quarterly housingupdate - trowers & hamlins · foreword 1...

Quarterly Housing Update

Spring 2011

T&H QHU spring 11:Layout 1 5/4/11 09:13

ContentsForeword 1

The Affordable Rent Regime – Impact on registered provider funding 2

Charity update for housing providers 4

The updated Code for Sustainable Homes –are we any closer to "zero carbon"? 6

When repossession looms, protect your stock! 7

Registered providers – what they really think of the Green Deal? 8

Agency Workers Regulations 10

Flood insurance 11

The Welfare Reform Bill 12

FOIA and EIR update for Registered Providers 14

Pensions implications of the removal of the default retirement age 15

Community Infrastructure Levy – social housing relief 16

LVT dispensation 18

News and forthcoming events 20


concrete about introducing the VAT sharedservices exemption.

In December 2010 the Department for Work& Pensions began an informal consultationon how to simplify the employer debt regimefor defined benefit pension schemes such asthe Social Housing Pension Scheme. Thelatest proposals would allow groupguarantees to play a part in alleviating theimpact of an employer debt. This soundshelpful and if these proposals become law itcould make group re-organisations muchsimpler from a pensions perspective.

Consultation on draft Regulations for thetransfer of ownership of private sewers to thepublic sector ended in November 2010. Wecan expect the Regulations to come intoforce in May/June 2011, meaning anyexisting private sewers and lateral drains willbe transferred overnight on 1 October 2011.Pumping stations and rising mains are stillexpected to follow in 2016.

In February 2011 consultation began on newbuild draft Regulations with a view toensuring no new private drains can becreated. The consultation also coverswhether the Water Companies will be able touse Bonds attached to existing adoptionagreements for any maintenance workneeded at the point of the statutoryhandover, and when vesting will take placefor those under-construction, so watch thisspace.

ForewordI am writing this in the last few days ofMarch. As ever, there's a frenzy of activitygoing on as people try to close deals andspend grant by the year end. This year thedeadline is particularly critical as wemove from one funding model to another.

By the time we send you the next editionmany of you will have submitted bids to HCAto develop "affordable rent" homes. Onewould hope by then that the dust will havesettled on a range of issues. RPs will haveconsidered whether they are comfortablecharging the full 80% of market rents. Theexcitement regarding charitable status willhave calmed down with RPs setting criteriafor allocating accommodation clearly aimedat those who are proper beneficiaries. Wewill know how valuers will approach thevaluation of the product. Lenders will haveclarified their approach to funding the newmodel. Local authorities will have determinedwhether they are supporters of theaffordable rent product or not. RPs will haveworked out where they can chargeaffordable rents on relets and where theymay have a contractual problem if they do so.

When you think about it that's a lot of thingsto resolve in a very short space of time. Weare all in for a busy few months. With suchsignificant change in the air it's easy to missother things. There are a few matters Iwanted to take this opportunity to mention.

The budget announced a number ofimportant consultations including those onchanging the rules relating to REITs and onfeed in tariffs and renewable heat incentiveschemes. Disappointingly there was nothing

Spring 2011Quarterly Housing Update

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Ian GrahamPartner and Head of Housing Projectst +44 (0)20 7423 8284e [email protected]


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The AffordableRent Regime –impact onregisteredprovider fundingLast October's Comprehensive SpendingReview proposed radical changes to theway in which affordable rented housing isprovided. The Homes and CommunitiesAgency (HCA) published its 2011-15Affordable Homes Programme"Framework document" on 21 February2011, which sets out how the new rentregime and the new delivery model willwork.

If a Registered Provider (RP) is successful inapplying to the HCA for funding under thenew delivery model, the rent it can chargecan be up to 80% of the current market rentfor the property. This increased flexibility willapply to new units and relets. The idea isthat the income generated from the increasein rent will be used to cross-subsidisedevelopment, as grant levels will be lower.

The implications for RPs pursuing the newmodel are far-reaching from a fundingperspective. RPs should examine theirexisting funding agreements in detail beforesubmitting a bid to HCA for a grant underthe new regime. The two key elements toconsider in this context are compliance andconsent. RPs should check whether applyingthe new affordable rent product to theirrelets and new properties may cause themto breach any terms of their loanagreements. They should also consider is

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whether they need to seek consent fromtheir funders in order to proceed with thenew regime.


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Spring 2011

Anna ClarkPartner, Banking and Financet +44 (0)20 7423 8130e [email protected]

granting a tenant a new tenancy agreement,which is likely to be an assured shortholdtenancy with a term longer than two years.Most loan agreements define "PermittedTenancy" (or something similar). RPs shouldcheck that the new form of tenancy fallswithin that definition and if it does not, anamendment to the definition will be required.If the new tenancy falls outside the definitionand no amendment is made, the RP will berequired to seek consent from the lender togrant the new tenancy. The lender may haveabsolute discretion to refuse consent, so it isimportant that this issue is resolved inadvance of implementing affordable rent forrelets (so, in practical terms, before a bid issubmitted to the HCA).

An RP should also consider whether anyproperties let on affordable rents in thefuture will be acceptable to a funder assecurity for new loans. As more reletsconvert, leaving fewer units let under thecurrent social rent regime, this might causeproblems for RPs seeking to borrow money.It is foreseeable that a funder may, at thevery least, wish to restrict the number ofunits let on affordable rents, in the same wayas funders often restrict the number ofshared ownership units that can be used assecurity. It is clear already from conversationswith lenders that they view the new productas "higher risk"; higher rents can meanincreases in arrears and voids (particularlyin light of the proposed housing benefit capunder the new Universal Credit). Thisimpacts on the RP's core business as awhole.

