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Finally, Amendment No. 108ZBD to Clause 157 concerns assistance by the regulator who can lend staff to a provider. This is to probe the employment status of the staff who are lent. For instance, could a member of staff refuse to be lent? I assume that they remain employed by the regulator and that there is no transfer of employment. Confirmation of that would also be welcome.
Baroness Andrews: I am grateful for the noble Baroness’s amendment. We should put these issues on the record. An explanation of Amendment No. 108ZBB would be helpful. During a moratorium, the registered provider’s land may be disposed of only with the regulator’s prior consent. The amendment would waive that, so the regulator would be obliged to consent in those circumstances. The amendment would exclude from that a disposal that had been agreed to but not completed when the moratorium came into effect. I assume that the noble Baroness intends to protect
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A provider who is on the verge of a moratorium is likely to be in the most serious of financial difficulties. In the final days and weeks before the moratorium is triggered, disposals may be agreed to that are not in the best long-term interests of the provider and its tenants. The moratorium provides an important breathing space at a very difficult time, and it is important that the regulator is not obliged to honour agreements to make disposals that are not in everyone’s best interests—hence that arrangement.
I think the noble Baroness’s sharp question was: when does the regulator’s disposal consent become legally binding? I understand that that happens when the regulator formally issues his consent if the consent is required because of a moratorium. The important point is that the consent can also be given before the moratorium starts or at any point during it. These arrangements do not prevent the regulator from consenting to a sensible and legitimate disposal. That consent may be given even before the moratorium has been triggered. Certain routine disposals are already exempted from this provision by virtue of Clause 149, including the most common forms of residential tenancies and sales under the right to buy and the right to acquire. We need to balance the interests of tenants, providers, creditors and so on. That is a very rare circumstance, which arose only once in the history of the Housing Corporation; so taking account of all that, the risks introduced by this amendment would be greater than the benefits.
Amendment No. 108ZBC concerns the proposals made by the regulator for the future of the provider and its homes. Clause 151 requires the regulator, when making proposals, to have regard to the interests of the provider’s creditors as a whole, and to avoid, as far as is reasonably practicable, worsening the position of unsecured creditors. These provisions specifically highlight the interests of unsecured creditors who might otherwise be overlooked. The regulator has a fundamental objective to protect the interests of tenants. As these proposals have effect only if agreed by secured creditors, the interests of secured creditors will always be considered. Without this provision, however, the interests of unsecured creditors might not be taken into account.
The noble Baroness has addressed the requirement to have regard to the interests of the tenants of the registered provider. She has read Clauses 88 and 98 correctly, and they are covered by that. They are also covered by the regulator’s objectives, which also require it to ensure that tenants have an appropriate degree of protection.
The whole purpose of the proposals set out at the beginning of the clause is to ensure that the property will be properly managed by a registered provider. That overriding purpose seeks to protect tenants by ensuring that their homes stay in the hands of a well managed registered provider.
On Amendment No. 108ZBD and the powers to assist a registered provider, the noble Baroness is quite right. Among other things, Clause 157 allows the
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and is about the employment status. However, the provision does not affect the employment status of any staff of the regulator. They would continue to be employed by the regulator, and any obligation on them to carry out this work would be no more or less than their obligation to move to alternative duties within the regulator’s office.
Baroness Hamwee: I am grateful for all that, and am happy with the responses to the second and third amendments. I am less happy with the points made about the first and about the effect of a binding agreement being in place to sell a property to a third party. The Minister sought to reassure me by talking about the transaction being delayed. As I understand it, however, the transaction could in effect be avoided; if consent was not given, the transaction could not go ahead. I take the Minister’s points, but there is a lot to be said for this being on all fours with liquidation, and possibly administration, in the commercial sector.
I am concerned by the prospect of an “innocent” third party being adversely affected by something completely outside his control. In the world of real property, the agreement and the competition of the agreement are two separate points in the process, although they sometimes come close together. It is no small thing for that well established position to be dealt with differently in this circumstance. Perhaps I might talk to the Minister about this after Committee. She nods; I am grateful.
On Question, amendment agreed to.
Clause 144, as amended, agreed to.
Baroness Andrews moved Amendment No. 108ZB:
On Question, amendment agreed to.
Clause 145, as amended, agreed to.
Clause 147 [Further moratorium]:
[Amendment No. 108ZBA not moved.]
Clause 148 [Effect of moratorium]:
[Amendment No. 108ZBB not moved.]
Clauses 149 and 150 agreed to.
