Law Commission listens to sector over changes that would have required RPs to sign up with another regulator

Sector concerns 

 

Most registered societies are CBSs and few social landlords are co-ops.

 

CBSs serve their communities and can engage in a range of activities, such as providing social housing. Meanwhile, co-ops exist for the benefit of their members, for example to group together to access cheaper prices for goods or services.

 

One proposed change had been the removal of exempt charity status, meaning providers that are CBSs would have been required to register with the Charity Commission and be subject to its regulatory remit.

 

Lawyers previously told Social Housing that this would present a higher regulatory burden. In addition, day-to-day activities could be affected, with RPs that are CBSs having to follow a specific process on every property disposal, which would have made these more difficult.

 

The other proposed change was a new statutory definition for CBSs, which would mandate that they must have voluntary and open memberships, with one vote per member.

 

Lawyers told Social Housing last year that, if enacted, this would be a huge shift from the sector’s norm of a closed shareholding approach. It could have meant RPs would find themselves with large numbers of shareholders with each having a vote, meaning that mergers could be made more difficult.

 

Social Housing now understands that the Law Commission has listened to these concerns and has indicated its intention to mitigate them in its final recommendations on the legal changes. It has set this out in an early update to key stakeholders on its draft policy position, although this position may change in future.

 

Some social housing lawyers in talks on the consultation with the Law Commission have seen a draft policy position paper.

 

They note that the document suggests the Law Commission’s recommendations will now retain the exempt charity status for registered housing associations, meaning they will not have to sign up with the Charity Commission.

 

It also suggests the Law Commission will scrap the recommendation to introduce a new statutory definition for a CBS mandating that they must have voluntary and open memberships.

 

Victoria Jardine, partner and head of housing governance at Anthony Collins, said: “The early policy position paper suggested that the Law Commission has listened to the detailed and extensive feedback from the regulated housing sector, and has responded positively to it.

 

“At this stage the policy position paper is simply indicative of the Law Commission’s conclusions having reviewed the consultation feedback,” she said.

 

“It may still change, and so we can’t rule out the possibility that things may yet change when it issues its final recommendations. However, the Law Commission has set out sound reasoning for its updated position, and so we are hopeful that this will be its final position.”

 

Gemma Bell, partner at Devonshires, said: “We’re pleased that the responses submitted to the consultation in relation to the impact of some initial proposed changes around removing exempt charity status for registered housing associations and requiring all societies to operate with open membership appear to have been taken into consideration by the Law Commission in formulating their draft responses.

 

“We note that a formal response to the consultation has not yet been issued, but other proposed changes will provide some helpful clarity for registered societies going forward.”

Rose Klemperer, partner at Bevan Brittan, noted that the Law Commission’s update to key stakeholders reflected its “evolved views following robust responses to the consultation from the sector”.

 

“The updated position offers greater clarity and reassurance for housing associations operating as community benefit societies,” she said.

 

“It is encouraging to see that sector concerns are being listened to and key proposals have been reconsidered to better reflect the realities of housing providers.

 

“This update represents the Law Commission’s project team’s current thinking, and the final recommendations are yet to be published. However, the update is positive and provides greater certainty for CBS housing associations. Overall, it represents a more balanced approach that reflects the operational realities of CBS housing associations.”

 

Ms Klemperer said that one of the “most significant updates” is the recognition that registered social housing providers should not automatically lose their exempt charity status.

 

The current thinking from the Law Commission now acknowledges the need for a “proportionate approach”, given that CBS housing associations are already subject to “rigorous oversight” by the Regulator of Social Housing or Welsh ministers, as well as other agencies, she said.

 

“This means that, for now, housing associations that are charitable CBSs will not have to engage with a new regulator, avoiding potential delays in property transactions and administrative burdens that could have impacted the sector’s ability to deliver homes and services efficiently,” Ms Klemperer said.

 

She added that the indication that the commission would not recommend open membership be prescribed for CBSs is “another welcome shift”.

 

Ms Klemperer said that many housing associations expressed concern that mandating open membership could lead to “administrative complexity and governance challenges”, particularly for larger providers with thousands of residents.

 

“The updated position recognises that CBSs often operate effectively with restricted membership and the current thinking indicates that CBSs will retain control over their membership structures,” she said.

 

“The Law Commission acknowledged that existing governance models that prioritise professional leadership while still enabling meaningful resident engagement through other mechanisms, such as the tenant satisfaction measures required by the RSH, were effective.”

 

Darren Hooker, partner and head of social housing governance at Capsticks, said that in January the Law Commission contacted a selected group of stakeholders informing them that it had listened to the responses and that its views had then evolved. It then invited further comments on its revised provisional policy position, he said.

 

“It is therefore clear that the Law Commission listened to the views that we, and others in the sector, put forward and it is really positive that these have been taken into account in evolving the proposals,” Mr Hooker said.

 

“We have told the Law Commission that we are pleased with the revised policy position on these two points, which are good news for our RP clients. Hopefully these will now be carried forward into the final recommendations to be made by the Law Commission.”

 

Mr Hooker said the new policy position paper put forward gives specific acknowledgement to housing associations and the reasons why an open membership might not be appropriate for them.

 

“The Law Commission has described housing associations’ reasoning as ‘persuasive’ and concludes that it is not appropriate to implement the requirement for open membership into the new definition of community benefit society,” he said.

 

“Therefore, the revised recommendations from the Law Commission do not include a requirement that a community benefit society should have a membership that is open to all.”

 

In addition, Mr Hooker said the new policy position paper states that although CBSs should generally cease to be exempt charities, RPs should continue to remain exempt.

 

“The Law Commission specifically noted in its new proposals to the selected group that RPs are already well regulated with bespoke processes befitting their specialised context and that registration with the Charity Commission is not therefore necessary for them,” he said.

 

A spokesperson from the Law Commission said: “Our consultation period closed in December, and we are currently considering responses and options for reform before coming forward with final recommendations.

 

“We anticipate that we will publish our recommendations later this year.”