MTVH warns £105m in building safety costs will hit its surplus this year

MTVH said that as part of the same full review, it has written down the value of other buildings where future expected life is “materially reduced”.

The update added: “These costs have been prudently assessed but MTVH will seek to mitigate them through recovery from third parties wherever possible.”

The Building Safety Act, which came into force in April 2023, intended to protect qualifying leaseholders from the costs associated with remediating historical building safety defects. It also underpinned the routes to legal action by extending the amount of time in which claims can be made over sub-standard construction work from six to 15 years.

The act makes clear how residential buildings should be constructed, maintained and made safe, and also sets out the clear responsibility of those involved in the design and completion.

MTVH said it will report its 2023-24 results in the summer this year.

Ian Johnson, chief financial officer at MTVH, told Social Housing: “In April 2023 we announced that we would not pass on to MTVH leaseholders any costs for building safety remediation work in buildings over 11 metres or five storeys in height.

“This was aligned with government’s intention to cap the costs to private leaseholders under the Building Safety Act of 2022 and reflects MTVH’s determination to remove the burden of any liability for remediation from leaseholders.   

“These costs were always fully included in our five-year business plan and now meet the accounting tests for them to be recognised in our financial statements at this point. The underlying cash flows associated with these costs are unaffected by this accounting treatment.

“We are committed to bearing these costs, even though we are not responsible for the fire safety issues that, in large part, reflect defects in the course of original building construction. We will mitigate these costs through recovery from third parties wherever possible, however as a responsible landlord we are ready to step in and provide leaseholders with peace of mind and financial certainty, which will allow them to get on with their lives.”

On 19 December, Standard & Poor’s (S&P) upgraded its outlook for MTVH from negative to stable and maintained the provider’s A- credit rating. In its reasoning, the credit rating agency said the financial base case included estimates of the landlord’s building safety costs.

“The outlook revision reflects our view that MTVH’s credit metrics are expected to stabilise, despite the group’s large programme of investments in existing homes,” S&P said in its credit rating report at the time.

“Our projections are underpinned by our view that management has a more accurate estimate of the scope of necessary works, and has taken steps to secure external funding for them.

“These actions help to limit the financial impact of the expenditure associated with fire and building safety, as well as energy efficiency of the social housing stock.”

According to its results for the year ending 31 March 2023, MTVH posted a surplus before tax of £33.5m, a drop from £40.3m in the previous year.

Operating surplus, after net building safety and non-recurring costs, fell from £122.1m to £109.1m over the same period.

The results also showed that the housing association spent £13.9m on building safety and non-recurring costs in 2022-23, a drop from £21.4m.