[Amendment No. 108ZBC not moved.]
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Clause 157 [Assistance by regulator]:
[Amendment No. 108ZBD not moved.]
6.45 pm
Clause 165 [Winding up petition by regulator]:
Baroness Hamwee moved Amendment No. 108ZBE:
The noble Baroness said: Amendment No. 108ZBE probes the term “properly” in Clause 165, which relates to a winding-up petition by the regulator. One of the grounds is because the,
When I read that, I wondered why it did not simply state that the “provider is failing to carry out its objects”. I wondered where on the spectrum between failing just a little bit and failing substantially, materially or other words of that sort properly falls. It may be somewhere in the middle. As we are talking about winding up, it is appropriate to understand what will trigger the regulator’s powers.
Amendment No. 108ZBF would insert a new clause. I may well be told that the protection already exists. I have provided for the regulator who has discharged liabilities—in other words, made payments—to have a charge over the land to the value of the amount paid out. I know that this is not technically correct. It does not deal with other charges that there might be on the land. However, this is public money, and the regulator should have some security, in the non-technical sense of the word, for that money, although it may come from another mechanism in the Bill. I beg to move.
Lord Dixon-Smith: Amendment No. 108ZBEA is tabled in my name and is in this group. I am concerned with the part of the Bill that deals with the restructuring and dissolution of housing providers in the event that things go seriously astray. This is a probing amendment because after we have fairly thoroughly dealt with the winding up on page 70, we come in Clause 166 on page 71 to the transfer of property. Clause 166(2) states:
“Any surplus property that is available after satisfying the registered provider’s liabilities shall be transferred (a) to the regulator, or (b) if the regulator directs, to a specified registered provider.”
I found myself wondering whether it would involve a conflict of interest if the regulator were suddenly to become the owner of some of these properties. It seems to me that it does, even if it is only a temporary solution. I think that the words,
ought to come out so that the regulator is obliged to transfer the property to someone else. He would be in a difficult position if anything else were to happen. I tabled this amendment to explore that potential conflict. I hope the Minister will not mind answering it.
Baroness Andrews: These are three forensic amendments. I am not entirely certain that the noble Baroness is going to be satisfied with my response. This is wonderful stuff for lawyers.
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The ground affected by this amendment—that the registered provider is failing properly to carry out its objects—was an existing power in the Housing Act 1996, which used the same term. Because it has been used so rarely, I do not think that getting rid of the word itself is going to be of much benefit to man or beast.
The trigger for “failing properly” is a standard phrase, which is also used in the Charities Act. The bar for the use of the power is high; it would obviously be tested in the courts. It has been used by the corporation on rare occasions when the association’s objects have not been addressed or achieved. There is an example, on which I shall not go into in detail but will be delighted to send to the noble Baroness, of when the provision was used. It involved the Railway Street Housing Co-operative, an association of owner-occupiers and tenants in miners’ cottages in Durham. This may bring back to the noble Baroness case law studies from her days as a student, when there were a lot of cases like it. The organisation proved incapable of functioning as an independent, viable and well managed organisation. It was quite an interesting case. However, it is an extremely rare power. It is a consistent form of terminology and, on that basis, we shall have to resist the amendment.
The noble Baroness’s other amendment, Amendment No. 108ZBF, is worth addressing briefly as it raises an important issue. It would add a new clause after Clause 167. Clauses 166 to 168 allow the regulator to transfer land held by a housing association that has been wound up, normally to ensure that tenanted social housing and assets that may have been publicly funded are passed to another association. Therefore, the tenants continue to have the benefit of protection and public assets to protect them. That is again an existing Housing Corporation power.
The amendment deals with a specific situation. The regulator transfers the land of an association that has been wound up to a second association. The first association has liabilities, which is quite likely if it was wound up for insolvency, and they would normally be met by selling the land. However, because the land is social housing, or there are other good reasons to transfer it, the regulator decides to pay off the liabilities itself rather than sell the land. Clause 166(3) explicitly permits it to do this.
