London landlord found non-compliant after ‘potential covenant breach’

It comes after the group revealed in October it is in merger talks with Places for People, with a view to joining the 240,000-home landlord as a subsidiary.

Today’s judgement said Origin had identified material errors in its reporting on interest payable for the 2023 financial year. This “significantly reduced” the available headroom above the landlord’s covenant requirement, according to the regulator. 

The landlord, which has homes across London and Hertfordshire, also failed to notify the RSH promptly of a potential covenant breach, the judgement said.

It came after one of Origin’s funders identified the provider had miscalculated its covenant requirements. 

“Poor financial governance and weak internal controls have impacted Origin’s future financial viability, putting its social housing assets at undue risk,” the judgement said. 

Origin’s financial position is “weak and requires close and effective management”, the RSH said. 

The regulator said Origin is working with it to avoid covenant breaches and ensure it has access to sufficient liquidity.

An action plan is also being developed by Origin to strengthen its board oversight, internal controls and financial reporting, the RSH said. 

Harold Brown, senior assistant director for investigations and enforcement at the RSH, said: “This case provides an important reminder that governing bodies must have an iron grip on their key risk exposures and ensure effective reporting. 

“It was disappointing that the provider was aware of issues but did not promptly communicate them to the regulator.”

In a statement on its website, Origin said: “We have recognised the need to improve our financial processes and reporting, and have been taking the right steps to strengthen control of our finances, especially given the impact of broader economic pressures and of rising demand and costs on our financial plan.” 

The group said an independent audit of budgetary controls and reporting had been completed and the recommendations are being implemented. 

A separate independent review into what Origin called "the covenant challenge related to one particular lender" is under way, the group added. 

It also flagged it had appointed a new finance director, Mark Farrar, who joined in July. Mr Farrar has previously worked for Thrive Homes, BPHA and Tesco. 

Former Guinness executive, Jeremy Kape, also joined Origin in the summer as its interim director of assets and compliance. 

In its last full year, Origin reported a post-tax deficit of £1.6m on turnover of £68.4m. This compared to a deficit of £21.3m the previous year. 

In 2019, Origin was downgraded to G2 for governance after the regulator said it had provided “consistently inaccurate” data returns. However, the group later regained its G1 status.