The new housing administration regime for registered providers of social housing is now in force. Our latest Insight introduces the new legislation and highlights some of the key ways in which a housing administration will differ from a normal administration process.
The housing insolvency administration regime introduced by the Housing and Planning Act 2016 is now live and from 5 July 2018 extends to private registered providers of social housing that are either companies, registered societies within the meaning of the Co-operative and Community Benefit Societies Act 2014 ("registered societies") or charitable incorporated organisations within the meaning of Part 11 of the Charities Act 2011 ("CIOs").
Although a housing administration order can only be obtained by the Secretary of State or the Regulator of Social Housing (with the Secretary of State's consent) making an application to Court, the advent of the new regime has wider ramifications for secured lenders and those advising them, as well as the registered providers themselves. This is not least because the order will be in place for an initial twelve month period, as opposed to the 28 day moratorium capable of being imposed by the Regulator of Social Housing. Whilst it is intended that this extended period will allow time for an appointed insolvency professional to deal with the complex issues that might arise during the insolvency of this type of business, it represents a considerably longer hiatus for an organisation's creditors.
The new rules and regulations
The commencement of the new regime is achieved by the introduction of three pieces of legislation:
- The Housing and Planning Act 2016 (Commencement No.9 and Transitional and Saving Provisions) Regulations 2018. Most notably, these regulations commence the relevant parts of Chapter 5, part 4 of the Housing and Planning Act 2016 with effect from 5 July 2018 and enable an application to be made to Court for a housing administration order. They also impose restrictions on other insolvency procedures in relation to private registered providers of social housing and make transitional provisions in relation to existing and further moratoria;
- The Insolvency of Registered Providers of Social Housing Regulations 2018, which from 4 July 2018, amongst other things, allow for parts of the Insolvency Act 1986 to apply to registered societies and CIOs; and
- The Housing Administration (England and Wales) Rules 2018, which come into force on 5 July 2018 and set out the detailed procedures for the conduct of a housing administration in England and Wales.
Although based on a traditional corporate administration, the housing administration process has a number of significant differences. Two key differences are highlighted below:
- Applicant: An application for a housing administration order can only be made by the Secretary of State or, (with the consent of the Secretary of State) the Regulator of Social Housing. It can be made notwithstanding the existence of pending applications for administration or petitions for winding up or the appointment of an administrative receiver. Unlike a traditional corporate administration, a creditor has no capacity to make an application.
- Purpose: There is an additional objective for a housing administration. In addition to the normal administration purposes, being to firstly (i) rescue the registered provider as a going concern, or if that is not possible then (ii) to look to achieve a better result for the registered provider's creditors as a whole than would be likely if the company were wound up, or, finally to (iii) realise property in order to make a distribution to one or more secured or preferential creditors, a housing administration also aims to keep social housing in the regulated sector. Whilst the normal administration purposes take priority, the housing administrator must also work towards keeping social housing within the sector, so far as it is possible to do so. It therefore bears similarities to the objectives of an intervention by the Regulator of Social Housing, which also aims to protect the social housing assets as well as the interests of the provider's residents.
The detail of the new regime will require careful analysis, particularly by creditors of and advisers to registered providers as well as the providers themselves as there are other features of the new regime that will differ from previous regulatory regimes. For example, creditors should be aware that, unlike a normal administration, creditors have no right to approve the proposals of the administrator.
Lenders in the sector should be alert to certain restrictions on when they wish to enforce their security, funding options and terms following the making of the administration order which could give rise to new or amended priority arrangements and generally their rights while the administration is in force.
Read the original article on GowlingWLG.com
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.