The current valuation bases which areapplied to social housing stock are either"existing use as social housing" or "market

value subject to tenancies". Neither of theseis entirely appropriate when valuing stockWe are in discussions with valuers toestablish what the precise requirements willbe when valuing affordable rented stock.We understand that the valuation basis islikely to remain EUV – SH but with differentassumptions attached.

Compliance with existing gearing covenantsmay be an issue for some RPs. Thefundamental principle behind the new HCAproduct is development with less grant andmore funding from a RP's own resources(including the additional rent generated fromapplying the new Affordable Rent levels).RPs should be mindful of this exposure andtalk to their lenders to ensure that action canbe taken to avoid a breach.

What if a RP decides not to apply to the HCAfor a grant under the new regime? If this isseen as ceasing to being a developingorganisation, could this be viewed by afunder as a cessation of a material part of itsbusiness triggering a default? Could thisalso be interpreted as the RP losing itsentitlement to public sector grant, whichwould also trigger a default? Although bothof these scenarios seem a little drastic,social housing funders are under pressure inthe current economic climate to recoupongoing losses brought about by historic lowmargins. Any opportunities to reprice loansare currently being pounced on by funders.RPs should proceed with caution and seekadvice before submitting bids this spring.


Relets at the new rent level will mean

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Charity updatefor housingprovidersThe majority of RPs are charities, and eventhose which are exempt from registrationwith the Charity Commission must complywith charity law. The following issuessurface regularly in this context.

Affordable rentsThe HCA funding proposals in connectionwith affordable rents are perhaps the hottestissue for charitable RPs right now. What arethe key issues?

When letting properties at 80% of market rent,providers must make sure that prospectivetenants are proper beneficiaries. This usuallycomes down to whether or not they are "poor",legally speaking, and whether the housingoffered meets their needs. Most providersshould be familiar with these tests in thecontext of Low Cost Home Ownership (LCHO).Is the prospective tenant (or household)unable to obtain suitable accommodation,either by renting or buying, on the openmarket? What are the household income andsavings levels, and what are the housing costsin the area? Is the housing affordable andsuitable? Where market rents are particularlyhigh, 80% of those rents may be so high as tomake it a challenge to satisfy these tests.

Until now, charitable RPs have had littlechoice but to grant long-term security oftenure. Under the affordable rent regime,tenancies can be granted for a fixed term.This means that where tenants' financialsituations improve, charitable landlords mayhave to recover possession, or raise rents,

when the term expires. It will also be hard tojustify offering a tenancy period significantlylonger than the minimum.

N.B. Apart from charity law issues, otherconstraints can interfere with offeringaffordable rents, including nominations,LSVT, grant funding, lending and section 106agreements.

Innovative delivery methodsWith grant and debt finance increasinglydifficult (and costly) to access, charitableRPs are looking at more innovative schemes,and relying on more non-charitabledevelopment to cross-subsidise. Care needsto be taken to minimise the risk of challenge.Development teams may not be clear aboutthe charity law requirements, or may bepreoccupied with other issues. It is importantthat officers take advice on a scheme byscheme basis and make sure that the boardis fully appraised of the risks.

Charity Commission guidance on investmentThe word "investment" can be used to describea charity's main activity (as in "investment insocial housing"), but what lawyers mean by"investment" is the application of free reservesto generate a return for the charity. TheCharity Commission is currently consideringrevisions to its guidance on investment inthis legal sense. The proposed changes arehelpful in some ways, but could blur thedistinction between the two meanings ofinvestment. Charitable RPs should keep aneye on these developments, and take accountof the new guidance when published.

Board pay and performanceThe performance of boards in all sectors hasbeen under scrutiny in recent months. InsideHousing recently surveyed senior executives,board members and company secretaries


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on board performance. 42% of boardmembers disagreed or strongly disagreedthat making payments to board membersimproved the performance or recruitmentand retention of the board. This should be ofconcern to charitable providers, who shouldonly pay their board members if there is anexcellent business case for doing so. Evenboards which have already implementedpayment should keep this decision underregular review to ensure that paymentactually delivers the intended benefits.

Payments and benefits (post Schedule 1)The old Housing Corporation regimeincluded a statutory prohibition on paymentsand benefits to employees and boardmembers. This has been removed, butcharitable providers must still apply charitylaw and restrict the benefits that can pass toboard members. Although it is possible todraft constitutions and policies so as topermit certain benefits, there will be areaswhich will present considerable challengesand many benefits are simply not allowed. Ifappropriate policies have not been adopted,boards may find it difficult to make importantbusiness decisions without offending thesecharity law principles.

HMRC requirementsFinance Act 2010 included a new definitionof charities for tax purposes, and inresponse HMRC has published guidance onwho is a fit and proper person to be amanager of a charity. Since HMRC hasbroad powers to interfere with tax benefits ifit feels that a charity is being mismanaged,managers (which includes but is not limitedto board members) should be asked tocomplete the HMRC model declaration thatthey are fit and proper persons. This can befound on HMRC's website.

This is a mixed bag of topics, but thecommon theme is that charity law imposessome important restrictions on whatcharitable RPs can do. In our experience,this is not always at the forefront of thinkingon important business decisions. If tax andother challenges are to be avoided, it paysto keep these rules in mind.

