Midlands-based provider found non-compliant and breaches Home Standard over fire safety backlog

EPIC, which was placed on the regulator’s gradings under review list in June, had also not carried out asbestos surveys for a number of properties, the notice said.

The regulator said EPIC had shown it is completing the remedial fire work and ensuring the required statutory checks are completed.

But the notice added: “Taking into account the seriousness of the issues, the durations for which tenants were potentially exposed to risk, and the number of tenants potentially affected, the regulator has concluded that it is proportionate to find that EPIC has breached the Home Standard and that there was a risk of serious detriment to tenants during this period.”

In the regulatory judgement, the RSH said that EPIC had made “significant business decisions without fully understanding or considering the impact on its approved business plan and its covenant compliance”.

The regulator said it had identified a “potential covenant breach” due to the group’s inclusion of deferred remedial fire safety works in the current year of the business plan.

“Following the regulator’s intervention, EPIC was subsequently able to rework its business plan and reprofile its expenditure in line with an agreed strategy to avoid a covenant breach,” the judgement said. “However, the fact that it was the regulator, not EPIC’s board, that discovered the potential breach is an indication of significant weaknesses in EPIC’s business planning, risk management and financial reporting processes.”

The group’s board had also approved the acquisition of 170 units from another registered provider, but this represents “almost four years’ worth of growth in a single transaction”, the regulator said.

“The regulator has seen minimal evidence that the board considered the impact of this decision on the business nor that adequate due diligence was carried out prior to the decision being made,” the judgement said.

The RSH also said that the provider had “experienced a high level of staff turnover, particularly at executive level, that has placed constraints on its capacity to deal with issues as they arise”.

Filings at Companies House show that four directors and Len Gibbs, who was listed as EPIC’s chief executive in its last filed accounts, left the group in June this year.

However the regulator said EPIC has “indicated its commitment to putting things right”.

It added: “It has appointed external advisors to provide support and help identify the causes of the presenting issues. EPIC has also committed to developing a comprehensive recovery plan, including strengthening its governance arrangements, improving its board reporting and addressing the health and safety issues as a priority.”

The landlord was also downgraded to a V2 rating for viability, but remains compliant. However, the regulator added that “the significant one-off expenditure relating to fire safety works impacts significantly on interest cover in 2021/22 and 2022/23. The revised business plan shows interest cover strengthening in 2023/24, but until then EPIC’s capacity to respond to adverse events is reduced.”

In response, EPIC said in a statement that it noted the “various issues raised, their seriousness, particularly in relation to some of our tenants, and regret that these arose”.

The statement said that Susan Kellock, EPIC’s new finance director, had also been appointed as interim chief executive. Ms Kellock is a former long-serving executive at 56,000-home landlord Riverside.

The statement added: “The interim CEO and chair are working with the board to address the shortcomings identified and are liaising closely with the Regulator of Social Housing to ensure the matters are promptly addressed. The board acknowledges and has agreed that it must take steps to improve the key areas identified, ensuring effective governance and improved board reporting. In this regard, we are being supported and advised by Savills.”