Introduction

Welcome to the March 2020 edition of our Social Housing Newsletter. We are living in unprecedented times as we enter the second week of lockdown in the fight against the spread of the coronavirus.

At Penningtons Manches Cooper, we take the health and welfare of our clients, contacts and staff very seriously, so we have closed all our UK offices and they will remain closed until the Government’s guidelines change. In the meantime, we are still open for business as our staff work from home. We were fortunate in having adopted a ‘work from anywhere’ culture a couple of years ago.

We have set up a dedicated Coronavirus Resource Hub on our website which contains all the essential information you and your organisation may need to navigate through the Government’s numerous announcements.

In this edition, we have a number of articles on non-Covid-19 related matters.

The first article summarises the significant proposals which have been made by the Law Commission concerning enfranchisement, and in particular how premiums are to be calculated. The Law Commission has made it plain it wants to reduce the premiums being paid, and simplify the process. If enacted, it will impact all housing associations by reducing capital receipts.

The Local Government Association has reported over 13,500 affordable homes have been lost through office to residential conversions. The LGA wants permitted development rules to be scrapped. This is the subject of our second article.

When I speak with my clients’ housing managers they say two subjects give them the most headaches - pets and parking. Our third article discusses the likely impact upon housing associations of the Government’s intention to re-issue the Model Tenancy Agreement so as to remove restrictions on keeping pets.

Finally, we have an article dealing with the latest consultation concerning Heat Networks. There is now doubt the provision of heat networks are increasing across the sector, not just in new homes, as housing associations seek to reduce their carbon footprint.

I hope you find these articles interesting, and please do get in touch if you have any questions.

In the meantime, we hope you, your family and colleagues remain safe and well.

Contact Linda Storey

Enfranchisement claims: price is what you pay, value is what you get

Our housing association clients regularly deal with claims by their leaseholds to buy the freehold or extend the lease of their homes (subject to the usual exemptions such as Shared Ownership Leases). These claims can generate a significant source of capital for housing associations, so many of our clients will be concerned at the options being proposed by the Law Commission in its recent report.

The main thrust of the report is to reduce the price payable by leaseholders to buy the freehold or extend the lease of their homes.

The full Leaseholder Enfranchisement report can be read here.

The Law Commission has put forward three schemes for determining the premium. They are (in brief)

only where the Term and Reversion are compensated – this assumes the leaseholder is not in the market to buy
only where the Term, the Reversion or Hope value are compensated. This also assumes the leaseholder is not in the market to buy but may be in the future. This is better for housing associations
only where the Term, Reversion and Marriage value are compensation. This is the current mainstream valuation basis and produces the highest valuation.

However, the Law Commission has proposed additional options for reform and which include

prescribing the rates used in calculating the price to be paid by leaseholders. Since this is the key source of disputes, the Law Commission hopes to make the process simpler, more certain and predictable.
helping leaseholders with onerous ground rents, by capping the level of ground rent used to calculate the premium. This will apply to ground rents which are either high to begin with or have unusual and onerous review patterns.
the creation of an online calculator for determining the price to make it easier to find out the cost of enfranchisement at the outset.
enabling leaseholders who are collectively enfranchising a block of flats to avoid paying “development value” to the housing association unless and until they actually undertake further development.

The ultimate decision as to which will be used will be for the Government. The Government has six months in which to give its interim response and a final response within a year. It will be interesting to see if leaseholders decide to delay taking any steps towards enfranchisement in the hope the premium to be paid could be much cheaper if these reforms are enacted. It will make this market uncertain for housing associations and their leaseholders.

A full analysis of the Law Commission’s proposals and the various options can be found here.

Contact Martin Codd

General Permitted Disaster: office conversions and the loss of high-quality and affordable housing

A recent assessment by the Local Government Association (LGA) – the national membership body for local authorities – estimates that communities have lost out on over 13,500 affordable homes as a result of permitted development rights (PDR) allowing offices to be converted to residential units without planning permission.

Figures released by the LGA, showing areas in which office-to-residential conversions are most common, refer to significant examples such as Harlow, where more than half (51%) of new homes in the year ending 1 April 2019 were former office blocks converted under PDR.

What is the law on office-to-residential PDR?

Taking effect from 1 April 2016, the Town and Country Planning (General PermittedDevelopment) (England) (Amendment) Order 2016 (2016 Order) made permanent existing temporary PDR allowing change of use of office buildings to residential without planning permission.

The 2016 Order provides that prior approval (Prior Approval) of the local planning authority (LPA) is required in relation to transport/highways, contamination, flooding and noise impacts; Prior Approval may be refused for those reasons only. If Prior Approval is granted, the development must be completed within three years of the date of that Approval.

Why are office-to-residential PDR in place?

