Brexit: The implications on Social Housing

As we are all now fully aware, the UK voted to leave the European Union in a referendum on the 23 June 2016. This decision will have an impact on a wide range of policy areas and industries, including the house building industry.

Following the referendum the National Housing Federation (NHF), the representative body for Housing Association, warned Associations against a potential fall in property prices and tighter lending conditions. Development by associations would also be impacted by wider market conditions, particularly the loss of skilled migrant labour in the construction industry. The latter being a concern for the government as they have their “1,000,000 homes target” by the end of the current Parliament.

The NHF has put forward their case for the relaxation of how Associations use government investment and what the Associations can build with the view to building 300,000 new homes, nearly a third of the government’s target.

We can only wait in anticipation of the Autumn Statement to see if the NHF and Associations will get their wish.

Will the European Investment Bank (EIB) abandon the UK?

Currently, whilst being a member of the European Union, the UK is in a fortunate position of being able to benefit from funding from the EIB. Latest figures show that the UK Social Housing Market has seen at least £5.5 billion worth of investment.

Having been asked the question, the EIB made the following statement:

“At present the UK shareholding in the EIB remains and the EIB’s engagement in the UK is unchanged. Any change to the EIB’s shareholder structure or lending activity is a decision for the member states.

We expect that the EIB’s shareholders, the 28 EU member states, will discuss the EIB’s engagement in the UK as part of broader discussions to define the future relationship of the UK with Europe and European bodies. At present, the EIB’s shareholders have not requested the Bank to change its approach to operations in the UK.”

 It seems that not much will change whilst we are a member, however, the future does not look bright. If we look at Switzerland as an example they only receive funding in the areas of energy and transport. Their housing market is left to “go it alone.”

 Let’s hope the Autumn Statement provides the assistance the Social Housing Sector needs.

The Housing Minister, Brandon Lewis, has discussed government plans regarding a deregulation package for Housing Associations. Details of the proposed deregulation package were discussed at the Communities and Local Government committee on 15th December 2015. 

The proposed deregulation package would mean that Housing Associations would no longer need permission from the regulator to make changes including mergers, restructuring, winding up and dissolution.

This would also mean that Associations would also no longer require the permission of the regulator for sales, charging for security and changes of ownership. Housing Associations will, however, still have to notify the regulator when they make changes so the register of social housing providers can be maintained.

The new plans would also mean that the proceeds disposal fund would be abolished and Associations could have complete discretion over how they use funds from sales, including through the Right to Buy scheme.

The proposal also means changes would be made to the ‘’Pay to Stay Scheme’’, this is currently compulsory but the proposed deregulation means that this will no longer be the case. Associations would not have to enforce Pay to Stay however they will have the opportunity to set higher rent levels for tenants with high income. To ensure fairness to tenants the government will encourage consistency between Housing associations and Local Authorities.

A special administration regime will be introduced for use in the unlikely event a housing association becomes insolvent. The special administration regime will protect service to tenants and the governments grant invested in the sector. It will also ensure creditors can recover their security.

Housing and Planning Act now in force

The contentious Housing and Planning Bill, first introduced in October 2015, has finally become law.  Royal Assent for the new legislation was granted on Thursday 12th May 2016. 

For many, the Act enshrines the current Government’s approach to the procurement of new housing and use of existing (social) housing assets.  However, critics of the new legislation have said that the new law is damaging to family life and to communities……time will tell.  We set out below a reminder of some of the key aspects of the new rules.   

As an expert provider of advice to the affordable and wider housing sectors, Sharratts’ lawyers can discuss with you the likely impact of the new law on your business.  For further advice, please contact:

Ben Halsey, telephone 01959 568014 or email: benh@sharratts-london.co.uk

or your usual Sharratts contact.

A glance through the contents section of the new statute (link below) provides a taste of its scope:

http://www.legislation.gov.uk/ukpga/2016/22/contents/enacted/data.htm 

As is now well documented, the Act includes the following key topics which are of interest to social housing providers and developers:

• the new Starter Homes regime, whereby planning authorities must allocate a specific number of starter homes within new development schemes.  Starter Homes, along with other parts of the new Act, are a key element of the Conservative policy to increase homeownership, albeit many have argued that the new Starter Homes will be provided at the expense of those most in housing need.  Starter Homes will be made available to applicants that fit the relevant age-range criteria and will be sold at a discount, and will then later be able to be sold at full market value.  Starter Homes will be almost universally required on new developments, but they will not be required on Rural Exception sites.  As with much of the new law, the devil of the new measures will be in the detail, which will be produced in secondary legislation.  
• Following the National Housing Federation striking a deal with central government for housing associations to voluntarily take up the Right to Buy, the Act includes the extension of the Right to Buy to housing associations, to be funded through a higher-value void levy on local authorities; and  
• Pay to Stay – the requirement for some tenants earning above certain thresholds to pay an increased rent.  Originally, government wanted tenants to pay market rent where they earnt over a certain threshold.  After objection from the House of Lords, a taper was introduced, being 15p in the pound for every pound over the threshold of £31,000 (£40,000 in London).   
• Lifetime tenancies – the policy here was to bring to an end the practice of granting lifetime tenancies for most tenants and replace them with fixed-term tenancies.  After much debate, the result is fixed-term tenancies of “up to” 10 years (up to 19 years for those with children up to nine years of age).
• Part 6 of the Act deals with amendments to the planning system, and introduce a new permission in principle for housing led developments, utilising a zoning concept that is intended to make it easier to get funding for new developments.  Once you have secured permission in principle, a ‘technical details consent’ is issued (which amounts to full planning permission).  A register of brownfield land will be maintained – interestingly, it’s intended that some of the land in the register will gain permission in principle simply by being included in the register.  

Stop Press!  £4.1bn funding announced for 135,000 new shared ownership homes

The Government and the Homes and Communities Agency has issued a prospectus inviting a wide variety of organisations to bid for a total of £4.7 billion of capital grants for the development of shared ownership (SO) and other affordable homes.

As an expert provider of advice to the housing sector, Sharratts’ lawyers are well versed in the rules and practice relating to grant funding, shared ownership development and disposals.  We look forward to working with you to make the most of the  opportunities provided by the new grant funding programme.  For further advice, please contact Sarah Jarvis, telephone: 01959 568 017 or email: sarahj@sharratts-london.co.uk  or Ben Halsey, telephone 01959 568014 or email: benh@sharratts-london.co.uk

Brief details of the new funding are set out below. 

The prospectus, entitled “Shared Ownership and Affordable Homes Programme 2016 – 2021” (SOAHP 2016 – 2021), was issued on 13 April 2016.  A link to the prospectus (available on the Homes and Communities Agency’s web pages) is set out below:-

The new funding is intended to provide 135,000 new SO homes, 10,000 rent to buy homes and 8,000 units of supported and/or older peoples’ rental accommodation.

SOAHP 2016 – 2021 funding will sit outside the current programme of Affordable Housing funding and represents a tangible sign of the current Government’s ongoing objective of supporting (affordable) home ownership, as evidenced by the fact that 88% of the new funding is allocated towards new SO accommodation.

Key aspects of SOAHP 2016 – 2021 are as follows:

• funding is intended to support development of new homes outside of Section 106 Affordable Housing requirements on new developments sites 
• funding is to be made available to a wide variety of potential bidders, not just existing registered providers of social housing – given the flavour of the prospectus document, it is clear that the Government wants to attract innovative collaborations between entities within the wider residential property (development) sector, including investment from and ownership by institutional investors
• the move to increase SO housing delivery envisaged by the new funding is supported through other Government initiatives, including the removal of restrictions on the type of organisation which can hold an interest in SO in the long term, and the relaxation of eligibility criteria applicable to SO housing accommodation – in particular the household income thresholds that apply inside and outside of London 
• funding will be administered by the HCA, through its investment management system (IMS)
• Although it is not clear, it is understood that inside Greater London, funding will continue to be administered by the GLA 
• modern and innovative methods of construction, including offsite construction, will be encouraged 
• funding will be ‘regulated’ contractually though heads of terms and model contact documentation – those familiar with the existing HCA Affordable Housing Programme will no doubt find that similar model documentation is utilised – however draft heads of terms/model contract documentation for SOAHP 2016 – 2021 funding is yet to be made available
• in addition, new funding will include requirements regarding ‘firm schemes’, ‘indicative schemes’ and ‘nil – grant’ schemes, again concepts which will be familiar to those already allocated grant funding by the HCA and/the GLA under existing programmes

We are delighted to announce that as from 1st April, Paul Skelton, Head of our Asset Management Team has been made a Partner and that Sarah Jarvis has become an Equity Partner.

We trust that our clients and colleagues will join us in wishing them both well in their new roles.

We are looking for an experienced legal secretary with a strong conveyancing background to work as part of our busy team.  This is a full time role working at our office in Brasted.  Car essential.  Excellent package for the right applicant.

Please send CV with covering email to sarahj@sharratts-london.co.uk

We currently have a vacancy for a full time plot sales fee-earner to join our existing team.  The successful applicant would have their own case load of shared ownership plots sales, private plot sales and resale and staircasing matters acting for existing Registered Provider clients.