This amendment would ensure that the regulator gets its money back by requiring it to take a charge over the land to the value of the amount it has paid. I think that will often be a sensible way forward, and there is nothing preventing the regulator doing that. However, my concern is that it will not always be the best way of dealing with the problem, and this amendment, by requiring the regulator to do that, reduces its flexibility in dealing with complex transactions, which has risks for the assets concerned. For example, the regulator may find it difficult to find a new owner for the land, if that land has liabilities attached. An association that accepted that land would do so despite making a loss, and not every association would be able or willing to do that. It also does not seem entirely fair to attach to the land liabilities that have little to do with it. When making this sort of decision, the regulator will be guided by its objects, which include concern for
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Finally, Amendment No. 108ZBEA, proposed by the noble Lord, Lord Dixon-Smith, restricts the regulator’s power to direct when transferring property to another provider. Clause 166 provides that when a non-profit registered provider is dissolved or wound up and all its liabilities are paid, the question remains of what to do with its remaining assets—that is to say, social housing. That is clearly a decision for the regulator. Clause 166 sets out the regulator’s powers: the properties are either transferred to the regulator or to another registered provider. The regulator’s first aim will always be to find another registered provider to take over the social housing. We think it unlikely that there would be no registered provider willing to take over the social housing but, in that case, the regulator would have to transfer the property to itself. In effect, it would be acting as the social landlord of last resort. That would only ever be a temporary arrangement while the regulator tried to persuade another registered provider to take on the properties. It is clearly not appropriate that the social housing is lost by being sold off to a private landlord. The noble Lord asked whether there would be a conflict of interest. To my knowledge, under those circumstances, there would not be. It is a temporary, last resort provision, so that should not be an issue.
The amendment is not helpful because it is necessary to have the regulator as the social landlord of last resort. Otherwise, things would be left in limbo in such cases. I will make sure that I am correct about the conflict of interest point, but I am fairly certain that that would not be the case.
Lord Dixon-Smith: I am grateful to the noble Baroness for her explanation, which was much as I expected it to be. I remain concerned that the regulator might have to become the proprietor of last resort, which in certain circumstances may be necessary. I will think about that some more.
Baroness Hamwee: I am grateful for the Minister’s explanation. On Amendment No. 108ZBF, she talked about flexibility. Does that mean that taking a charge is one of the options rather than being excluded?
Baroness Hamwee: Thank you. That is very helpful. On the term “properly”, I am reassured by its use in other legislation. As I have said before, it can cause more problems to alter something than not. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 166 [Transfer of property]:
[Amendment No. 108ZBEA not moved.]
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[Amendment No. 108ZBF not moved.]
Clauses 168 and 169 agreed to.
Clause 170 [Power to dispose]:
Baroness Andrews moved Amendment No. 108ZC:
“(1A) But a non-profit registered provider may dispose of the landlord’s interest under a secure tenancy only to another non-profit registered provider.”
The noble Baroness said: We have come to a group in which the majority of the amendments are government amendments. I will deal with Amendments Nos. 108ZC, 108ZD, 108ZE, 108ZF, 108ZG, 108ZH and 108ZJ. The amendments vary in length and complexity; so look sharp, even though it is 7 pm.
Amendment No. 108ZC is a technical and precautionary amendment to ensure that if a non-profit registered provider wishes to sell a home that is let under a secure tenancy, it can only do so to another non-profit registered provider. Secure tenancies are slightly different in law to the assured tenancies that are typically issued by registered social landlords. I know that noble Lords understand those differences. Some of the protections of a secure tenancy rely on the status of a landlord as a public-sector landlord, a registered social landlord or non-profit registered provider in future. We would therefore not wish to see a home let under a secure tenancy transferred to a profit-making registered provider. We would not expect the regulator to consent to such a disposal, which would be inconsistent with its objective to protect tenants. The amendment makes absolutely certain of that by explicitly prohibiting such a disposal.
7 pm
Amendment Nos. 108ZD, 108ZE, 108ZG and 108ZH are related. They represent a significant reduction in the regulatory burden on non-profit providers of social housing by removing the requirement on them to seek consent for the disposal of land except where that disposal is of social housing. It brings the requirement on non-profit providers into line with that for profit-making providers. Those who have followed this debate in the other place will know that, initially, we took a very cautious approach over non-profit providers of social housing—the successors to RSLs. We retained the requirement for them to seek consent for any disposal of land. That requirement has a long-standing history as part of the regulatory system and reflects an historic situation. In the past, RSLs were concerned almost exclusively with social housing. Now, quite rightly, they are involved in mixed-tenure developments and in wider community services and have a wider range of assets that are not social housing. In addition, until now, there has not been a legal definition of social housing, so we had no way to distinguish in statute between social housing and other assets.
Given all this, we accept that times have changed. We have listened to the concerns of stakeholders and were careful to balance the risks. We are now proposing to limit the requirement to seek disposal consent to social housing only under Amendment No. 108ZD. It
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