Blake Lapthorn solicitors' Social Housing team held a seminar with Rund Partnership Ltd on stock rationalisation on 14 February 2013.

1. Social Housing seminar with Rund
Partnership
14 February 2013
John Russell, Partner
john.russell@bllaw.co.uk

2. Stock Rationalisation
Chris Carr, Solicitor, Real Estate
chris.carr@bllaw.co.uk

3. Introduction
What is Stock Rationalisation
How we prepare for sales
Obtaining consent
Consulting tenants
Other options to sales

4. What is Stock Rationalisation
Process of better managing your stock
More detailed knowledge of your stock’s performance
Why Transfer?
– Fund raising?
– Too costly to run?
Other options to Transfer
– Lease
– Management Agreement

5. Identifying what to sell
What do you own?
– Houses and flats
– Other land
– Unknown land
Who is in occupation?
– Are they who you expect them to be?
– Do you need to secure possession from occupiers?

6. Preparation, preparation, preparation
Locate all Land Registry Titles
Identify problems
Remedy known problems where possible
Searches
Pre-Contract enquiries
Other considerations
– Will you be transferring any employees?
– VAT implications

7. Consent
Who’s consent will you need?
– Homes and Communities Agency
– Lender
– Local Authority
LSVT organisations
– Third Party

8. The HCA’s requirements
The HCA requires you to:
– Consult with the affected tenants
– Consult with local authorities
– Have an in date valuation for the stock
– Fill out the required forms

9. Consulting your tenants
Assured tenants v Secure Tenants
When to consult
– When formulating your proposal
– When you have the final proposal
The information you need to give
– Discuss benefits
– Discuss detriments
– Give chance to respond
Tenant’s response not binding on your final decision

10. What we do
Sales
– Prepare the contract packages
– Draft and supply contracts and contract packs
– Advise and negotiate appropriate warranties
– Deal with enquiries
– Advise on dealing with arrears and surpluses
– Assist/obtain your lender’s consent
– Assist with obtaining HCA Consent
– Deal with Completion

11. Other options to disposal
Leases
– The advantages
– The disadvantages
Management Agreements
– The advantages
– The disadvantages
– OEUJ
– VAT

12. Conclusion
Be prepared
Investigate early
Consult thoroughly

13. Stock Rationalisation
Chris Carr, Solicitor, Real Estate
chris.carr@bllaw.co.uk

14. STOCK
RATIONALISATION
IN PRACTICE
Martha Slade
Head of Sustainability

15. ESTABLISH CONDITION
OF PROPERTIES
• CALCULATE VALUE
• BE AWARE OF STATUTORY
STANDARDS TO LET PROPERTIES
• RUN OPTION APPRAISALS ON
WHETHER TO RENOVATE, CONVERT OR
RE‐DEVELOP

16. •LOCAL AUTHORITY PLANNING
CONDITIONS
• ENERGY ACT 2011
• FUNDING OPPORTUNITIES

17. LOCAL AUTHORITY
PLANNING CONDITIONS
• MORE LAs SETTING OUT HIGHER LEVELS OF
CARBON REDUCTIONS FOR CONVERSIONS,
EXTENSIONS, RENOVATIONS OR CHANGE OF
USE OF EXISTING BUILDINGS
•SOUTHAMPTON CITY COUNCIL’S PLANNING
POLICY CS20 PLACES CONDITIONS ON
RESIDENTIAL CONVERSIONS

18. SOUTHAMPTON CITY
COUNCIL PLANNING POLICY
CS20
Development Low Rise 4 Storey +
Type Residential Residential
Minimum CO2
Emission Reduction 20% 15%
Required

19. BRE SURVEY OF LOCAL
PLANNING POLICIES
• BRE CARRIED OUT A SURVEY REGARDING POLICIES
ON CONVERSIONS AND REFURBISHMENTS
• 8 LONDON BOROUGHS AND IN THE SOUTH ‐
BRIGHTON, BRISTOL, READING AND PORTSMOUTH
REQUIRE BREEAM DOMESTIC REFURBISHMENT “VERY
GOOD” OR HIGHER.

