly known as industrial and provident societies, but there are a good number which are companies limited by guarantee (CLGs). This difference in legal form is about to become a significant factor for the speedy and efficient conduct of land transactions by RPs.
As addressed previously in the article on page 2, the Housing and Planning Act 2016 (the Act) makes provision for the removal of the land disposals consent regime provided for by section 172 and section 133. This regime and its statutory predecessors, acted to exempt those RPs which are charities from the requirement to comply with the land disposals regime contained in charities legislation.
The disposals regime for registered charities is less flexible and a great deal more administratively cumbersome than the existing S172/133 regime. It has no general consents regime for small, minor or business standard disposals. Significantly any disposal to a subsidiary of the charitable RP would require either a Court Order or (more likely) an Order of the Charity Commission, which is likely to be neither an easy or speedy process. This has led us to recommend that some RPs which are registered charities should consider conversion to become a CBS (and so change from being a registered charity to an exempt one). There are other benefits to having exempt charity status, such as not having to register nor file annual returns with the Charity Commission. Compliance with "all relevant law" for the HCA Governance and Viability Standard will contain fewer potential bear traps.
There has recently been some public debate about possible changes to the charity disposal
regime. Our latest understanding is that the Charity Commission will not be making any changes ahead of a Law Commission report scheduled for release in late 2016. Once issued, the report must be considered by Government and space found in the crowded parliamentary timetable for new legislation.
We cannot predict what any new regime will look like, but given it is unlikely to be in place until well into 2017, conversion to CBS status remains the quickest and most effective solution.
There are consultation, process and consents points to consider in converting from CLG to CBS and funders' approval will be needed. In our experience even before the Act the flexibility which the CBS legal form provides is worth the time and effort involved.
The conversion process does not have any significant impact on the legal rights and responsibilities of the RP and is well understood by experienced lawyers and funders. Most of the RP's affairs would remain unchanged, but the conversion does provide an opportunity for streamlining certain administrative areas of the business form and constitution.
A number of RPs have taken this route over the last few years without any real difficulties, so we think it unlikely that those who wish to do so in light of the issue highlighted in this article would face any now.
The first of many – the HCA consultation document on revisions to its registration criteria and its intervention and enforcement powersMany of the regulatory changes for RPs included within the Housing and Planning Act 2016 (the Act) are as a direct consequence of the decision last October by the Office for National Statistics (ONS) to reclassify private registered providers as Public Non-Financial Corporations.
When the ONS undertakes a further assessment of the status of private registered providers, the Government's hope will be that because of the changes being introduced by the Act (and consequentially through the HCA's regulatory regime), the ONS will reclassify private registered providers as "Private Non-Financial Corporations". The changes are intended to reduce the level of day to day involvement of the Regulator.
The changes being introduced (as well as the consequential changes proposed to the HCA's registration criteria and enforcement powers) will not fundamentally change the responsibilities of board members. Similarly, the changes will not alter the Regulator's obligations to perform its functions with a view to achieving the economic and consumer regulation objectives in ways that minimise interference and are proportionate, consistent, transparent and accountable.
The Regulator has issued the first of its statutory consultations covering changes to its registration criteria as well as changes to its intervention and enforcement powers. We are expecting a
number of further consultations to be issued shortly after purdah in relation to the EU Referendum.
Many of the changes contained within the proposed registration criteria are technical. Perhaps one of the most interesting aspects, however, is in relation to mergers and group structures, where the Regulator is proposing a new registration criteria for "restructured bodies". The proposals will introduce the following three registration decisions:
● where the Regulator's consent will be required – these include RPs changing their corporate status (where changing from a company to a registered society or vice verse) and transfers of engagements (whole or partial) by RPs to non-RPs;
● where the Regulator's consent may be required – these involve amalgamations; and
● where the Regulator's consent will not be required – these involve transfers of engagements (whole or partial) between RPs.
Separately, the Regulator's proposals also cover changes to its guidance on the use of its intervention and enforcement powers. The main changes are first to recognise that the Regulator has intervention and enforcement powers in relation to those RPs which fail to comply with the requirements for the setting and charging of rents for social housing; and secondly, to narrow the circumstances where the Regulator is able to appoint a manager in circumstances where an RP has mismanaged social housing. The change is to recognise that mismanagement for these purposes covers an RP being managed in breach of any legal requirements.
Richard St John WilliamsPartner � Housing and Regeneration
Exit payments in the public sectorThe Government will be imposing a cap of £95,000 on severance payments in the public sector. We do not know exactly when this will happen, but the draft Public Sector Exit Payment Regulations 2016 state that it will not be 'before 1st October 2016'. In the meantime change is on the cards and over the course of the next year, many organisations will be feeling the impact.
The £95,000 threshold applies to the total amount of pay received by an individual for loss of employment, including redundancy payments, voluntary exit payments and "any other payment made as a consequence of, in relation to, or conditional upon, loss of employment whether under a contract of employment or otherwise".
The regulations cover all bodies within the public sector, as set out on the list prepared by the ONS, and currently include RPs and ALMOs, but not charities. Although RPs were reclassified last year by the ONS as public non-financial corporations, bringing them within the remit of these regulations, the Government has made it clear that this is not its intention and that they will be reclassified so that the regulations will no longer apply to them.
Recent consultation
Earlier this year, the Government issued a 'Consultation on reforms to public sector exit payments' with the aim of establishing the way in which exit payments will be calculated. This closed on 3 May 2016. It included the following proposals:
● setting a maximum tariff of 3 weeks' pay per year of service for calculating exit payments;
● apping the maximum number of months' salary that can be used when calculating redundancy payments to 15 months;
● setting a maximum salary (£80,000) on which exit payments can be based;
● tapering the amount of lump sum compensation an individual is entitled to receive as they get closer to their pension retirement age; and
● requiring employer-funded early access to pension to be limited or ended.
Once the Government has firmed up the way in which public sector exit payments will be capped, it is likely that the draft regulations will be re-worked.
What about exit payments agreed before the regulations come into force? The consultation document stated that the Government would consider the case for transitional protection and whether to protect exits formally agreed prior to the new scheme taking effect.
Will the regulations apply to RPs?
The ONS reclassification of RPs is an obvious complicating factor and while in the long-run, the Government's intention is clearly to exclude them, it is not a foregone conclusion that the regulations will no longer apply to them when they finally come into force.
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