Section: Audit & Regulation

New HCA Regs: No April Fools

Posted 17.02.15

With the publication of the HCA's decision statement on the consultation on the regulatory framework changes, we now know what the new regime will look will look like on the 1 April 2015. Here are the highlights:

Compliance

The requirement for RPs to certify compliance with all relevant law remains unchanged, however, non-compliance will not automatically result in a breach if the RP can prove that it has taken all reasonable steps to comply

RPs will be required to certify compliance in their accounts. This will be set out on the narrative report which accompanies the financial statements

Independence

The code of practice has been amended to reflect the HCA's requirements. Board members should exercise independence of judgement and act at all times in the best interests of RP, there should also be appropriate mechanisms in place to manage any conflicts of interest to demonstrate probity and value for money

There should be no undue influence from third parties that could reasonably be expected to lead to non-compliance with regulatory standards

Groups and Risks

Within group structures, boards should ensure they have full understanding of where liabilities exist between all entities (both registered and unregistered). This should include understanding of how a failure in one part of the group may affect other group members.

RPs in a group should ensure they have an appropriate methodology to model and communicate the impacts of risks crystallising in one entity on other entities within the group, in particular where there would be recourse to social housing assets

Assets and Liabilities Registers

Asset records should clearly identify social housing assets and where these assets are encumbered. Such records would normally include, but are not limited to, treasury arrangements, key contracts, title information and any restrictions on that title (for example planning obligations, charitable or other restrictions), valuations, stock condition and lender covenants

RPs should consider and record their liabilities in the widest context. The HCA considers the liabilities should include items which relate directly to the social housing assets and those which might have an impact on the business as a whole. This may include, but is not limited to:

Index Linked Financing

The consultation provision for index linked finance will be implemented due to increasing interest in index linked structures and the risk exposures for a sector with constraints on its income; therefore the General Consent cannot be used to secure index linked finance

On-lending

The consent of the HCA will not be required to on-lend to non-social housing subsidiaries

PRTB

The requirement that all Preserved Right to Buy (PRTB) proceeds are to go into Disposals Proceeds Funds (DPF) replaces the existing arrangements for all future transactions, however, the changes will not be applied retrospectively and will only apply to transfers completed post 31 December 2014

The Rent Standard

The standard allows for higher rents to be charged to high income social housing tenants. This is an optional provision and RPs are to make their own decisions as to introducing it

This article has been reproduced from guidance provided by Croftons Solicitors. For further information, contact Jo Savage - Tel: 0161 214 6188; Email: jo.savage@croftons.co.uk.



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Reporting on February 2015

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