20. ENERGY ACT 2011
• FROM APRIL 2018 IT WILL BE ILLEGAL TO LET
PRIVATE SECTOR PROPERTIES WITH F OR G EPC
RATING (LONG STOP DATE SO THIS COULD BE
SOONER)
• FROM APRIL 2016 PRIVATE SECTOR LANDLORDS
CANNOT REFUSE TENANTS’ REQUESTS TO IMPROVE
THEIR PROPERTY TO AT LEAST AN E RATING (ALSO A
LONG STOP DATE)

21. GREEN DEAL FINANCE
• ENERGY EFFICIENCY IMPROVEMENTS CAN BE
PAID THROUGH THE GREEN DEAL
• LOAN TAKEN OUT WILL BE PAID BACK
THROUGH ENERGY BILLS BY THE PERSON WHO
IS LIABLE TO PAY THOSE BILLS

22. GREEN DEAL FINANCE
GREEN DEAL PROVIDER COULD CONSIDER
THE APPROPRIATE CREDIT WORTHINESS
OF THE BILL PAYER UNDER SECTION 82 OF
THE CONSUMER CREDIT ACT

23. GREEN DEAL FINANCE
• WHERE THE CONSUMER CREDIT ACT WILL AFFECT
ANY INCOMING RESIDENTS THIS WILL HAVE
IMPLICATIONS FOR STOCK TRANSFERS OF
PROPERTIES WITH GREEN DEAL PLANS IN PLACE
•COULD HAVE CONSEQUENCES ON LOCAL AUTHORITY
NOMINATIONS TO THE SOCIAL HOUSING SECTOR

24. GREEN DEAL ASSESSMENT
REPORT
• THE NHF HAS IDENTIFIED THAT THERE ARE
SIGNIFICANT LEVELS OF UNDER‐HEATING AND
SELF‐DISCONNECTION IN SOCIAL HOUSING
• THESE FACTORS MEAN THAT A GREEN DEAL
OCCUPANCY ASSESSMENT PREPARED FOR ONE
HOUSEHOLD COULD BE SEVERELY
COMPROMISED BY AN INCOMING HOUSEHOLD

25. ECO FUNDING
• ENERGY COMPANIES OBLIGATION (ECO)
FUNDING IS AN OPPORTUNITY TO FUND ENERGY
IMPROVEMENTS TO STOCK
• 3 FUNDING STREAMS REPLACE NOW DEFUNCT
CERT AND CESP FUNDING
• SPENDING IS ANTICIPATED AT £1.3BN TO MARCH
2015 (HISTORIC £1.5BN SPENT UNDER CERT)

26. ECO FUNDING
• AFFORDABLE WARMTH FOR LOW INCOME
PRIVATE SECTOR HOUSEHOLDS
•CARBON SAVINGS COMMUNITY OBLIGATION
(CSCo) TARGETING LOW INCOME COMMUNITIES
TARGET AREAS WHICH ARE LOWEST 15% WARDS
IN ENGLAND, SCOTLAND AND WALES INDICATED
IN THE INDICES OF MULTIPLE DEPRIVATION
•CARBON REDUCTIONS FOR SOLID WALL/HARD TO
TREAT CAVITIES

27. ECO FUNDING

28. ECO FUNDING
• CARBON REDUCTION FUNDING STREAM IS LIKELY TO
APPLY TO A SUBSTANTIAL NO. OF SOCIAL HOUSING
SECTOR AS 25% OF UK HOMES HAVE SOLID WALLS
•LIKELY THAT A LOT OF SOCIAL HOUSING PROPERTIES
WILL BE ELIGIBLE FOR CARBON SAVINGS COMMUNITY
OBLIGATION FUNDING AS MANY HOMES IN THIS
SECTOR WILL BE LOCATED IN LOW INCOME
COMMUNITIES TARGET AREAS

29. Which energy efficiency improvements qualify for Green
Deal or ECO finance (URN 12D/243)
http://www.decc.gov.uk/publications/AdvancedSearch

31. TECHNOLOGY STRATEGY
BOARD
• GOVERNMENT FUNDING TSB HAS
RELEASED DETAILS OF TWO
FORTHCOMING COMPETITIONS FOR
FUNDING
• WITH ONLY £4.5M GUARANTEED FOR 4‐
5 SCHEMES, THERE IS VERY STIFF
COMPETITION FOR THIS FUNDING

32. LOCAL AUTHORITY
CARBON OFFSET
FUNDS
•THIS WILL PROVIDE ANOTHER SOURCE
OF FUNDING FOR THE SUSTAINABLE
RETROFIT OF EXISTING PROPERTIES

33. Opportunities and Challenges of
Upgrading Existing Stock
Case studies
Claire Westron
Rund Partnership

34. Opportunities and Challenges of Upgrading Existing Stock
Case studies
1.ECO Funding ‐ Heronwood Estate, Aldershot
2.BREEAM Domestic Refurbishment – Lower Derby Road, Portsmouth

