Consultation outcome

Draft guidance note 15: Sections 256 to 265 – Powers available during or following an inquiry (enforcement power)

Updated 29 February 2024

Applies to England

	Applicable
PRP (For profit)	yes
PRP (Not for profit)	yes
PRP (Registered charity)	yes
Local authority	no

Type of power: enforcement power  

Scope 

1 - This power enables the regulator to take the following actions during or following an inquiry or extraordinary audit under sections 206 and 210 of the Act: 

• restrict dealings of a PRP; or 

• suspend or remove an officer, employee or agent of a private registered provider. 

2 - In particular, the regulator may conclude that it is necessary to suspend or remove officers, employees or agents of the PRP in order to ensure the proper conduct of the inquiry and/or the proper management of the PRP’s functions, including the delivery of services to its tenants.  

3 - Where a person is removed from their position following a statutory inquiry or extraordinary audit, the regulator may conclude that it would not be appropriate for that person to serve as an officer of another registered provider and so the regulator may disqualify that person. 

Restrictions on dealings during or following an inquiry 

When the regulator will use these powers 

4 - The regulator envisages that this power will be utilised in circumstances to protect a PRP’s assets and public investment, although this does not preclude the regulator using it in other circumstances. 

5 - Section 256 (1) - (3) of the Act sets out the circumstances under which the regulator can make an order restricting dealings during an inquiry under Section 206 of the Act. These circumstances are that: 

• the regulator is satisfied that: 
  - the affairs of the PRP have been mismanaged ^{[footnote 1]}, and  
  - the interests of tenants of the PRP, or its assets, require protection; or  

• if as a result of an inquirer’s interim report under section 207 of the Act, the regulator is satisfied that: 
  - the affairs of the PRP have been mismanaged; or 
  - the PRP has failed to meet a standard under section 194 of the Act. 

6 - Section 257 (1) of the Act sets out the circumstances under which the regulator can make an order restricting dealings following an inquiry under Section 206 of the Act or an extraordinary audit under section 210 of the Act. These circumstances are: 

• the regulator is satisfied that: 
  i) the affairs of the PRP have been mismanaged; or  
  ii) a PRP has failed to meet a standard under section 194 of the Act. 

Process for using the powers 

7 - If the regulator is satisfied that the circumstances in section 256(1)-(3) or section 257(1) of the Act have been met, it will consider whether the order should restrict: 

•  the transactions that may be entered into by the PRP; or 

•  the nature and amounts of payments that may be made by the PRP.  

In accordance with sections 256(6) and section 257(4) of the Act, such order may provide that transactions or payments may not be made without the regulator’s consent.  

8 - The regulator will also consider whether to order a bank or other person who holds money or securities on behalf of the PRP not to part with them without the regulator’s consent pursuant to section 256(4) or 257(2) of the Act. 

9 - In accordance with section 258(1) of the Act, before making an order, the regulator must take all reasonable steps to give notice to: 

• the PRP; and 

• any person to whom it directs an order restricting the parting with money or securities held by them on behalf of the PRP under section 256(4) or section 257(2) of the Act.  

10 - An order made: 

• whilst the inquiry is still ongoing ceases to have effect at the end of the period of 6 months beginning with the day on which the inquirer’s final report under section 207 of the Act is made. However, the regulator may revoke the order before this, or extend it for a specified period of up to 6 months 

• following an inquiry has effect until revoked by the regulator.  

11 - Where the regulator has decided to utilise the powers linked to an inquiry, it will inform key stakeholders, including the Charity Commission where the PRP is a registered charity. 

12 - A person who contravenes an order under section 256(4) or 257(2) of the Act commits an offence. 

Suspension of officers, employees or agents during an inquiry 

When the regulator will use this power 

13 - Section 259(1) to (3A) of the Act sets out the circumstances under which the regulator may make an order to suspend an officer, employee or agent of the PRP whilst an inquiry under Section 206 of the Act is in progress. These circumstances are that: 

• the regulator is satisfied that: 
  i) the affairs of the PRP have been mismanaged; and 
  ii) the interests of tenants of the PRP, or its assets, require protection. 

• if as a result of an interim inquiry report under section 207 of the Act, the regulator is satisfied that either: 
  i) the affairs of the PRP have been mismanaged; or 
  ii) the PRP has failed to meet a standard under section 193, 194 or 194C of the Act. 

In such circumstances, the regulator may suspend the person who it thinks has contributed to the mismanagement or failure. 

