Following on from Part 1 of our ‘Private Investment in Social Housing’ series, Krissun Soodin, a Partner in the Real Estate & Projects team at Devonshires, discusses some more key features of a transaction where a Housing Association (“HA”) is considering the sale of land from its development pipeline. The focus of Part 2 is on third parties and stakeholders who need to be engaged in such transactions.
- It’s good to talk – if the units are already occupied at the time of sale, the Housing Association (“HA”) will need to comply with the requirements of the Regulator of Social Housing on resident consultation with particular relevance to the Tenant Involvement and Empowerment Standard. The HA’s Board should retain oversight of the consultation process to ensure that they have correctly discharged their regulatory duties.
- Don’t take it for Granted – if any of the units were acquired using grant funding (whether from the Greater London Authority (“GLA”), or Homes England), it is important that the HA engages with the grant funders early to ascertain their requirements, and make sure the contract contains any necessary conditions for the transfer of grant funding to the buyer.
- Please release me – if the HA has charged the units, or if the units are subject to any other restrictions which requires a third-party consent (such as the consent of the beneficiary of an overage), the HA should engage with the lender/beneficiary to ensure their terms can be met before committing to sell the units to the buyer.
- It’s CIL, silly – if the schemes are being delivered as 100% affordable, in light of the recent case of Stonewater (2) Ltd v Wealden DC, it is important that the parties establish whether social housing relief for CIL will be available for all the units, or only those units which the relevant planning permission and/or section 106 agreement require to be used as affordable housing.
- MPC is MVP – a well drafted mortgagee protection clause (“MPC”) in a section 106 agreement will allow the buyer to achieve the best possible funding valuation when charging against the units. It is important that these are reviewed at an early stage and the local authority engaged in respect of any variation that may be required.
- Best laid plans – the buyer will carry out planning due diligence and will primarily want to establish that the planning permission is suitable for its proposed use of the site and all conditions have been discharged (or are capable of being discharged) to permit occupation. The buyer is likely to be mindful of recent changes in planning law, such as the recent Supreme Court judgement in Hillside Parks Ltd v Snowdonia National Park Authority [2022] which could be material if overlapping planning permissions have been granted on larger complex development sites.
- Nitrates and phosphate and all things not nice – a number of local planning authorities are not able to grant planning permission (or to discharge existing planning conditions) where a development is likely to add harmful nitrate and phosphate nutrients to water systems without evidence that the development achieves ‘nutrient neutrality’. On a similar but separate note, it is worth keeping in mind that from the winter of 2023, the Environment Act 2021 will introduce a mandatory minimum 10% biodiversity net gain (BNG) requirement for all new developments. A well-advised buyer will want to ensure that, if the units are within an affected catchment area, the HA already have plans in place (approved by the local authority and/or Natural England) to achieve nutrient neutrality.
This is just a canter through a few key issues on a type of transaction which will likely develop further during the months ahead. It is not intended to be comprehensive, nor does it constitute legal advice. Devonshires’ long track record of delivering developments enable us to understand the context in which complex and multi-stakeholder projects operate. We can assist you to develop and deliver on your policies and offer practical, targeted advice to identify and resolve issues to progress your transaction to a rapid conclusion. Please do not hesitate to contact Krissun Soodin or another member of the Real Estate & Projects team: Jonathan Corris, Triya Maicha, Hannah Langford, or Elad Yasdi, with any queries.
Upcoming Webinar
We will be hosting a webinar on this very topic on Thursday 23 March. You can register now to secure your place.
The webinar will feature a Q&A session where we will discuss the most commonly asked questions. So we can tailor our webinar, we ask you to submit your questions and comments to us on Private Investment in Social Housing when registering.
To help keep this webinar of interest for all delegates, it would be helpful if questions can be kept as generic as possible. Whilst we will endeavour to answer and discuss a variety of questions during our webinar, please note we cannot guarantee that we will be able to respond to all of your questions.
For more information, please contact Krissun Soodin.