Emma TarranPartner, Charities and Governancet +44 (0)20 7423 8011e [email protected]


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The updatedCode forSustainableHomesIn November 2010 the Department forCommunities and Local Government(DCLG) announced its updates to thetechnical guide to the Code forSustainable Homes, which rates thestandards of sustainable design andconstruction of new build housing.

Government has set a target for all newhomes to reach "zero carbon" by 2016.The Code exceeds the sustainabilityrequirements in the Building Regulations toincrease efficiency standards and reduceenergy demand. Housing Minister, GrantShapps, hopes that the updated Code willsuit the local situation and simplify the"regulations house builders have to follow toachieve the standards that local communitiesdemand". Unfortunately, the update fallsshort of introducing a definition of "zerocarbon".

What are the main changes?The driver behind the update is to align itwith the higher carbon emission standards inthe revised Part L of the 2010 BuildingRegulations (in force from October 2010).Levels 1 to 3 of the Code will be achievedwhere the Building Regulations are compliedwith, but to attain Level 4, the property willhave to show a 25% improvement on carbonemissions compared to a property built to2010 Part L. Levels 5 (a 100% improvementon 2006 Part L) and 6 (net zero emissions)are unchanged, but these are being

considered by the Zero Carbon Hub, thetask group established by Government tohelp deliver the 2016 commitment.

Site waste management plans are now alegal requirement and so not a mandatoryelement of the Code. Voluntary credits willbe available for minimising or diverting wastefrom landfill.

For Levels 5 and 6 of the Code, the HeatLoss Parameter has been replaced with theFabric Energy Efficiency Standards, whichwere published in July and focus onreducing energy waste through the fabric ofthe home.

What was missed out?Most importantly, DCLG did not publisha definition of "zero carbon" before theupdates to the Code were introduced. As aresult, the carbon requirements for Levels 5and 6 have not been lowered. On 21February, the Zero Carbon Hub issued itsfinal recommendations to Grant Shapps,clarifying the minimum Carbon ComplianceStandards, but these apply to builtperformance and so cannot be directlycompared to the Code. We will have tocontinue to watch this space.

The consultation on the Code considered aFabric Energy Efficiency Standard for Level4, but this did not make the final cut.However, in anticipation of the BuildingRegulations matching Level 4 in 2013,guidance will be published detailing whatthe requirement will be.

Rhianna WilsherSolicitor, Projects and Constructiont +44 (0)20 7423 8108e [email protected]


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Spring 2011

When repossessionlooms, protectyour stock!Repossessed properties are easily lostfrom an RP's stock when sharedownership leaseholders default on theirmortgage repayments. Repossessinglenders can staircase to 100% and sell theproperty on the open market without firstoffering the property to the RegisteredProvider (RP).

Whilst an RP has a right to buy the propertyback or nominate a purchaser within 21years of final staircasing, it may be unable toexercise this right because of a lack of fundsor not having a nominee able to pay fullmarket value.

To avoid this, RPs should be alert to signs ofleaseholders in difficulty, e.g. failure to payrent and service charges and requests forhelp. Shared ownership leases granted after6 April 2010 allow lenders and RPs toexchange details of any arrears, making iteasier to identify where leaseholders are indifficulty.

RPs can then approach the lender to seewhether it will repossess and, if so, whetherit will accept an offer to buy back theproperty or nominate a purchaser from awaiting list to acquire the leaseholder'sshare.

When negotiating with lenders, be mindful ofthe Mortgagee Protection Clause (MPC).This enables lenders to recoup theirqualifying losses (including any negativeequity) from the RP.

Where the lease was granted before 6 April2010, lenders can only benefit from the MPCby staircasing to 100%. Where it has notmade a loss, or any loss is marginal, thelender may be willing to forgo staircasing,preferring a quick sale of the leaseholder'sshare to the RP or its nominee.

Leases granted after 6 April 2010 no longerrequire the lender to staircase to 100% tobenefit from the MPC. While this means theRP may still have to reimburse the lender inrespect of its qualifying losses, the lender maybe more receptive to selling the leaseholder'sshare back to the RP or its nominee.

Where the RP buys the property, it maydecide to grant an assured shortholdtenancy to the defaulting leaseholders tokeep them in their home. Care is neededwhen doing this to avoid automaticallycreating an assured tenancy (which canarise by virtue of the tenant being in prioroccupation) with unintended, additionalsecurity of tenure.

By proactively responding to arrears and,where the leaseholder is in difficulty, makingan offer to the lender before it staircases to100% and sells the property on the openmarket, an RP can avoid losing sharedownership properties from its stock.

Gemma FerneeTrainee Solicitort +44 (0)1392 221952e [email protected]

Graham ThreadinghamSolicitor, Housing Projectst +44 (0)1392 221938e [email protected]


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Registeredproviders – whatthey really thinkof the Green Deal?The results of a Trowers & Hamlins'survey into the effects of theGovernment's Green Deal proposals.

Homes are currently responsible forapproximately 27% of the UK's total carbonemissions and 30% of the UK's total energyconsumption. By 2050, the UK has promisedto reduce carbon dioxide emissions andgreenhouse gases by 80%. Only about 15%of the housing stock will have been builtunder the Codes for Sustainable Homes by2050, meaning retrofitting existing stock is amajor issue for all housing providers (statisticsdrawn from various Government publications).

The Green Deal is the Government's newinitiative to encourage owners and occupiersto improve the energy efficiency of theirproperties. It will create a framework toprovide finance for those improvementswithout upfront capital cost. The costs will berepaid by the consumer through energy bills.The scheme envisages a whole range ofadvisors, providers and installers to providethe full Green Deal package.

