Civitas Social Housing has provided an update on the progress in the implementation of its new regulatory clause (details of which were announced in May).
The clause is intended to assist housing associations to be better positioned to achieve regulatory compliance under the Regulator of Social Housing’s governance and financial viability standard. The clause has now, after detailed negotiation including legal input, received approval from the boards of the two initial housing association.
Following this approval, the clause is now being introduced to several leases so that its impact can be incorporated into the long-term modelling that housing associations are required to prepare as part of their ongoing submissions to the Regulator of Social Housing (RSH).
The new clause seeks to address repeated concerns raised by the regulator in regards to the leased-based social housing model – namely the financial weakness of the housing association tenants and the mismatch of long-term lease liabilities and short-term income streams – through greater risk-sharing with the housing associations. The clause would allow a housing association to temporarily stop paying rent in certain circumstances, such as if it had not received housing benefit from a local authority. This would apply after an initial period of time, and then only if paying the rent in full would cause the housing association to fail to meet the regulator’s standards. CSH would receive rent arrears as and when the housing benefit is subsequently received by the housing association. Under the terms of the clause, the housing association would provide CSH with full data and step-in rights.
The company has previously sought and obtained formal written confirmation from its valuers that the inclusion of a clause of this type within the company’s new and existing leases will not of itself cause a diminution in the value of those leases or in the underlying assets.
The clause remains subject to approval by the company’s lenders and now that a settled form of the clause has been agreed, this process will be commenced. The scale and timing of any further roll out beyond the initial specimen leases will be determined by the way the sector responds to the introduction of the clause that is now taking place and will be at the discretion of the company.
Commenting on the progress achieved, Michael Wrobel, chairman of Civitas Social Housing, said: “We are pleased to have reached agreement with the boards of several of our housing association partners for the terms of the new clause. We share the same objective of regulatory compliance and continue to make an active contribution in this regard. We consider the clause will be of benefit to the company’s stakeholders and to the sector overall.”
Steve Fensom, CEO, Westmoreland Supported Housing, added: “The board of Westmoreland is actively engaged in driving forward both the quality and overall compliance of the services that we deliver. Considerable progress has been made in this regard particularly in addressing the past issues raised by the RSH. We consider that the implementation of the new clause will assist further in our mission to achieve full regulatory compliance.”
CSH : Civitas Social Housing updates on new lease clause