D Day is coming – 6 April 2017

The HCA has this week published two explanatory documents relating to the implementation of the deregulation measures set out in the Housing and Planning Act 2016 which will come into force on 6th April 2017 (D Day).

These cover an overview of the deregulatory measures and the HCA’s approach to managing the transition towards D Day.

These are the first of a number of publications that the HCA will produce in advance of D Day.

Future publications will include the HCA’s directions and guidance on the notification regimes (which replace the current consent regimes). The HCA has indicated that these will not be published until March. We will provide further analysis on those directions and that guidance following publication.

In the meantime, these HCA publications act as a helpful reminder of a number of the key changes that will be brought into effect on D Day:-

a) Removal of the disposal consent regime – meaning that private RPs no longer need HCA permission to dispose of social dwellings or the charging of those dwellings as security for lending. This is replaced with a duty to notify the HCA of the disposal of social housing dwellings and, in the case of not for profit RPs, the disposal of any land (note this is not limited to legacy land as defined by section 77 of the Housing and Regeneration Act 2008).

b) Removal of the constitutional consents regime – so that RPs no longer need permission from the HCA to make changes to their constitution (in particular, to change their objects or to join or leave a group), or to merge, convert to a new corporate entity or restructuring, winding up or dissolution. Instead, RPs will be under a duty to notify the HCA rather than seek its consent.

c) Abolishing the disposals proceeds funds – RPs will no longer be required to credit to a Disposal Proceeds Fund receipts (and associated grant) derived from Right to Buy, Right to Acquire and Voluntary Purchase Grant sales or, in the case of For-Profit providers, receipts from other sales of land acquired from non-profit RPs. Nor will the HCA be able to stipulate how RPs should spend those receipts in future – but note the requirement to spend the proceeds in accordance with the HCA’s priorities in relation to proceeds within a RP’s DPF as at 6 April 2017 (as set out in the Capital Funding Guide from time to time); and

d) Appointment of managers and officers – from 6 April 2017, the HCA will only be able to appoint an officer of a non-profit RP where the regulator considers that an additional officer is necessary for the proper management of the RPs’ affairs. The proposals “raise the bar” slightly, so that the HCA would have to show the appointment is necessary to ensure the RPs’ affairs are managed in accordance with the legal requirements. So this falls short of removing the power of appointment entirely.

The removal of the consent regimes for disposals and restructures has given rise to the further following changes:

a) The inclusion of a new statutory duty on the HCA to determine the eligibility of any new body arising out of a restructure and the status of that entity on the HCA’s register of providers.

A restructure for these purposes covers not for profit RPs:-

(a) Converting from a company to a Registered Society (and vice versa); or

(b) Involved in an amalgamation or a transfer of engagements;

The legislation provides that until such time as the HCA has determined the eligibility and status of the new body, it will be deemed to be a RP and treated as if it were designated as a non-profit organisation.

The HCA has issued a direction setting out the registration criteria it will apply to determine the status of the new body. This provides that in order to be designated as a not for profit body on the HCA’s register, if the entity is a subsidiary, the HCA must be satisfied that it is clear on the face of its constitution that:-

(a) it is a subsidiary;

(b) who the parent is; and

(c) the parental controls are clearly identified.

If the HCA is not satisfied in this respect, the RP (assuming it remains eligible to be a RP) will be reclassified as a for-profit RP. For so long as that reclassification endures, there would be certain implications for that entity, including an ineligibility to claim the SDLT “RSL relief”.

b) The HCA has commenced a consultation on amendments to the Tenant Involvement and Empowerment Standard. The amendment is intended to strengthen the consultation requirements relating to affected tenants in the event of a disposal, restructure or any other significant change in their management arrangements.

The changes proposed impose more prescriptive provisions relating to that consultation; requiring the RP to ensure that it is fair, timely, appropriate and effective. It also requires the RP to set out any actual or potential advantages or disadvantages (including cost) to tenants over the short, medium and long term and to demonstrate to affected tenants how they have taken the results of the consultation into account in the final decision.

Assuming these changes are introduced, there will be a greater onus on RPs to carry out meaningful consultation with tenants, but, since there is no right to a vote or veto by tenants, an RP will be able to comply with this standard even in circumstances in which all affected tenants demonstrate their opposition to the proposed changes.

c) The HCA has stated in its overview of legislative changes publication that as a consequence of the removal of the consents regime for disposals, registered charities (i.e. those registered providers that are established as companies or as statutory bodies with charitable objects) will now need to comply with the provisions in part 7 of the Charities Act 2011. This is certainly arguable, given that the deregulatory measures do not extend to the revocation of the authority bestowed upon RPs under the Housing and Regeneration Act 2008 to make disposals of social housing land provided they comply with the remaining provisions within that part of the Act (which now imposes an obligation to notify as opposed to an obligation to obtain consent). That said, it is clear what the HCA’s interpretation of the legislation is and we are promised regulations dealing with changes to the Land Registry requirements for RPs which, we can only assume, will be predicated in part upon that interpretation.

As mentioned above, these are just the first in an anticipated flurry of publications relating to the deregulatory measures included in the Housing and Planning Act 2016. It is undoubtedly a busy time for the regulator.

In addition to the directions and guidance associated with the new notification duties, we also await the regulations relating to the reduction in local authority influence. Watch this space.

Read our previous article titled “Deregulation and taking charge of your future” published on September 26, 2016.

For further information, please contact Jonathan Jarvis, Andrew Cowan, Elad Yasdi or Nick Billingham.

Download the PDF version of this article.

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