It should be of interest to everyone involvedin managing sustainable stock, but will itwork in the social rented sector? We askedsome of our clients to see how the GreenDeal was being welcomed.

Just over 50% of those surveyed think that theGreen Deal is very important for their stock

and 62% will actively pursue a role in theframework. Only 10% said that they will onlyoperate under the Green Deal if forced to.

The "golden rule" of the Green Deal is thatthe expected financial savings should beequal to or greater than the cost which isadded to the energy bill. Because socialhousing tenants have a different profile ofenergy use, 80% were not yet sure that the"golden rule" would work in the social rentedsector. The different profile was onlyconsidered a fundamental problem by lessthan 10% of those surveyed.

Tenants will be able to require their landlordsto make energy efficiency improvements totheir homes. A majority of those surveyed feltthat fewer than one third of their tenantswould take action if they did not act aslandlord. Any improvements made under theGreen Deal would need tenants' consent.Even if the "golden rule" were satisfied,nearly 60% asked felt that they shouldproceed as they would for otherprogrammes of improvement works. Thismeans that obtaining consent should not bedispensed with, regardless of the expectedfinancial savings.

We think that the Green Deal is flexible enoughto allow RPs to finance works themselvesand recover the costs through tenants'energy bills. 89% expressed an interest inallocating their own capital to finance works.Given other competing demands, however,they could not guarantee that this type offunding would be a priority, but very feworganisations surveyed are alreadybudgeting for such capital expenditure.

The Government expects organisations willwant to partner with one another to providethe full Green Deal package. Over 80% felt


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We asked about a "green" market forhousing, rather like the emerging market forgreen cars, where properties with goodsustainable energy credentials have anadvantage. 80% agreed that it was possiblein the future, but not for some time.

The responses to our Green Deal surveywere overwhelming positive. We will bekeeping an eye on the development of theGreen Deal over the months to come as itmoves through its parliamentary process.The first contracts are due to be let in 2012so watch this space.

that they were well placed to form consortia,but would need to see how proposalsdevelop before committing themselves. Only2% felt that RPs should not involvethemselves with the new proposals.

The Green Deal is designed to be passedon to future owners of a property. Themajority expect teething problems whencharging or selling a home where GreenDeal works have been carried out. Ratherlike the initial problems associated with theintroduction of HIPs and EPCs, it was feltthat these would be overcome.

RPs have recognised the need to procureenergy efficiency works. Bearing that in mindthe vast majority had procurement on theagenda, but for most of them the Green Dealwill be allowed for in future frameworks.

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Andy BarnardPartner, Housing Projectst +44 (0)20 7423 8329e [email protected]


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Agency WorkersRegulationsThe Agency Workers Regulations 2010will take effect on 1 October 2011. Theyprovide that once an agency worker hasspent a Qualifying Period (explainedbelow) working in the same role for ahirer, he/she will be entitled to the samebasic working and employmentconditions as a comparable employee ordirectly recruited worker of the hirer. Thisincludes terms on pay (including bonusand holiday pay) and working time(including night work, leave and restbreaks). An agency worker cannot claimparity in respect of pension benefits orsick, maternity, paternity, adoption orredundancy pay.

An agency worker attains the QualifyingPeriod if he/she spends twelve continuouscalendar weeks in the same role (or one notsubstantively different) for the same hirer.Even if there is a break in those twelveweeks (if due to specified reasons such asillness, pregnancy, maternity, paternity oradoption leave, jury service or if the break issimply for less than six weeks), the weeksbefore and after the break in the same rolewill count as continuous weeks. Time spenton assignments prior to 1 October 2011 willnot count towards the Qualifying Period.

This right to parity of terms will last until theagency worker is put in a substantiallydifferent role or has a certain type of breakfrom the role, such as one lasting more thansix weeks. Anti-avoidance provisions – and£5,000 compensation awards per employeein respect of whom there is a breach – aredesigned to deter hirers from moving

workers around to avoid the Regulations'requirements. Agency workers are exemptfrom the pay equality provisions if they areemployees of the agency and are paid bythe agency during periods where there is nowork.

If agency workers are not given the samebasic working and employment conditionsthey can claim against either the hirer and/orthe employment agency. A tribunal willallocate any compensation awardedbetween the respondents, depending ontheir responsibility for the breach. Hirersshould ensure that they accurately pass oninformation to the employment agencies theywork with to help ensure that agencyworkers receive the benefits and pay theyare entitled to.

Hirers should consider requiring agencies toemploy agency workers, so that they fallwithin exemption on pay equality. This maysave hirers who have many long termagency workers, a significant amount.

To limit legal challenges, contracts withagencies should be revisited to ensure thehirer is properly indemnified for claimsarising from acts or omissions of the agencyand to ensure that Data Protection Act andconfidentiality issues are tied up.

Emma BurrowsPartner, Employmentt +44 (0)20 7423 8347e [email protected]


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Spring 2011

Flood insuranceRiver View, Bankside Walk, AdmiralQuay,…… Places associated with waterare often seen as idyllic but with climatechange, cuts to the flood defence budgetand the approach of 2013, should you beconsidering flood risk more seriously?

Last year's floods in Cumbria cost theinsurance industry £174 million in propertyclaims. This follows the floods of 2007 wherethe cost of damage is estimated at £3 billion.The Comprehensive Spending Review lastOctober reduced the budget for flooddefences to a level which is considered toolow by many. The Environment Agency (EA)estimates that one in six homes in Englandand Wales is at risk of flooding from rivers,the sea or from ground or surface water.