The rationale behind using PDR to facilitate office-to-residential conversions was explained in a 2013 press release published by the Department for Communities and Local Government (DCLG, now the Ministry of Housing, Communities and Local Government), which described the rights as creating ‘an opportunity for office owners and developers to bring outdated and underused buildings back to life and create much needed new housing…more quickly without costly delays from seeking permission to change the use of a building’.

What is the effect of office-to-residential PDR in practice, according to critics?

A 2013, DCLG impact assessment predicted around 140 applications for Prior Approval would be received in England per year. In reality, 10,166 applications were received in England between 2014 and 2017, according to a 2018 impact assessment published by RICS.

Critics of PDR being used in this way argue that removing the planning system’s checks and balances results in poorer-quality housing - as the schemes need only to comply with Building Regulations as opposed to, for example, government standards on minimum space - and loss of valuable office space.

Furthermore, and perhaps most importantly to those operating in the social housing sector, PDR allowing office-to-residential conversions leaves LPAs unable to require the provision of affordable housing units or contributions, resulting in the loss of units reported by the LGA.

RICS’ 2018 impact assessment describes office-to-residential PDR as ‘a fiscal giveaway from the state to private real estate interests…leaving a legacy of a higher quantum of poor quality housing than is seen with schemes governed through full planning permission’.

What does the future hold for office-to-residential PDR?

The LGA and a number of other bodies are calling on the government to scrap these PDR, so that the usual system of development controls will again apply to all office-to-residential schemes. However, the government announced proposals in late 2019 to extend the PDR scheme to other types of change of use, and to ‘upward extensions’ (adding additional storeys to buildings without planning permission).

Despite concern about the quality, design and safety of the homes being built under office-to-residential PDR and the loss of affordable housing, it appears further deregulation is in store.

Contact Charlotte Benson-Goring

Can your tenants have pets?

The new Housing Secretary, Robert Jenrick, recently announced an overhaul of the current model lease. Jenrick urged landlords to allow tenants to keep “well-behaved” pets, marking a shift away from the current model which bans pets unless they are guide or assistance dogs. The Housing Secretary stated that “pets bring a huge amount of comfort to people’s lives... improving their mental and physical wellbeing.” But, there are more factors that may influence whether it is appropriate to keep a pet in a tenanted property.

Renting, for some, has become a long term solution to the struggle of getting on the property ladder, yet only 7% of landlords advertise houses as being suitable for pets . Silva Homes, on the other hand, is bucking this trend, announcing reforms that involve changing their current pet policy. Dasos Christou, executive director for customer relations at Silva Homes and self-proclaimed pet lover, highlighted the detrimental effect of enforcing their pet policy on customer relations. Customers keeping pets contrary to the terms of their lease were deemed to be “less open… with some even refusing entry for other services” . Customers may turn down accommodation they require because they are not allowed to keep pets, going against the ethos of housing associations key ethos of allowing easier access to homes.

The case of Dee Thomas-Ashley and Drum Housing Association has shed light on some of the issues that arise from pet ownership for both the housing association and tenant. The appellant, in this case, suffered from bipolar disorder and had been keeping her Jack Russell at her rented property. The witness for the appellant stated “the benefits previously gained as regards mental health, socialisation and physical health would be jeopardised if Mrs Thomas-Ashley was forced to give up her dog” . Nevertheless, the appeal was dismissed. No breach had been found under section 24A of the Disability Discrimination Act in asking the tenant to remove the dog, as the tenant had already lived at the property for 15 months without the dog. Under the terms of the headlease, pets were not permitted but the tenant could obtain permission to keep the pet. It is important to note that the dog was not a registered care dog, it was not a permitted breed given its tendency to frequently bark. Drum Housing was also not the head lessor and had little control over the terms of their lease.

So must we consider what is deemed a well-behaved pet? Are pets to be judged on a case-by-case basis? Or judged as a particular breed? What about the welfare of the animal? Are housing associations obliged to ensure the well-being of the pet as well as their tenants? Some housing associations currently allow pets in houses as long as permission is requested: Catalyst and Hightown Housing Association for example. However, they will not allow pets in flats or premises that are not appropriate. Considerations must also be made when properties are resold. Are leases going to be changed to the new form or remain as originally drafted? Whilst the Housing Secretary’s announcement is a positive move toward more tenant-focused renting, it may not be as simple as removing the “no pet” clause from the current form lease.

Contact Lucy Norton

Proposals for the regulation of heat networks close on 1 May 2020 – still time for property and energy companies to get involved

The established worlds of property and energy increasingly mix in all sorts of ways: self-generation, EV charging points, building efficiency, and controlling energy demand in response to price signals being just a few examples.

Heat is currently responsible for around one third of our greenhouse gas emissions and the Government is keen to encourage greater use of low carbon heat networks in response to this. It is now consulting on proposals for the regulation of heat networks, with a closing date of 1 May 2020 for responses. All those interested in property or energy should take note.

Contact Ed Weightman