Blake Lapthorn Social Housing seminar with Rund Partnership Ltd - stock rationalisation

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

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Blake Lapthorn Social Housing seminar with Rund Partnership Ltd - stock rationalisation

  1. 1. Social Housing seminar with Rund Partnership 14 February 2013 John Russell, Partner john.russell@bllaw.co.uk
  2. 2. Stock RationalisationChris Carr, Solicitor, Real Estate chris.carr@bllaw.co.uk
  3. 3. Introduction What is Stock Rationalisation How we prepare for sales Obtaining consent Consulting tenants Other options to sales
  4. 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. 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. 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. 7. Consent Who’s consent will you need? – Homes and Communities Agency – Lender – Local Authority LSVT organisations – Third Party
  8. 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. 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. 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. 11. Other options to disposal Leases – The advantages – The disadvantages Management Agreements – The advantages – The disadvantages – OEUJ – VAT
  12. 12. Conclusion Be prepared Investigate early Consult thoroughly
  13. 13. Stock RationalisationChris Carr, Solicitor, Real Estate chris.carr@bllaw.co.uk
  14. 14. STOCK RATIONALISATION IN PRACTICE Martha Slade Head of Sustainability 
  15. 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. 16. •LOCAL AUTHORITY PLANNING       CONDITIONS • ENERGY ACT 2011• FUNDING OPPORTUNITIES
  17. 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. 18. SOUTHAMPTON CITY COUNCIL PLANNING POLICY CS20Development Low Rise 4 Storey +Type Residential ResidentialMinimum CO2Emission Reduction 20% 15%Required
  19. 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. 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. 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. 22. GREEN DEAL FINANCEGREEN DEAL PROVIDER COULD CONSIDER THE APPROPRIATE CREDIT WORTHINESS OF THE BILL PAYER UNDER SECTION 82 OF THE CONSUMER CREDIT ACT 
  23. 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. 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. 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. 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. 27. ECO FUNDING
  28. 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. 29. Which energy efficiency improvements qualify for  Green Deal or ECO finance (URN 12D/243)   http://www.decc.gov.uk/publications/AdvancedSearch              
  30. 30. 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
  31. 31. LOCAL AUTHORITY CARBON OFFSET           FUNDS•THIS WILL PROVIDE ANOTHER SOURCE OF FUNDING FOR THE SUSTAINABLE RETROFIT OF EXISTING PROPERTIES
  32. 32. Opportunities and Challenges of Upgrading Existing Stock Case studies Claire Westron Rund Partnership 
  33. 33. Opportunities and Challenges of Upgrading Existing StockCase studies1.ECO Funding ‐ Heronwood Estate, Aldershot2.BREEAM  Domestic Refurbishment – Lower Derby Road, Portsmouth
  34. 34. HERONWOOD ESTATE
  35. 35. 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 
  36. 36. 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
  37. 37. New build (max) 10New build (typical)               5Heronwood ground floor  4.2  Heronwood upper floors    7.7 Air tightness
  38. 38. 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
  39. 39. CONSIDERATIONSWhat 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. boilerreplacements?How can ECO funding be supplemented?Is planning consent required for solid wall insulation?How to advise residents who are approached directly by Green DealProviders?Can an attractive Eco / Green Deal package be created for leaseholders inflats?
  40. 40. BREEAM Domestic Refurbishment
  41. 41. BREEAMDomesticRefurbishment
  42. 42. BREEAMDomesticRefurbishment
  43. 43. Element Existing Post BREEAM dwelling refurbishment CreditsRoof 1.6 0.10Walls 0.5 0.24Floor 0.73 0.15Windows UPVC 3 UPVC 1.20Doors Timber 3.1 UPVC 1.40Heating Gas combi boiler Alpha gas combi boilerVentilation Extract fans MVHR systemAir tightness 15 7Renewable energy None Alpha solar smart 2DER 66.9 19.2 7.5(Dwelling EmissionRate)FEE 177.5 64.8 5(Fabric EnergyEfficiency)
  44. 44. 70 60 50Dwelling emission 40 rate 30 20 10 0 Existing dwelling Fabric only Fabric with solar  Fabric with PV thermal
  45. 45. < 100 litres perWater person per day4/2.6 dual flush WC170 litre capacitybath7 litres per minutetaps5 litres per minutekitchen taps7 litres per minuteshower flow rate
  46. 46. CostsMechanical ventilation heat £1,500recoverySolar hot water with gas fired £7,000heatingTriple glazed windows £3,780Enhanced insulation £3,980General refurbishment £23,120 Value before refurbishment £105,000 Value post refurbishment £140,000
  47. 47. CARBON OFFSET FUNDS Local Authority case studies: • Brighton • Milton Keynes • Southampton City Council
  48. 48. ALLOWABLE SOLUTIONS
  49. 49. Claire WestronCode for Sustainable Homes Assessor Rund Partnership Ltd clairew@rund.co.uk
  50. 50. Financial Viability of Stock  RationalisationRund Partnership Breakfast Seminar 14 February 2013 Andy Leahy  Managing Director Bespoke Property Consultants
  51. 51. Stock RationalisationReasons for:•Geography – more efficient management concentration•LA partnerships – matching development areas•Financial stability•Stock conditionReasons against:•Future strategy uncertain 
  52. 52. 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?
  53. 53. 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
  54. 54. Viability MethodologyBespoke 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
  55. 55. THANK YOU Andy LeahyBespoke Property Consultants Tel:  01403 823425Andy.Leahy@BPGLimited.co.uk www.bpglimited.co.uk

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