Insuring against the risk of flooding is astandard part of British property insurancebut could this change?

Flood insurance is currently protected by anagreement made between the Association ofBritish Insurers (ABI) and the Government.The ABI promised to continue to providecover for existing customers, provided thatthe Government continued to improve flooddefences. Properties built after January 2009are not covered by this agreement because(in theory, at least) they have been built inaccordance with the ABI's guidelines whichrefers to Planning Policy Statement 25 (PPS25). The agreement ends in June 2013 andthe ABI has indicated that it may not berenewed.

Without a renewal of that commitment toprovide cover, flood insurance in the futurecould be affected in several ways.

Premiums may go up. The ABI has revealedthat the insurance of the majority ofproperties is under-priced, with those not atrisk subsidising those whose property is atrisk of flooding.

Policy excesses may be higher. In reportedcases, excesses for properties which havealready flooded have gone up dramatically.

The availability of insurance may decrease.Difficulties in obtaining insurance couldaffect the value of and the ability to raisefinance on the property.

To ensure that this does not happen, theGovernment says that it is committed toimproving flood risk management. Privatesewers and drains are to be transferred tostatutory sewerage and water companieswhich is hoped may help to reduce surfacewater flooding. PPS 25 sets out planningpolicy on development and flood risk. TheEA also publishes guidance.

Buyers and developers need to be aware ofthe flood risks to any site as early aspossible. The investigation on title shouldinclude flood searches to assess the risk ofriver, coastal, ground and surface waterflooding. Otherwise, your idyll could turn intoa nightmare.

Kirstin HalliwellProfessional Support Lawyert +44 (0)20 7423 8281e [email protected]


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The WelfareReform BillThe Welfare Reform Bill provides forradical changes to the existing welfarebenefits system and, if enacted in itscurrent form, will allow the Government toimplement most of the benefit reformsannounced in the Emergency Budget lastJune.

The Bill provides for the following changes:

� The introduction of Universal Credit, acombined benefit administered via asingle application point, which will replacemany existing working-age benefits,including Housing Benefit (HB) and theincome-based elements of JobseekersAllowance and Employment and SupportAllowance (ESA).

� A new national cap on the total benefitspayable to each household. Indicationsare that the cap will be set at £26,000,which the Government says reflects theaverage net income of a working family.The wording of the Bill allows forexceptions to the cap, but it is not yetclear how these powers will be used andwho may benefit.

� Restrictions to benefit entitlement forsocial tenants of working age who areliving in properties larger than theirhousehold requires.

� A national cap on the weekly benefitpayable to private tenants to coverhousing costs. The Government intends toset the cap at £400 for properties with 4or more bedrooms, with a sliding scale oflower limits for smaller properties. Subjectto this national cap, plans to reduce local

local housing allowance limits will also beimplemented, and are likely to restrictseverely the number of private propertiesavailable to those reliant on benefits tomeet housing costs.

� The up-rating of benefits based on theConsumer Price Index rather than thehigher Retail Price Index.

� A new system of "work-relatedrequirements" for job seekers and certainESA claimants. This will include toughsanctions, including powers to cutclaimants' benefit for between 6 monthsand 3 years if they fail to prepare for orsearch for work, or if they cease paidwork or lose pay voluntarily or throughmisconduct.

� Discretionary Housing Payments will bereplaced by Hardship Payments, whichclaimants whose benefit has beenreduced due to sanctions, and thoseotherwise considered to be "in hardship",will be eligible to receive.

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� Disability Living Allowance (DLA) will bereplaced by the "Personal IndependencePayment", which will be calculated onsimilar lines to DLA, though paymentsdesigned to assist with mobility may bewithheld in certain circumstances.

� The DWP have also indicated that theyintend to use powers in the Bill to publishnew regulations on direct payments tosocial landlords, but that these are onlylikely to permit direct payments inexceptional circumstances

Plans to cut HB by 10% for claimantsseeking work for over a year have beenscrapped amidst concerns that theproposed blanket cuts would not takeaccount of how hard a claimant was trying tofind work, nor of the number of jobs availablein their area.

Implications for Registered Providers(RPs)The Government's decision not to imposethe proposed 10% cut in HB for long-termjob seekers is good news for claimants andRPs, given that unemployed tenants mayhave struggled to make up shortfalls in rent.

The introduction of a single, centrallyadministered working age benefit, togetherwith new information sharing powers, arecentral to the Government's plans to reducefraud and error, and should make it easier forclaimants and landlords to keep track ofclaims. This may reduce the risk of underand over-payments occurring, which will alsobe good news for RPs collecting rent.

The Government's promise to increasefunding for Hardship Payments (HPs) hasalso been welcomed by RPs, though it isquestionable how much additional funding

the payments will actually provide, given thatthe Bill suggests that HPs may be used tocounter the effects of benefit cuts imposeddue to work-related sanctions.

Pilot projects have indicated that arrears willincrease dramatically if benefits are paiddirectly to claimants rather than landlords.Lenders have suggested that, if rentalincome drops, RPs may need to makeadditional capital payments or revisebusiness plans in order to retain existingloans.

A DWP impact assessment suggests thatalmost a third of social tenants will see areduction in their benefits due to size-relatedrestrictions, with obvious implications forRPs' arrears levels. The proposedrestrictions will particularly affect RPs with alarge number of older tenants, many ofwhom may be living in larger propertiesfollowing the death of a partner or childrenmoving out.