Applicants would preferably need experience of dealing with plots sales and be keen to work as part of a busy friendly team. 

Excellent package and great career prospects for the right applicant.

CV’s should be emailed to Sarah Jarvis sarahj@sharratts-london.co.uk

The Assured Shorthold Tenancy Notices and Prescribed Requirements (England) Regulations 2015 (SI 2015/1646) (Regulations) were laid before Parliament on 9 September 2015. They will come into force on 1 October 2015.

The Regulations prescribe the form of notice to be given ending an assured shorthold tenancy under section 21 of the Housing Act 1988 (section 21 notice).

They also provide that the landlord cannot serve a section 21 notice unless it has complied with its obligations to provide to the tenant:

• An energy performance certificate.
• A copy of a gas safety certificate.
• The Department for Communities and Local Government’s booklet, “How to rent: the checklist for renting in England”.The changes apply in England.The new rules will apply to ASTs granted on or after 1 October 2015.They will not apply to a fixed term AST granted prior to 1 October 2015 even if, after the relevant date, the fixed term AST becomes a statutory periodic tenancy.However, from 1 October 2018, the rules will apply to any AST (except for the requirement for the landlord to provide prescribed information about the rights and responsibilities of the landlord and tenant under the AST) (section 41, DA 2015).Prescribed Form

The Regulations set out the prescribed form of section 21 notice (Form No. 6A). They add this new form to the forms set out in the Assured Tenancies and Agricultural Occupancies (Forms) (England) Regulations 2015 (SI 2015/620).

Form 6A states that a section 21 notice cannot be used where:

• The tenant has resided in the property for less than four months.
• The landlord is prevented from retaliatory eviction under section 33 of the DA 2015.
• The landlord has not complied with the requirements under the Regulations (see Legal Requirements).
• The landlord has not protected the tenant’s deposit under a Tenancy Deposit Scheme (see Practice note, Tenancy Deposit Schemes ( www.practicallaw.com/9-238-2955) ).
• The property requires a licence but is unlicensed.

Form 6A states that:

• It must be used for all ASTs created on or after 1 October 2015, except for periodic tenancies that come into being after 1 October 2015 and which were fixed term ASTs created before 1 October 2015.

Effect of expiry of Notice To Complete

The High Court considered the effect of the expiry of a notice to complete and held that a defaulting seller, who had not complied with the buyer’s valid notice to complete, was not entitled a few days later itself to serve a notice of rescission terminating the contract.

The effect of the buyer’s notice making time of the essence of the contract was to fix the time for performance so that the seller’s failure to comply with that time for performance constituted a repudiatory breach of the contract.

Making time of the essence of the contract did not mean that time remained of the essence of the contract for a reasonable period after the expiry of the notice to complete, so that when the seller became ready, able and willing to complete it could itself claim repudiatory breach by the buyer for failing to complete on a date nominated by the seller.

The seller’s notice of rescission was ineffective to bring the contract to an end. The court ordered specific performance in favour of the buyer.

Hakimzay Ltd v Swailes [2015] EWHC B14 (Ch)

Condition 6 of the Standard Conditions of Sale (Fifth Edition) (SCS) entitles either party to give the other notice to complete any time after the time specified in SCS 6.1.2 (2.00 pm, unless changed by special condition 5) on the completion date. The party giving the notice to complete must itself be “ready, able and willing” to complete (SCS 6.8.1).

Service of a notice to complete makes time of the essence of the contract. If time is of the essence for performing a contractual duty, then the time limit is a condition of the contract, so that any breach is repudiatory. Any delay in performing the duty will be grounds for the innocent party to elect to terminate the contract (in addition to any other available remedy). Rescission does not happen automatically on expiry of the notice to complete.

SOCIAL HOUSING

PAY TO STAY:

Social housing tenants with household incomes of £40,000 and above in London, and £30,000 and above in the rest of England, will be required to pay a market, or near market, rent for their accommodation.

The government aims to make such tenants pay a fair level of rent, or make way for those whose need is greater.

Local authorities will repay the rent subsidy that they recover from high income tenants to the Exchequer, contributing to deficit reduction. Housing Associations will be able to use the rent subsidy that they recover to reinvest in new housing. The government will consult on and set out the detail of this reform in due course.

REVIEW OF LIFETIME TENANCIES

The government will review the use of lifetime tenancies in social housing to limit their use and ensure that households are offered tenancies to match their needs. This should help ensure the best use is made of the social housing stock.

REDUCTION OF SOCIAL SECTOR RENTS

The government will reduce rents paid by tenants in social housing in England by 1% a year for four years from 2016-17 to 2019-20, reducing expenditure on housing benefit and universal credit.