• the regulator is satisfied that an officer, employee or agent of the registered provider is obstructing, or failing to co-operate with, the inquiry. 

In such circumstance, the regulator may suspend the person who it thinks is obstructing, or failing to co-operate with, the inquiry.  

Process for using the power 

14 - If the regulator is satisfied that the circumstances at section 259(1) to (3A) of the Act exist, in accordance with section 259(7A) of the Act, if the regulator makes an order, it must take all reasonable steps to notify the person suspended and notify the PRP. 

15 - Where the regulator has decided to suspend a person, it will inform key stakeholders, including the Charity Commission where the PRP is a registered charity. 

16 - In accordance with section 259(6) of the Act, an order made suspending a person will cease to have effect at the end of the period of 6 months beginning with the day on which the inquirer’s final report under section 207 of the Act is made. However, the regulator may revoke an order before the end of that period. 

Removal or suspension of officers, employees or agents following an inquiry  

When the regulator will use these powers 

17 - Section 260(1) to (2) of the Act provides that if as a result of an inquiry under section 206 or an extraordinary audit under section 210 of the Act, the regulator is satisfied that the affairs of a PRP have been mismanaged, or the PRP has failed to meet a standard under section 193, 194 or 194C, it may remove an officer, employee or agent who it thinks has: 

• contributed to the mismanagement or failure; or  

• obstructed, or failed to co-operate with the inquiry under Section 206 of the Act. 

Process for using the powers 

18 - Pending a decision to remove a person, the regulator will consider whether the person should be suspended and the length of that period of suspension. In accordance with section 260(3) of the Act, such period may be for up to 6 months. 

19 - If the regulator considers it necessary to suspend or remove a person, before doing so, it must take all reasonable steps to give 14 days’ notice to: 

• the PRP; and 

• the person. 

20 - Where the regulator has decided to suspend or remove a person, it will: 

• take all reasonable steps to notify the person removed or suspended 

• notify the PRP; and  

• inform key stakeholders, including the Charity Commission where the PRP is a registered charity. 

Actions following a suspension or removal 

Directions  

21 - Following a suspension of an officer, employee or agent of a PRP under section 259 or 260, pursuant to section 261 of the Act the regulator can give directions to the PRP about: 

• the performance of the suspended person’s functions; and  

• any other matter arising from the suspension.  

22 - The regulator may appoint someone to undertake the function of the suspended person(s). In this case the regulator would consider factors including but not limited to: 

• the scope of the appointment 

• the terms and conditions under which someone will be appointed including remuneration 

• who is to be appointed – factors including professional expertise, experience and availability will be considered. 

Disqualification of a removed person  

23 - In accordance with section 262(1) of the Act where a person is removed under section 260 of the Act, or pursuant to other provisions under the Housing Acts 1964 and 1996 or the Housing Associations Act 1985, this person will be disqualified from acting as an officer of a registered provider.  

24 - A disqualified person can apply to the regulator to waive their disqualification. In determining their application, the regulator will consider factors including but not limited to the seriousness of issues that led to them being removed. If the regulator does waive a disqualification, this can be generally or in relation to a particular registered provider or class of registered providers.  

25 - In accordance with section 262(5) of the Act, if a disqualified person acts as an officer of a registered provider, their acts are not invalid by reason only of the disqualification. However: 

• under section 264 of the Act, it is an offence to act as an officer of a registered provider in respect of which the person is disqualified; and 

• under section 265 of the Act, if a person acts as an officer of a registered provider in respect of which they have been disqualified and in doing so receives payments or other benefits, the regulator may require them to repay the sum, or an amount specified representing the whole or part of the value of the benefit. The registered provider can recover the sum or specified amount as a debt if there is a failure to comply with this.  

26 - The regulator will maintain a register of people who have been disqualified from acting as an officer of a registered provider under section 262 of the Act. This register will include details of any waivers granted; and be available for inspection by the public.  

Appeal process 

27 - There is no statutory right of appeal or appeals’ process in accordance with the Regulator’s Appeals Scheme. Where the regulator restricts dealings of a PRP. 

28 - There is a statutory right of appeal to the High Court where a person is removed or suspended under section 259 or 260 of the Act. Such appeal must be brought within the period of 28 days beginning with the day on which the PRP is notified of the removal or suspension.

1. Mismanagement has a specific meaning in the Act and is defined in 275 of the Act. ↩