Uprating benefits according to CPI, whichdoes not take account of housing costs, mayincrease the risk of rent shortfalls occurring,particularly in expensive areas or where RPschoose to grant affordable tenancies at 80%of market rent.

If the Government is to deliver on its promiseto "make work pay", it seems that proposedsanctions will need to be backed up byenabling measures. Inevitably, the devil willbe in the detail.

Jo TillSolicitor, Housing Projectst +44 (0)20 7423 8082e [email protected]


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FOIA and EIRupdate forRegisteredProvidersRegistered Providers (RPs) are notcurrently "public authorities" subject tothe Freedom of Information Act (FOIA).This is despite plans announced by TheMinistry of Justice (MoJ) in January 2011to extend the scope of the FOIA and theDeputy Prime Minister's view that privateorganisations performing functions of apublic nature should be covered.

The three new bodies currently proposed tobe added are the Association of Chief PoliceOfficers, UCAS and the Financial OmbudsmanService. In addition, the MoJ is to consult onadding a further tranche of bodies includingthe Local Government Association, the NHSConfederation, the British Standards Instituteand the Panel of Takeover and Mergers butinterestingly not RPs. The position of RPsunder the Environmental InformationRegulations (EIR) is not so clear. The EIRimpose a duty on public bodies to makeenvironmental information available onrequest. The EIR came into force at thesame time as the FOIA in January 2005.

The definition of a ‘public authority’ in the EIRis wider than in the FOIA. It extends to:

� any body that carries out functions ofpublic administration; or

� any body which is under the control of agovernment department; or

� any other public authority as defined inthe FOIA; or

� a body which carries out functions of publicadministration, and which has publicresponsibilities relating to the environment,exercises functions of a public naturerelating to the environment or providespublic services relating to the environment.

In Decision Notices issued in October 2008,two Northern Irish housing associations,Welsley Housing Association Ltd and BelfastImproved Housing Association, were foundto be subject to the EIR.

In a recent ruling, the InformationCommissioner (ICO) confirmed that NetworkHousing Group (Network) was not a publicauthority under the EIR. The ICO reviewedthe function of Network in relation to a 2010request for documents relating to the grant-funded purchase and development of localauthority properties.

The ICO found that Network provided socialhousing and is the parent company of agroup of Industrial & Provident Societies andprivate companies formed for the benefit ofthe community. In relation to the 2010request, it did not meet the extendeddefinition of a public authority set out in theEIR. The ICO accepted the distinctionbetween Network and the Northern Irishhousing associations.

Each RP should be aware that it could beconsidered a public authority for thepurposes of the EIR if it satisfies thedefinition of a public authority set out in theRegulations in relation to a request.

Lynn AglionbyPartner, Dispute Resolution andLitigationt +44 (0)20 7423 8546e [email protected]


Spring 2011

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Pensionsimplications ofthe removal ofthe defaultretirement ageIn a significant change this year, theGovernment is phasing out the "DefaultRetirement Age" (DRA). This articleexamines the pension implications of theabolition of the DRA.

Up until now, provided they followed thecorrect procedure in considering any requeststo work beyond age 65, employers couldcompulsorily retire an employee at the age of65 without facing the risk of a claim from theemployee for age discrimination or unfairdismissal. The corollary of this was thatceasing to make pension contributions, orceasing pensionable accrual in anoccupational pension scheme at 65 in thecontext of an employee retirement, was notage discriminatory.

From 1 October 2011 it will no longer bepossible compulsorily to retire an employeeusing the DRA. Employers who wish to retaina DRA of, say 65, will still be able to do so,provided the DRA can be "objectivelyjustified" within the context of their particularorganisation. In the light of this, if anemployer no longer operates a DRA withinthe workforce and makes pension provisionfor its workforce, the employer may need tocontinue to make pension provision for thoseemployees aged over 65 (i.e. those employeeswhom they would have previously retired) or"objectively justify" why it does not makepension provision for older workers (although

there is an exception for the provision ofinsured benefits such as life assurance). Ifan employer simply ignores the issue, anemployee aged 66 could argue that theyhave been less favourably treated on thegrounds of their age with respect to pensionprovision as compared to an employee aged55. Occupational defined benefit (or "finalsalary") pension schemes may requirescheme rule amendment as manyoccupational pension schemes are framedaround a notion that benefit accrual ceasesat 65. Provided scheme members have thechoice either to remain in employment andcontinue to accrue benefits, remain inemployment whilst drawing a pension(flexible retirement) or retire at the scheme's"normal pension age", any discriminationclaims risk within the pensions context,ought to be minimised. The LocalGovernment Pension Scheme and the SocialHousing Pension Scheme include flexibleretirement provisions so no action is requiredin respect of pension provision through thoseschemes. Employers that contribute toemployees' personal pension schemes mayneed to continue to contribute beyond age65. Continued pension provision for olderemployees will have cost implications foremployers. Employers may wish to considerwhether they can "objectively justify" thediscontinuation of pension provision for olderemployees. Employers will need to be awarethat costs alone are seldom sufficient to meetthe "objective justification" test. Legal advicewill be necessary for those employers seekingto rely on an objective justification defencefor the discontinuation of pension benefits.

Tharusha RajapakseSolicitor, Tax, Trusts and Pensionst +44 (0)20 7423 8341e [email protected]


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CommunityInfrastructureLevy – socialhousing reliefCommunity Infrastructure Levy (CIL) is aLocal Authority (LA) tax on the carryingout of a "development" in England andWales.

