Scottish regulator asks non-compliant landlord for plan to tackle ‘serious weaknesses’

Continued engagement

The regulator said it is also engaging with Reidvale about the outcome of a special general meeting and its plans for induction and training of the management committee to seek assurance about the capacity of the committee to address its “significant weaknesses”.

The SHR said: “Reidvale is engaging openly and constructively with us.”

The regulator noted the fact that a majority of shareholders had rejected its proposed tie-up with Places for People. 

“Following the outcome of the shareholders vote regarding the proposed transfer we are engaging with Reidvale to understand the steps it will take to address these serious weaknesses, including how it will fund the investment required to its homes and ensure that it complies with its legislative and regulatory obligations,” the SHR said. 

Denise Dempsey, chair of Reidvale, said the management committee welcomes the updated engagement plan.

She said: “We have agreed detailed plans for returning Reidvale to full compliance with regulatory requirements and the development of a comprehensive new business plan. In the short term, we will soon be publishing an interim business plan for 2024-25. 

“The regulator’s expectations and requirements set out in the updated engagement plan very much reflect our own plans and we are working closely with SHR to monitor progress.”

‘Serious weaknesses’

Following its original engagement with the SHR in 2019, Reidvale commissioned an independent review of its compliance with the standards, which found that there were a number of areas in which it was non-compliant with the standards. 

These included demonstrating strategic control, the development and monitoring of its business plan and risk management. It also included the lack of appropriate processes to assess the skills and experience needed on the management committee, the appraisal processes for staff and board members, and succession planning. 

Reidvale developed a governance improvement plan and commissioned a further review of its compliance, which identified some progress in relation to delivering improvements but found “continued serious weaknesses” in compliance with regulatory requirements. 

The review specifically raised matters relating to Reidvale’s business plan and rent affordability. 

The SHR said it also became apparent that Reidvale’s expenditure in some areas such as staff salaries was high in comparison to similar RSLs.

A review on this highlighted “serious weaknesses” in the housing association’s organisational structure and raised further additional concerns regarding Reidvale’s compliance with the standards, the regulator said.

Reidvale also carried out a stock condition survey to understand its future maintenance requirements. The report, produced in January 2022, highlighted “significant investment requirements”.

It developed a pilot programme to establish the extent of the work required to its stonework and the likely costs involved. The SHR said this found that these costs are “far higher” than it had estimated, and this has slowed the pace of the stonework repairs.

There have also been a number of incidents of falling stonework, which raise “serious concerns” regarding resident safety, the regulator added.

As Reidvale has taken forward its programme of stonework repairs, it has found that the work required to address the failing stonework is “significantly more extensive than originally anticipated”, the SHR said.

It is carrying out a further stonework survey to clarify the extent of the work required and the associated costs.  

“The estimated maintenance costs from the stock condition survey, the stonework repairs, the higher-than-average operating expenditure and historically low rents put significant stress on Reidvale’s ongoing financial position and rent affordability,” the SHR said.