Changes to HCA Consents Regime from 06 April 2017

Article

04 April, 2017

On 06 April 2017, a number of changes to the regulation of social housing will be introduced under the Housing and Planning Act 2016 ('the Act').

One of the de-regulation measures to be introduced is the removal of the HCA consents regime. These measures are set out in Schedule 4 to the Act. When they come into force on 06 April 2017, private registered providers ('RPs') will no longer need HCA consent to dispose of social housing.

Currently, s.172 of the Housing and Regeneration Act 2008 means that most RPs in England are required to obtain consent from the HCA for the disposal of certain types of land. Similarly, s.133 Housing Act 1988 requires consent from the HCA for a disposal where the social housing dwelling was once owned by a local authority. In 2015, the HCA issued 'General Consent 2015' which acts as a consent for common types of disposal. If the proposed disposal requires consent under either s.172 or s.133 but does not meet the conditions imposed by General Consent, RPs have to apply to the HCA for specific consent.

When the de-regulatory measures of the Act come into force on 06 April 2017, RPs will no longer need consent under s.172 or s.133 to dispose of social housing. Instead, RPs will only be required to notify the HCA of the disposal of social housing dwellings.

The HCA has now issued a Direction covering the scope, timing and content of the new notification requirements. The Direction will have effect from 06 April 2017. A copy of the Direction and accompanying guidance notes can be found here -

https://www.gov.uk/government/publications/notifications-about-disposals.

Relevant Disposals

From 06 April 2017, RPs will not be required to seek HCA consent to dispose of social housing but will be required to notify the HCA. The term 'disposal' covers a wide variety of transactions that involve the disposal of any interest a RP may have in social housing. However, the Direction states not every disposal will be notifiable and that the HCA will only require notification of a disposal of social housing dwellings in certain circumstances and calls these 'Relevant Disposals'.

The HCA requires notification of disposals that mean social housing homes are lost from the sector, where the disposal results in a change of landlord for the residential occupier or where the disposal has an effect on the financial position of the RP. The Direction contains a table of Relevant Disposals and it includes the following circumstances:

  1. Category 1 - Out of Sector - where the dwelling, whether occupied at the time of disposal or not, is disposed of to a purchaser that is not a RP. This will include disposals to a RP's associate, subsidiary or joint venture if those organisations are not registered with the HCA. This category specifically excludes sales to the residential occupier.
  2. Category 2 - Within Sector - where the dwelling is disposed to another RP and it is occupied at the point of disposal. This includes both freehold and leasehold disposals.
  3. Category 3 - Last Social Housing - where the dwelling disposed is (or includes) the RPs last social housing dwelling. This will apply regardless of whom the dwelling is disposed to or whether or not it is occupied.
  4. Category 4 - To a Profit Making Provider - Where the dwelling is disposed to a profit making provider whether or not the dwellings are occupied.
  5. Category 5 - More than 5% of Stock - If a small provider (with fewer than 1,000 social housing dwellings) disposes of 5% or more of its stock in a single transaction then it must notify the HCA.

The Direction also sets out requirements for notification in circumstances where the purpose of the disposal is to obtain finance or to provide or support a guarantee.

The Guidance confirms that the HCA does need to be notified about disposals of non-residential property or gardens or garages or similar land that may be disposed of separately to a dwelling.

Timing of Notifications

The Direction confirms that the majority of Relevant Disposals made by RPs need only be notified to the HCA on a quarterly basis. However, 'Priority Notifications' must be made to the HCA within 3 weeks of completion of the disposal.

Priority Notifications include the following:

  • Category 1 - Out of Sector;
  • Category 3 - Last Social Housing; and
  • Category 5 - More than 5% of Stock.

RPs must notify the HCA of all other Relevant Disposals within 3 weeks of the end of each quarter. All RPs will be required to make their notifications through the NROSH+ system online.

Regulatory Expectations

The guidance notes make clear that whilst RPs are now only expected to notify the HCA rather than seek consent, the HCA still expects RPs to act within the boundaries of the Regulatory Framework. In particular where a RP is disposing of social housing, the HCA expects the following of RPs:

  • To protect social housing from undue risk;
  • To adhere to all relevant law and compliance with governing documents;
  • To be accountable to tenants and carry out consultation with tenants when considering a disposal which would mean a change in the tenant's landlord or changes that affect tenant's statutory or contractual rights; and
  • To achieve value for money in how social housing is used.

The disposal of the HCA consents regime will result in RPs having to satisfy themselves that they are meeting all the necessary regulatory requirements. However, in some circumstances, the HCA may seek further information regarding a disposal upon receiving notification. This may include a further explanation and evidence about a particular disposal or type of disposal and its impact on the RPs compliance with either the economic or consumer standards.

Charity Law Considerations

Non-exempt charitable RPs are regulated by both the Charity Commission and the HCA. Therefore, they are required to consider the provisions of the Charities Act 2011 ('CA 2011') prior to making a disposal of land, in addition to complying with the regulatory provisions set by the HCA.

The removal of the HCA consents regime will mean that non-exempt charitable RPs will no long be able to waive the requirement to seek an order from the Charity Commission on the basis that HCA consent has already been obtained.

Section 117 of the CA 2011 prohibits any disposal of land owned by a non-exempt charity without an order made by the Charity Commission or the court unless the charity can comply with a number of requirements set out in s.119 or s.120 of the CA 2011.

Broadly speaking prior to making a disposal of land (except for leases for a term of 7 years or less), non-exempt charities will be required to obtain a written report from a qualified surveyor acting exclusively for the charity and to advertise the land in accordance with the recommendations made by the surveyor. The charity trustees must then decide that the terms of the disposal of land are the best that can reasonably be obtained. This must all be completed before the contract for disposal is entered into.

Conclusion

The removal of the consents regime will clearly reduce the regulation of the social housing sector. However non-exempt charitable RPs will remain subject to regulation by the Charity Commission which contains its own disposal consent requirements. In addition, the HCA will continue to actively regulate RPs in respect of the Governance and Financial Viability and Value for Money Standards.

Therefore, RPs will want to review their processes and policies for dealing with disposals carefully and retain records to demonstrate that good governance procedure has been followed in making the disposal in order to show that the outcomes achieved represent good governance and demonstrate continued ability to meet the Governance and Financial Viability and Value for Money Standards.

For more information, please contact a member of the Housing & Regeneration (Property) team on 01772 220022.

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