35. HERONWOOD ESTATE

36. HERONWOOD ESTATE
• Low rise post war Housing Estate constructed using
concrete panels
• Heating systems were replaced 10 years ago with
gas fired back boilers & cylinders
• UPVC double glazed windows and external doors
installed in the 1990s with around 200mm loft
insulation

37. HERONWOOD ESTATE
• 65% of tenants are over 60
• 25% are known to have a disability or health
problem
• 35% of flats are reported to have a damp problem

42. New build (max) 10
New build (typical) 5
Heronwood ground floor 4.2
Heronwood upper floors
7.7
Air tightness

43. Existing (SAP Band D)
Option 1 (SAP Band C)
• Solid wall insulation
20% savings on fuel bills
25% carbon reduction
320 lifetime tonnes CO2 saving (ECO)
Option 2 (SAP Band B)
• Solid wall insulation
• Insulate walls to communal areas
• PV panels
• Combi boiler with flue gas heat recovery
• Ventilation with heat recovery
50% saving on fuel bills
60% carbon reduction

44. CONSIDERATIONS
What are the potential carbon savings from your stock?
Are any properties located in target “Low Income Communities Target” areas?
Is there an opportunity to upgrade other measures at the same time e.g. boiler
replacements?
How can ECO funding be supplemented?
Is planning consent required for solid wall insulation?
How to advise residents who are approached directly by Green Deal
Providers?
Can an attractive Eco / Green Deal package be created for leaseholders in
flats?

45. BREEAM Domestic Refurbishment

48. BREEAM
Domestic
Refurbishment

49. BREEAM
Domestic
Refurbishment

51. Element Existing Post BREEAM
dwelling refurbishment Credits
Roof 1.6 0.10
Walls 0.5 0.24
Floor 0.73 0.15
Windows UPVC 3 UPVC 1.20
Doors Timber 3.1 UPVC 1.40
Heating Gas combi boiler Alpha gas combi
boiler
Ventilation Extract fans MVHR system
Air tightness 15 7
Renewable energy None Alpha solar smart 2
DER 66.9 19.2 7.5
(Dwelling Emission
Rate)
FEE 177.5 64.8 5
(Fabric Energy
Efficiency)

53. 70
60
50
Dwelling emission
40
rate
30
20
10
0
Existing dwelling Fabric only Fabric with solar Fabric with PV
thermal

54. < 100 litres per
Water person per day
4/2.6 dual flush WC
170 litre capacity
bath
7 litres per minute
taps
5 litres per minute
kitchen taps
7 litres per minute
shower flow rate

56. Costs
Mechanical ventilation heat £1,500
recovery
Solar hot water with gas fired £7,000
heating
Triple glazed windows £3,780
Enhanced insulation £3,980
General refurbishment £23,120
Value before refurbishment £105,000
Value post refurbishment £140,000

57. CARBON OFFSET FUNDS
Local Authority case studies:
• Brighton
• Milton Keynes
• Southampton City Council

58. ALLOWABLE SOLUTIONS

59. Claire Westron
Code for Sustainable Homes Assessor
Rund Partnership Ltd
clairew@rund.co.uk

60. Financial Viability of Stock
Rationalisation
Rund Partnership Breakfast Seminar
14 February 2013
Andy Leahy
Managing Director
Bespoke Property Consultants

61. Stock Rationalisation
Reasons for:
•Geography – more efficient management
concentration
•LA partnerships – matching development areas
•Financial stability
•Stock condition
Reasons against:
•Future strategy uncertain

62. Stock Rationalisation
• Be prepared – due diligence is exhaustive
• Be aware of the basis of valuation
– Market
– EU – SHV
• Be aware of your stock condition
• Boards don’t like surprises
• Stock swap – how are you going to fund a
cash difference?

63. Financial Appraisal
• What goes in is what comes out!
• Understand the basis of the information you are using
• Dust off old agreements – does current practice match them?
• May need to build spreadsheet macros to aid data transfer
• Valuation methodology
– Internal models
– Proprietary products
• Circle developer
• Argus
• BRIM
• Ensure model is tenure sensitive

64. Viability Methodology
Bespoke Residential Investment Model (BRIM)
•Enter all unit types
•Addresses all tenures
•Development or refurbishment function
•Sensitivity analysis
•20 year investment return cashflow
•Addresses different funding sources
•Free to download from BPG website

65. THANK YOU
Andy Leahy
Bespoke Property Consultants
Tel: 01403 823425
Andy.Leahy@BPGLimited.co.uk
www.bpglimited.co.uk