Decision

Withdrawn Regulatory Notice: St Andrews Community Housing Association Ltd (19 December 2018)

Updated 8 September 2023

This decision was withdrawn on 12 September 2023

St Andrews Community Housing Association Ltd was de-registered on 7 September 2023.

Applies to England

Withdrawn on 8 September 2023: St Andrews Community Housing Association Ltd was de-registered on 7 September 2023

RSH Regulatory Notice

• Provider: St Andrews Community Housing Association
• Regulatory code: L4546
• Publication date: 19 December 2018
• Governance grade: N/A
• Viability grade: N/A
• Reason for publication: Governance and Financial Viability standard
• Regulatory route: Reactive Engagement

Other providers included in the judgement

None

Regulatory Finding

The regulator has concluded that:

a) St Andrews is non-compliant with the governance element of the Governance and Financial Viability Standard. St Andrews has not ensured effective governance arrangements that deliver its aims, objectives and intended outcomes for tenants and potential tenants in an effective, transparent and accountable manner.

b) St Andrews has not been able to demonstrate that it has managed its affairs with an appropriate degree of skill, independence, diligence, effectiveness, prudence and foresight.

c) St Andrews has failed to ensure that it operates an appropriate strategic planning, risk and control framework that identifies and manages risks to the delivery of its objectives.

The Case

The regulator received a number of referrals from London boroughs raising concerns relating to St Andrews’ governance and compliance with consumer standards.

The regulator has concluded that there has not been a breach of the consumer standards. However, the regulator’s investigations into the referrals have revealed that St Andrews failed to act with due diligence in entering into its property acquisitions and activities.

St Andrews has acquired all of its assets using the same arrangements and with the same investor. The arrangements involve the registered provider, St Andrews, acquiring the legal interest in a social housing property but holding the beneficial interest on behalf of a third party, the investor, which funds the purchase. A deed of trust between the investor and St Andrews enables this to happen with the investor legally entitled to all capital and income arising from the property. The investor, through a property management agreement, appoints a registered provider (this has been St Andrews in these transactions but the agreement allows for it to be any registered provider) to manage the properties on its behalf and for a management fee.

In line with our regulatory standards we would expect St Andrews’ board to have sought to assure itself on the detail, appropriateness and risks to St Andrews of these arrangements before entering into them, including any impact on the role of a not-for-profit registered provider and its ability to deliver its objectives. St Andrews has not been able to provide evidence that the board commissioned appropriate advice or that relevant information was made available to the board to support its decision making.

The arrangements St Andrews has chosen to adopt mean that there is reliance on the relationship with the investor to ensure that the registered provider can comply with its own objectives and meet regulatory requirements. The documents underpinning the arrangements make clear that St Andrews must act on the instructions of and in the interests of the investor, a third party. Where issues arise that need to be addressed in order for St Andrews to comply with legal and regulatory expectations, consent and funding for the necessary remedial action rests with the beneficial owner. There is no evidence that the beneficial owner recognises and will take into account the organisation’s objectives and regulatory responsibilities in issuing instructions under the deed of trust and the management agreement.

The regulator’s investigation has identified that the way in which St Andrews operates does not align with its purpose as a not-for-profit registered provider of social housing. St Andrews cannot provide evidence that its allocation policy is in line with its purpose or compliant with regulatory expectations. St Andrews policy is that its accommodation is not permanent, not available for those on housing benefit, and that prospective tenants should demonstrate that they will be able to move on to home ownership or another rented property. The provider has been unable to give a rationale for its approach.

The Governance & Financial Viability standard requires registered providers to ensure that any arrangements they enter into do not inappropriately advance the interests of third parties, or are arrangements which the regulator could reasonably assume were for such purposes. St Andrews has been unable to provide compelling evidence that it has met these requirements for the arrangements it has entered into.

Our investigation found that St Andrews could not demonstrate that it had adequately managed conflicts of interest as a result of connections between the registered provider’s chair and the parties involved in designing, promoting and operating the arrangements into which it has entered. From the information provided by St Andrews, the regulator has concluded that any potential conflict of interest was not considered and that the board has solely relied on the chair’s advice and views. In practice, the chair has influenced and been actively involved in all aspects of the arrangements and acquisitions.

The Governance & Financial Viability standard also requires registered providers to have an effective risk management framework in place. St Andrews has not been able to provide evidence that it identified the risks of the arrangements it entered into or has in place mitigation strategies to manage these risks.

The information submitted by St Andrews shows that the board did not consider any risks and referred only to advice having been taken by the investor. The board did not identify that the risks involved in acquiring a mixed use site for development were different from those associated with its acquisition of two rented units. It is also evident that the acquisition of St Andrews head leases was entered into at the request of the investor and as a condition of St Andrews’ other acquisitions.

As a result of these decisions, the outcomes for St Andrews are that its reputation has been damaged, it has entered into financial arrangements without any plans in place to manage them, and into transactions to acquire social housing over which it has no control and where it is reliant on a third party to ensure it can comply with its own objectives and meet legal and regulatory requirements.

Based on its most recent statistical data return, St Andrews had fewer than 1,000 units and is classed as a small provider. The regulator does not publish regulatory judgements for providers which fall into this category. Instead, in the interests of transparency, the regulator publishes a Regulatory Notice where it has evidence that a small registered provider is not meeting the regulatory standards. This notice is published under those arrangements.

Section 220 of the Housing and Regeneration Act 2008 states that the regulator’s regulatory and enforcement powers may be used if a registered provider has failed to meet a standard under section 194 of the Act. The regulator is considering what further action should be taken, including whether to exercise any of its powers.

About the provider

St Andrews Community Housing Association (4546) is a not-for-profit provider registered in December 2009.

At the time of registration the provider’s objective was to provide low cost affordable supported housing for single homeless young people aged 16-24. A change of chair and board members in 2016 resulted in St Andrews Community Housing Association (St Andrews) adopting a new strategy to provide affordable housing for key workers with a specific focus on the housing of ex-service personnel.

St Andrews manages two units of social housing in London which it acquired from another registered provider along with a small number of head leases and a site for development.

About our Regulatory Notices

Regulatory notices are issued in response to an event of regulatory importance (for example, a finding of a breach of the Rent Standard or of a consumer standard that has or may cause serious harm) that, in accordance with its obligation to be transparent, the regulator wishes to make public. More detail about Regulatory notices is set out in ‘Regulating the Standards.’

Key to grades

Governance:

• G1 (Compliant): The provider meets our governance requirements
• G2 (Compliant): The provider meets our governance requirements but needs to improve some aspects of its governance arrangements to support continued compliance
• G3 (Non-compliant): The provider does not meet our governance requirements. There are issues of serious regulatory concern and in agreement with us the provider is working to improve its position.
• G4 (Non-compliant): The provider does not meet our governance requirements. There are issues of serious regulatory concern and the provider is subject to regulatory intervention or enforcement action.

Viability:

• V1 (Compliant): The provider meets our viability requirements and has the financial capacity to deal with a wide range of adverse scenarios.
• V2 (Compliant): The provider meets our viability requirements. It has the financial capacity to deal with a reasonable range of adverse scenarios but needs to manage material risks to ensure continued compliance.
• V3 (Non-compliant): The provider does not meet our viability requirements. There are issues of serious regulatory concern and, in agreement with us, the provider is working to improve its position.
• V4 (Non-compliant): The provider does not meet our viability requirements. There are issues of serious regulatory concern and the provider is subject to regulatory intervention or enforcement action.