One of the available reliefs from CIL is socialhousing relief. This relief applies to adevelopment insofar as it "comprises or is tocomprise qualifying dwellings". A "qualifyingdwelling" is a dwelling (i.e. a building or partof a building occupied or intended to beoccupied as a separate dwelling) which islet by a private registered provider of socialhousing, a registered social landlord or alocal housing authority on specified terms, orby a wider class of landlords on prescribedshared ownership arrangements.

Lettings on specified termsThese terms are:

� assured tenancy under Part I Housing Act1988 (excluding an assured shortholdtenancy under Part I Housing Act 1988);

� assured agricultural occupancy underPart 1 Housing Act 1988;

� an arrangement which would be anassured tenancy or an assuredagricultural occupancy but for paragraph(12)(1)(h) or 12ZA of Schedule 1 HousingAct 1988;

� demoted tenancy under Section 20BHousing Act 1988 or Section 143AHousing Act 1996;

� introductory tenancy under Chapter I Part5 Housing Act 1996;

� secure tenancy under Part 4 Housing Act1985;

� an arrangement which would be a securetenancy but for paragraph 4ZA or 12 ofSchedule 1 Housing Act 1985;

� intermediate rent basis (i.e. an assuredshorthold tenancy where the rent is notmore than 80% of the market rent).

Shared ownership arrangementsThe arrangements must be that:

� the dwelling must be occupied inaccordance with shared ownershiparrangements within the meaning ofSection 70(4) Housing and RegenerationAct 2008;

� the initial tranche sold for a premium mustnot exceed 75% of the market value whenthe lease is granted;

� the annual rent when the lease is grantedmust not be more than 3% of the value ofthe unsold interest (i.e. the freehold orleasehold interest owned by the personproviding the dwelling); and

� in any given year, the annual rent must notincrease by more than the retail pricesindex plus 0.5% for the year to Septemberimmediately preceding the anniversary ofthe date the lease was granted.

Amount of social housing reliefIn broad terms, the relief is calculated byreference to a number of factors, including:

� the gross internal area and the net area ofthe qualifying dwellings within thedevelopment;

� the gross internal areas of all buildings


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which, on the day planning permissionfirst permits the development, are on therelevant land, in lawful use ("use" has aspecific meaning in this context) and areto be demolished before completion of thechargeable development; and

� the gross internal area of the chargeabledevelopment.

Claiming social housing reliefSocial housing relief must be claimed in aprescribed form (or substantially in thatform). It must include a relief assessmentand evidence of qualification. The personclaiming the relief must assume liability topay CIL and be an owner of the relevantland. The development must not becommenced before the LA's decision isnotified, otherwise the relief lapses. Acommencement notice must be submittedbefore the development commences. Therelief lapses if the claimant's assumption ofliability for CIL is withdrawn or otherwiseceases to have effect or is transferred toanother person.

Disposal before occupationWhere social housing relief has beengranted and an owner of the relevant landmakes a "material disposal" (a transfer of a

legal estate or the grant of lease of morethan seven years) of the relevant land beforethe dwellings are "made available foroccupation", the purchaser is eligible for aqualifying amount of social housing relief. Itis calculated, in broad terms, by reference tothe gross internal area of what is acquiredby the purchaser comprising qualifyingdwellings. The owner making the disposalwill be able to claim the balance of the relief.

Withdrawal of social housing reliefSocial housing relief is withdrawn if, withinseven years from commencement ofdevelopment there is "any change in relationto a qualifying dwelling". However, a materialdisposal has no effect if:

� the sale proceeds are "spent on aqualifying dwelling";

� the sale proceeds are transferred to theSecretary of State, Welsh Ministers, alocal housing authority or the Homes andCommunities Agency;

� there is a disposal to Welsh Ministersunder paragraphs 15 or 27 of Schedule 1Housing Act 1996; or

� there is a disposal to the Regulator ofSocial Housing under Section 167 or 253Housing and Regeneration Act 2008.

istockphoto

Neil CohenPartner, Taxt +44 (0)20 7423 8213e [email protected]

Chad SuttonSolicitor, Commercial Propertyt +44 (0)20 7423 8283e [email protected]



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LVT dispensationThe Court of Appeal has added to theincreasing number of cases refusingdispensation to landlords in respect ofthe statutory obligations to consult withtheir tenants prior to works being carriedout to residential property.

In Daejan Investments Ltd v Benson, thelandlord, Daejan, identified that major workswere required to the property. It wasanticipated that the cost of the works, to bemet by the tenants, would exceed £400,000.However, due to technical defects in theconsultation process carried out, servicecharge recovery was capped at the statutorylevel of £250 for each of the five tenants. Thestatutory consultation procedure is set out inthe Service Charges (ConsultationRequirements) (England) Regulations 2003and consists of three stages requiring thelandlord to give information, inviteobservations and take those observationsinto account. One of the aims of theRegulations is to strengthen the position oflong-leaseholders, who might encounterpoor management and high servicecharges, by providing for a degree oftransparency and accountability when alandlord decides to undertake qualifyingworks or enter into a qualifying long termagreement. Although it is possible for alandlord to obtain dispensation (eitherprospectively or retrospectively) fromcomplying with the consultation procedures,dispensation will only be granted in limitedcircumstances, for example, if the tenantshave suffered no significant prejudice.

