Decision

Enforcement Notice: Auckland Home Solutions CIC (20 April 2023)

Updated 20 April 2023

Applies to England

ENFORCEMENT NOTICE

Section 219 HOUSING AND REGENERATION ACT 2008 (“the Act”)

Introduction

A registered provider is responsible for ensuring that it manages itself effectively, achieves the standards set by the regulator, and engages positively with the regulator’s regulatory framework. Where a failure against a standard or other problem has been identified, the regulator expects a registered provider to respond in a prompt and effective manner. It may be necessary for the regulator to step in and exercise its powers under section 219 of the Act when a provider fails to do so.

Sections 219 to 225 of the Act allow the regulator to require a registered provider to take specified action to resolve a specified failure or other problem by issue of an enforcement notice. The regulator has published guidance on its use of this power which can be found here.

The Regulatory Standards that registered providers of social housing are required to meet can be found here together with our approach to regulating the standards.

Grounds for issuing this enforcement notice

A regulatory notice was published on 13 August 2021^{[footnote 1]} concluding Auckland Home Solutions CIC (Auckland) was non-compliant with the Governance and Financial Viability Standard (the Standard) and the Rent Standard. The regulator has engaged intensively with Auckland and assessed actions taken by Auckland to address the issues raised in the regulatory notice.

The regulator has concluded that it lacks assurance that Auckland complies with the Standard in that Auckland is unable to:

• ensure effective governance arrangements that deliver its aims and objectives and intended outcomes for tenants and potential tenants in an effective, transparent and accountable manner;

• manage its resources effectively to ensure its viability is maintained while ensuring that social housing assets are not put at undue risk;

• manage its affairs with an appropriate degree of skill, independence, diligence, effectiveness, prudence and foresight;

• ensure that it has an appropriate, robust and prudent business planning, risk and control framework which ensures:

  (a) there is access to sufficient liquidity at all times;

  (b) financial forecasts are based on appropriate and reasonable assumptions;

  (c) effective systems are in place to monitor and accurately report delivery of the registered provider’s plans; and

  (d) the financial and other implications of risks to the delivery of plans are considered

• assess, manage and where appropriate address risks to ensure the long-term viability of the registered provider, including ensuring that social housing assets are protected by:

  (a) maintaining a thorough, accurate and up to date record of its assets and liabilities and particularly those liabilities that may have recourse to social housing assets; and

  (b) carrying out detailed and robust stress testing against identified risks and combinations of risks across a range of scenarios and putting appropriate mitigation strategies in place as a result

• ensure that the arrangements it has entered into do not inappropriately advance the interests of third parties or are arrangements which the regulator could reasonably assume were for such purposes.

The regulator has also concluded that:

• Auckland’s affairs have been mismanaged as defined under 275 of the Act in that Auckland has failed to submit its statutory accounts with the regulator, due 30 September 2022 in accordance with the requirements of the Act; and

• Auckland has failed to provide adequate assurance that it is compliant with the Rent Standard and/ or meets exceptions claimed from the Rent Standard for Specialised Supported Housing (SSH).

The regulator issues this enforcement notice to Auckland by virtue of its powers under sections 219 to 225 of the Act. Specifically, the grounds for issuing this enforcement notice are under section 220(1) of the Act:

• Case 1 – that Auckland has failed to meet the requirements of the Standard and Rent Standard applicable to it under section 194 of the Act; and

• Case 2 - that the affairs of the registered provider have been mismanaged.

Direction

The regulator directs that Auckland takes the following actions:

1. To a scope agreed with the regulator, Auckland must commission an independent appraisal (the Appraisal), to be carried out by a party with relevant skills and expertise, of options to address its continued non-compliance with the regulatory standards which includes (but is not limited to) a review of:

   a. Board skills, effectiveness and leadership capacity;

   b. Adequacy of board reporting and record keeping;

   c. Financial risks and obligations which impact its long-term viability as well as management of risks to its short to medium term liquidity;

   d. Business planning, risk and control framework including:

   • financial forecasts based on appropriate and reasonable assumptions, within a 30-year business plan; and

   • stress testing and mitigation strategies

   e. Management of actual and/ or potential conflicts of interest;

   f. Whether Auckland has entered into arrangements which inappropriately advance third party interests; and

   g. Compliance with the Rent Standard and/ or exceptions claimed from the Rent Standard for SSH.

2. Based on the outcome of the Appraisal, the board must commission:

   a. an action recovery plan and timetable to achieve compliance with the regulatory standards;

   b. reclassification of stock where there is insufficient evidence to demonstrate it meets the definition of SSH; and

   c. a review of alternative options including (but not limited to) voluntary de-registration as a social housing provider or winding down (followed by de-registration).

3. Auckland must provide the following to the regulator:

   a. the draft written scope of the commission of the Appraisal and list of proposed parties to carry out the Appraisal no later than 21 days from the date of this enforcement notice;

   b. the completed Appraisal report no later than 28 days from the date the regulator approves the scope of the Appraisal in writing;

   c. the board approved action plan based on recommendations arising from the Appraisal with timescales for implementation and regular reporting on delivery to the regulator, together with minutes of board discussions relating to the Appraisal outcome, no later than 28 days from the completion of the Appraisal; and

   d. written confirmation of reclassification of stock where applicable and the review of alternative options to be completed no later than 28 days from the completion of the Appraisal.

4. Auckland is required to engage as soon as reasonably practicable with the regulator before entering any agreement to own or manage any additional properties while a non-compliant regulatory notice remains in place.

The Regulator of Social Housing expectations

The regulator expects Auckland to co-operate fully with the regulator and to co-ordinate its communications strategy on all matters relating to this enforcement notice with the regulator, and to give the regulator the opportunity to comment on the content and timing of any news releases or other public statements.

Further Information

• In coming to the decision set out in this enforcement notice, the regulator has taken into account all relevant matters and representations referred to in the regulatory framework and Annex 1 of the regulator’s ‘Guidance on the regulator’s approach to intervention, enforcement and use of powers‘ with particular reference to ‘Guidance note 9’.

• Please note that a registered provider that is given an enforcement notice may appeal against it to the High Court.

• The regulator may withdraw this enforcement notice at any time by giving notice to Auckland.

• Should Auckland fail to comply with this enforcement notice, the regulator may consider exercising other regulatory or enforcement powers.

• The regulator may choose to publicise the serving of this enforcement notice.

• Any information or correspondence pertaining to this enforcement notice should be sent to the regulator, addressed to:

  Harold Brown

  Senior Assistant Director, Investigation and Enforcement

  Regulator of Social Housing

  Level 1A – City Tower

  Piccadilly Plaza

  Manchester M1 4BT

Signed on behalf of the regulator

Harold Brown

Senior Assistant Director, Investigation and Enforcement

Date of enforcement notice: 17 April 2023

1. Regulatory Notice: Auckland Home Solutions CIC (13 August 2021) – GOV.UK (www.gov.uk) ↩