In Daejan, the landlord served a Stage 1Notice of Intention in accordance with theRegulations and proceeded to obtain fourpriced tenders for the works. It provided thetenants with a copy of only one of thesetenders (from Mitre) but the tenants pressedfor an opportunity to inspect all of the pricedtenders. Daejan subsequently purported toserve a Stage 2 Notice but did not providecopies of the remaining tenders until after ithad (apparently inaccurately) informed thetenants that the contract had been awardedto Mitre, which the Court held effectivelycurtailed the statutory consultation period. Itwas held that this failure to comply with theRegulations, in particular, the curtailment ofthe consultation process, had causedsignificant prejudice to the tenants becausethey had been denied the opportunity tomake further representations and have themconsidered by the landlord. Accordingly,dispensation was refused.

Significant prejudice was found despite thefact that not one of the tenants was able toidentify the comments he would have madehad he seen the other estimates earlier.Furthermore, it did not assist Daejan that ithad carried out "extra-statutory" consultationin appointing, as contract administrator, asurveyor originally engaged by the tenants toadvise them.

Daejan argued that it was not proportionatein all the circumstances for Daejan to bedenied dispensation as it would be obligedto bear all but £1,250 of the cost of theworks. The Court of Appeal said the financialeffect of the grant or refusal of dispensationwas irrelevant and dismissed the appeal.


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This severity contrasts with another recentcase heard, on appeal by the UpperTribunal. In Staunton v Taylor, the residentsof a square created an informal sub-committee to deal with the commissioning ofdrainage works.

One of the long leaseholders refused to pay£1,200 as his share. It was a service charge,he said, and the landlord had not givenaddress details in accordance with s.47 ofthe Landlord and Tenant Act 1987, andfurther had not complied with theconsultation requirements in the residentialservice charge code of the Landlord andTenant Act 1985.

However, on the facts, the Upper Tribunalheld that the Landlord had indeed consultedintensively with the tenants, even though theconsultation did not comply with thestatutory provisions. They had suffered nodetriment, and so it was reasonable to grantretrospective dispensation to dispense withstrict compliance.

The two cases illustrate how difficult it canbe to predict likely outcomes at LeaseholdValuation Tribunals. It shows once again howlandlords must do their utmost to complywith the section 20 procedure, for fear offacing an unsympathetic tribunal, who willhave no interest in the financial detrimentsuffered. Retrospective dispensation is rarelysomething that LVTs will award.

istockphoto

Michael DonnellanPartner, Dispute Resolution andLitigationt +44 (0)20 7423 8578e [email protected]


News andforthcomingeventsNew partnersWe are delighted to announce that on 1 April2011 we welcomed six new partners to thePartnership. The new partners are asfollows:

Sharron WebsterPublic Sector – Communities andGovernance

Yvette BryanCommercial Property

Karen LilleymanDispute Resolution and Litigation

Katie DyerHousing Projects

Naomi RoperBanking and Finance

Merissa MartinezDispute Resolution and Litigation

Exhibitions and conferences

� CIH annual Housing Conference andExhibition21 – 23 June 2011, Harrogate

Trowers & Hamlins will once again beattending the CIH annual exhibition andconference. This year we will besponsoring the Housing Finance ThinkTank. The Think Tank will showcase arange of different ideas about the future ofhousing finance for Councils and RPs.

� National Housing Federation's Housing,Care and Support Conference andExhibition 20117 – 8 July 2011, University of Warwick

We will once again be attending theannual NHF Care and Support conferenceand exhibition.

Quarterly Housing Update Spring 2011

20

Emily AdlingtonCommunications Officert +44 (0)20 7423 8439e [email protected]


L O N D O N M A N C H E S T E R E X E T E R A B U D H A B I B A H R A I N C A I R O D U B A I O M A N S A U D I A R A B I A

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© Trowers & Hamlins LLP 2011

Produced by Trowers & Hamlins LLP, Sceptre Court, 40 Tower Hill, London EC3N 4DX.

Front cover image: istockphoto

Trowers & Hamlins LLP is a limited liability partnership registered in England and Wales with registered number OC337852 whoseregistered office is at Sceptre Court, 40 Tower Hill, London, EC3N 4DX. Trowers & Hamlins LLP is regulated by the SolicitorsRegulation Authority. The word "partner" is used to refer to a member of Trowers & Hamlins LLP or an employee or consultant withequivalent standing and qualifications or an individual with equivalent status in one of Trowers & Hamlins LLP’s affiliatedundertakings. A list of the members of Trowers & Hamlins LLP together with those non-members who are designated as partners isopen to inspection at the registered office.

Trowers & Hamlins LLP has taken all reasonable precautions to ensure that information contained in this document is accurate, butstresses that the content is not intended to be legally comprehensive. Trowers & Hamlins LLP recommends that no action be taken onmatters covered in this document without taking full legal advice. Trowers & Hamlins LLP holds the copyright for Trowers & Hamlins’Quarterly Housing Update which is sent to you on the basis that it should not be used or reproduced in any material or othermedium produced by you or passed to any third parties without the prior consent of Trowers & Hamlins LLP.

Contact:

London

Ian GrahamSceptre Court40 Tower HillLondon EC3N 4DX

t +44 (0)20 7423 8000f +44 (0)20 7423 8001e [email protected]

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Mike GaskellHeron HouseAlbert SquareManchester M2 5HD

t +44 (0)161 211 0000f +44 (0)161 211 0001e [email protected]

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For further information, please contact us at any of our officesor visit our website at www.trowers.com


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